Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040227d.jpg" width="353">
A recovery in Japan looks to be not only continuing, but spreading. Data for January that were published February 27 show gains in production, household spending and employment. Perhaps most notably, employment appears to be stabilizing after its cyclical decline that began in December 2000. The increase in January was a modest 70,000 but that followed December&#39;s 280,000. Although the unemployment rate edged up in January to 5.0%, it had fallen in December to 4.9%, the lowest since April 2001.
Workers&#39; household spending, possibly bolstered by the improved employment conditions, had a sizable gain in January, 4.2%. These spending data are erratic and could easily retreat in the very next report, but even so, January had the strongest year-on-year performance since the autumn of 2002. Workers&#39; real incomes showed the first year-on-year increase since March 2002.
Industrial production was up 3.2% in the month and 5.0% over the last 12 months. At 101.2 (2000=100), it was the highest since December 2000. Gains were widespread across industries.
All these reports come on the heels of the strong GDP report for the fourth quarter 2003, suggesting a broad-based recovery could be developing. Indeed, the important consumer sector might become more significant, as more stable employment conditions and less unemployment boost their spending.<table border="1" cellpadding="0" cellspacing="0"><tbody></tbody></table>

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Selected Indicators for Japan </th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Workers&#39; Household Spending (2000=100)</td>
<td>101.2</td>
<td>97.9</td>
<td>95.2</td>
<td>95.1</td>
<td>92.0</td>
<td>93.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>4.2</td>
<td>-1.0</td>
<td>3.3</td>
<td>0.9</td>
<td>-3.1</td>
<td>-4.8</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Employment (millions)&nbsp;</td>
<td>63.22</td>
<td>63.15</td>
<td>63.03</td>
<td>63.17</td>
<td>63.30</td>
<td>64.10</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; % Change</td>
<td>0.1</td>
<td>0.4</td>
<td>0.3</td>
<td>0.3</td>
<td>-1.1</td>
<td>-1.2</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>5.0</td>
<td>4.9</td>
<td>5.5</td>
<td>5.3</td>
<td>5.4</td>
<td>5.0</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Industrial Production (2000=100)&nbsp;</td>
<td>101.2</td>
<td>97.9</td>
<td>95.2</td>
<td>95.1</td>
<td>92.0</td>
<td>93.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; % Change</td>
<td>+3.4</td>
<td>-0.8</td>
<td>5.0</td>
<td>5.9</td>
<td>7.0</td>
<td>-14.8</td>
</tr>
</tbody>
</table>
</body>
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A recovery in Japan looks to be not only continuing, but spreading. Data for January that were published February 27 show gains in production, household spending and employment. Perhaps most notably, employment appears to be [...]

Japan Sees Gains in Production, Jobs and Spending

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040227a.jpg" width="353">
US economic growth last quarter was unexpectedly revised higher to 4.1% versus expectations for a slight downward revision.
Inventories contributed a greater 0.9 percentage points to 4Q GDP growth versus the advance estimate of a 0.6 point contribution.
Growth in nonresidential fixed investment also was revised higher to 9.6% (7.1% y/y) from 9.0% reported initially. Investment in equipment &amp; software was revised up to 15.1% versus the advance report of an 11.5% surge.
Overall, domestic final demand growth was revised to 3.3% from 3.1%. Growth in real PCE was about unchanged at 2.7% versus 6.9% in 3Q. Residential investment grew 8.6% (AR).
Offsetting these upward revisions was the foreign trade sector which subtracted 0.3 percentage points instead of adding 0.2 points to GDP growth. Export growth of 21.0% was slightly faster than originally estimated, but import growth was revised up to 16.4% from 11.3%.
Inflation was revised slightly higher to a tame 1.2%.
Analysis titled &quot;Globalization and Global Disinflation&quot; from the Federal Reserve Bank of Kansas City is available <a href="http:/www.kc.frb.org/Publicat/econrev/Pdf/4q03rogo.pdf">here</a>. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM"> Chained 2000$, % AR</a></th>
<th scope="col"> 4Q &#39;03 &nbsp;(Prelim)</th>
<th scope="col"> 4Q &#39;03 &nbsp;(Advance)</th>
<th scope="col"> 3Q&#39;03</th>
<th scope="col"> Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>4.1%</td>
<td>4.0%</td>
<td>8.2%</td>
<td>&nbsp;4.3%</td>
<td>3.1%</td>
<td>2.2%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.9%</td>
<td>0.6%</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>0.4%</td>
<td>-0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>3.2%</td>
<td>3.4%</td>
<td>8.3%</td>
<td>4.4%</td>
<td>3.1%</td>
<td>1.8%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>-0.3%</td>
<td>0.2%</td>
<td>0.8%</td>
<td>0.3%</td>
<td>-0.1%</td>
<td>-0.6%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>3.3%</td>
<td>3.1%</td>
<td>7.2%</td>
<td>4.2%</td>
<td>3.4%</td>
<td>2.4%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>1.2%</td>
<td>1.1%</td>
<td>1.6%</td>
<td>1.5%</td>
<td>1.7%</td>
<td>1.5%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Improved Late in February 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 27, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040227b.jpg" width="353">
The University of Michigan&#146;s consumer sentiment index for the full month of February came in at 94.4 versus the mid-month read of 93.1. Nevertheless, sentiment still fell 9.1% from January. Consensus expectations had been for a February reading of 94.0.
During the last ten years there has been an 75% correlation between the level of consumer sentiment and the y/y change in real PCE. That correlation has risen to 84% during the last five years.
Perceptions of current economic conditions improved as the full month index came in at 103.6 versus 100.4 mid-month. The 5.4% m/m slide followed a 12.9% rise in January.
The expectations index dropped 11.6% m/m, about the same as the mid-month reading.
The University of Michigan survey is not seasonally adjusted.It is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<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/@EF14/@EF1402/@EF1402.HTM"> University of Michigan</a></th>
<th scope="col"> Feb</th>
<th scope="col"> Jan</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>94.4</td>
<td>103.8</td>
<td>18.1%</td>
<td>87.6</td>
<td>89.6</td>
<td>89.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>103.6</td>
<td>109.5</td>
<td>8.6%</td>
<td>97.2</td>
<td>97.5</td>
<td>100.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>88.5</td>
<td>100.1</td>
<td>26.6%</td>
<td>81.4</td>
<td>84.6</td>
<td>82.3</td>
</tr>
</tbody>
</table>
Chicago Purchasing Agents' Index Firm 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 27, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040227c.jpg" width="353">
The February Chicago Purchasing Managers Business Barometer fell slightly to 63.6 from the near-ten year high of 65.9 in January. That matched Consensus expectations for a reading of 63.5.
During the last twenty years there has been a 52% correlation between the level of the Chicago PMI and quarterly growth in real GDP.
The new orders index fell to 67.5 from 69.7 in January. The Jan-Feb average of 68.6 is versus a 4Q average of 65.4.
Production fell to 73.0 from 76.5 in January. The 74.7 average is versus 68.9 in 4Q.
Employment surged to 54.8, the highest level since April 1998. During the last ten years there has been a 69% correlation between the level of the employment index and the y/y change in payroll employment.
The index of prices paid fell slightly to a still-high 66.9.

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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF05/@EF05.HTM"> Chicago Purchasing Managers Index, SA</a></th>
<th scope="col"> Feb 04</th>
<th scope="col">Jan 04</th>
<th scope="col">Feb 03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Barometer</td>
<td>63.6</td>
<td>65.9</td>
<td>53.6</td>
<td>54.7</td>
<td>52.7</td>
<td>41.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>67.5</td>
<td>69.7</td>
<td>57.1</td>
<td>58.0</td>
<td>56.2</td>
<td>42.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>66.9</td>
<td>67.8</td>
<td>54.8</td>
<td>55.8</td>
<td>56.9</td>
<td>50.4</td>
</tr>
</tbody>
</table>
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US economic growth last quarter was unexpectedly revised higher to 4.1% versus expectations for a slight downward revision. Inventories contributed a greater 0.9 percentage points to 4Q GDP growth versus the advance estimate of a 0.6 [...]

4Q U.S. GDP Growth Revised Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040226e.jpg" width="353">
In four countries&#39; surveys of business confidence issued today for February, firms appear to be gaining confidence or, in the case of the UK, at least feeling less pessimistic. At the same time, consumers in two of those nations still view economic conditions as deteriorating.
In the UK, France and Slovakia, the various business climate or industrial trend gauges not only improved from January, but had their best readings since early 2001. The comparable gauge for the Czech Republic edged up in the month from +3 to +5, but that level has been quite common since the spring of 2002.
Despite the better industry positions in the Czech Republic and Slovakia, consumer confidence in those countries is deteriorating markedly. As shown in the graph, the decline in consumers&#39; views in the Czech Republic corresponds to a continuing reduction in employment. Indeed, on a quarterly basis, even over the brief 3-1/2 year history of the confidence data, its correlation with employment data is 63%. In Slovakia, by contrast, there is virtually no relationship between the confidence data and employment, but the unemployment rate has a 72% negative correlation with confidence. The recent unemployment rate of 15.3% is lower than an early 2000 peak of 19.0%, but it has risen from a mid-2003 level of 14.6%, not a promising development. At the same time, GDP in both countries is growing: steadily in a range of 2.5% to 3.5% recently in the Czech Republic and more vigorously at and above 5% in Slovakia. Thus, in both countries, consumers appear more concerned about labor market conditions and less sensitive to overall growth measures. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Measures of Confidence</th>
<th scope="col">Feb 04</th>
<th scope="col">Jan 04</th>
<th scope="col">Dec 03</th>
<th scope="col">Feb 03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">UK CBI Industry Trend (Balance)</td>
<td>-15</td>
<td>-18</td>
<td>-19</td>
<td>-31</td>
<td>-29</td>
<td>-27</td>
<td>-26</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">France Composite Business Climate Indicator (100=neutral)</td>
<td>103</td>
<td>102</td>
<td>101</td>
<td>98</td>
<td>95</td>
<td>97</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Czech Republic (Balances)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Indicator</td>
<td>5</td>
<td>3</td>
<td>5</td>
<td>5</td>
<td>5</td>
<td>4</td>
<td>2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Confidence Indicator</td>
<td>-26</td>
<td>-20</td>
<td>-21</td>
<td>-13</td>
<td>-15</td>
<td>-7</td>
<td>-5</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Slovakia (Balances)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Industry Confidence</td>
<td>16.0</td>
<td>4.0</td>
<td>1.3</td>
<td>0.7</td>
<td>4.6</td>
<td>4.6</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Confidence</td>
<td>-35.9</td>
<td>-32.5</td>
<td>-38.9</td>
<td>-36.7</td>
<td>-34.8</td>
<td>-30.2</td>
<td>-32.7</td>
</tr>
</tbody>
</table>
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In four countries' surveys of business confidence issued today for February, firms appear to be gaining confidence or, in the case of the UK, at least feeling less pessimistic. At the same time, consumers in two of those nations still [...]

Industry Outlook Improves in 4 Countries, but Some Consumers More Pessimistic

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040226a.jpg" width="353">
Initial claims for jobless insurance rose by 6,000 (1.7%) to 350,000 last week, spot on Consensus expectations. The prior week&#39;s level was unrevised.
During the last ten years there has been a 79% (negative) correlation between the level of initial claims and the y/y change in non-farm payrolls.
The four-week moving average of initial claims rose slightly 354,750 (-11.1% y/y).
Continuing claims for unemployment insurance fell 62,000 w/w and the prior week&#39;s level was revised lower.
The insured rate of unemployment was unchanged at 2.5%.

<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/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col">2/21/04</th>
<th scope="col">2/14/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>350.0</td>
<td>344.0</td>
<td>-15.0%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,102</td>
<td>-7.9%</td>
<td>3,535</td>
<td>3,575</td>
<td>3,022</td>
</tr>
</tbody>
</table>
U.S. Durable Goods Orders Fell, Revisions Positive 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 26, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040226b.jpg" width="353">
Durable goods orders fell last month by 1.8%, but orders in December were revised to a 1.6% increase from the previously reported unchanged reading. Consensus expectations had been for a 1.4% rise in January orders.
Nondefense capital goods orders excluding aircraft and parts jumped 3.6% (+11.1% y/y) and the prior month&#39;s previously reported slight decline was revised to a 3.8% surge .
Orders for computers &amp; electronic products jumped 7.1% and the prior month was revised to a slight rise from the 2.7% drop reported initially.
Orders for electrical equipment, appliances &amp; components jumped 3.7% (1.0% y/y) following two months of decline. Machinery orders fell 1.9% (+13.6% y/y) after four months of strong gain.
Excluding the volatile transportation sector durable goods orders rose 2.0% (8.9% y/y) to the highest level since early 2001. Transportation equipment orders fell 10.4% (+0.8% y/y) as aircraft orders slumped 30.2%.
Shipments of durable goods fell slightly m/m (+6.1% y/y) following four months of gain. Excluding transportation shipments rose 1.1% (8.3% y/y).
Durable inventories rose 0.1% for the third gain in four months.
&quot;What Accounts for the Postwar Decline in Economic Volatility&quot; from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.phil.frb.org/files/br/brq104ks.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/@ED0101.HTM"> NAICS Classification</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Durable Goods Orders</td>
<td>-1.8%</td>
<td>1.6%</td>
<td>6.6%</td>
<td>2.5%</td>
<td>-1.7%</td>
<td>-10.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nondefense Capital Goods</td>
<td>1.5%</td>
<td>4.0%</td>
<td>10.6%</td>
<td>5.6%</td>
<td>-7.2%</td>
<td>-15.5%</td>
</tr>
</tbody>
</table>
New Home Sales Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 26, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040226d.jpg" width="353">
Sales of new single family homes fell a slight 1.7% to 1.106M in January but sales in December were revised up. Since the peak last June sales have fallen 7.8%. Consensus estimates were for sales of 1.100M in January.
Sales fell in each of the country&#39;s regions except the Midwest.
The median price of a new home rose a slight 0.6% m/m to $197,000 (8.4% y/y).
These new home sales data from the US Census Department reflect current sales versus the existing home sale figures which reflect closings on past sales.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E904/@E90401/@E90401.HTM"> Homes Sales (000s, AR)</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">New Single-Family</td>
<td>1,106</td>
<td>1,125</td>
<td>9.6%</td>
<td>1,091</td>
<td>977</td>
<td>907</td>
</tr>
</tbody>
</table>
Help-Wanted Advertising Flat 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 26, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040226c.jpg" width="353">
The Conference Board&#146;s National Index of Help-Wanted Advertising ticked up to 38 last month versus a downwardly revised December reading of 37. The latest figure was equal to the 2003 average.
During the last ten years there has been a 93% correlation between the level of help-wanted advertising and the year-to-year change in non-farm payrolls.
The proportion of labor markets with rising want-ad volume improved to 57% from 29% in December, but that was just even with last January.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month. 

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col"> Jan</th>
<th scope="col">Dec</th>
<th scope="col">Jan &#39;03</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>38</td>
<td>37</td>
<td>41</td>
</tr>
</tbody>
</table>
</body>
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Initial claims for jobless insurance rose by 6,000 (1.7%) to 350,000 last week, spot on Consensus expectations. The prior week's level was unrevised. During the last ten years there has been a 79% (negative) correlation between the [...]

Initial Jobless Insurance Claims Tick Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040225d.jpg" width="353">
Consumer prices in three disparate countries were reported today for January. Inflation in France and South Africa looks tame while that in India is at least stable at a rate that is quite moderate by historical comparison.
The first graph shows the wide swings in India&#39;s CPI for agricultural workers; similar movements are apparent in the more recent data available for other worker groups, such as &quot;Urban Nonmanual Workers&quot;. The Indian Central Statistical Organization notes that bankers and other users of inflation data now emphasize this latter series, which we show in the table below. It covers living costs for workers in what is probably the most dynamic segment of the Indian labor market, office workers in urban areas. 
France&#39;s CPI by comparison has been very steady, with an inflation rate around 2%. Most recently, tobacco prices have risen rapidly; the French national statistics office publishes the CPI excluding tobacco, which is seen in the table to have run consistently lower than the total index, lately by 0.6%. So inflation for non-smokers in France is quite modest. 



<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040225e.jpg" width="353">
The second graph shows consumer prices in South Africa. We include in the graph a basic short-term interest rate, 91-day Treasury bills. The CPI in South Africa contains mortgage interest costs, so the overall reported inflation performance is strongly related to movements in interest rates. Thus, the recent extraordinarily slow pace of inflation reflects recent interest rate declines; this impact is seen in the &quot;housing&quot; item in the table. Prices of other items are mixed, with current upward pressure coming from beverages and tobacco and transportation services. Overall, though, after a widespread surge in 2002, consumer prices in South Africa have moderated markedly.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Consumer Price Indexes, % Change</th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">France - Total</td>
<td>0.2</td>
<td>0.1</td>
<td>2.0</td>
<td>2.2</td>
<td>2.3</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total less Tobacco</td>
<td>--</td>
<td>--</td>
<td>1.4</td>
<td>1.6</td>
<td>2.1</td>
<td>1.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Clothing</td>
<td>--</td>
<td>--</td>
<td>-2.1</td>
<td>0.0</td>
<td>0.7</td>
<td>1.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">South Africa -- Total</td>
<td>-0.1</td>
<td>0.2</td>
<td>0.2</td>
<td>0.3</td>
<td>12.4</td>
<td>4.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Housing</td>
<td>--</td>
<td>--</td>
<td>-8.5</td>
<td>-7.4</td>
<td>19.5</td>
<td>-2.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Clothing</td>
<td>--</td>
<td>--</td>
<td>-3.6</td>
<td>-3.0</td>
<td>3.9</td>
<td>-3.0</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">India-Urban Nonmanual Workers</td>
<td>0.7</td>
<td>0.7</td>
<td>3.9</td>
<td>4.0</td>
<td>2.8</td>
<td>5.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Agricultural Labourers</td>
<td>0.9</td>
<td>0.6</td>
<td>3.8</td>
<td>3.4</td>
<td>2.9</td>
<td>1.4</td>
</tr>
</tbody>
</table>
</body>
</html>

Consumer prices in three disparate countries were reported today for January. Inflation in France and South Africa looks tame while that in India is at least stable at a rate that is quite moderate by historical comparison. The first [...]

Consumer Prices Inflation Modest in France, India and South Africa

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040225a.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association rose 2.1% last week following a 4.9% rise the week prior. The index is up 5.2% in February from the January average (-27.4% y/y).
Purchase applications rose 2.3% w/w (+37.1% y/y) but the February average is down 8.0% from January (+25.4%).
During the last ten years there has been a 50% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Refinance applications increased for the second week (1.9% w/w, -42.9% y/y) and are up 17.6% this month versus January.
The effective interest rate on a conventional 30-Year mortgage rose to 5.77% from 5.74% the prior week. The average rate this month has been 5.80% versus 5.91% in January and 5.96% last February. The effective rate on a 15-year mortgage rose 2 basis points to 5.13%.
Chairman Greenspan&#39;s testimony on the role of housing-related government-sponsored enterprises (GSEs) in the US economy can be found <a href="http://www.federalreserve.gov/boarddocs/testimony/2004/20040224/default.htm"> here</a>.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">2/20/04</th>
<th scope="col">2/13/04</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>854.5</td>
<td>837.1</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>423.5</td>
<td>413.9</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>3,361.9</td>
<td>3,298.3</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
Existing Home Sales Slip 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 25, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040225b.jpg" width="353">
Sales of existing single family homes reported by the National Association of Realtors fell 5.2% m/m last month to 6.04M, the lowest level since June. Consensus expectations had been for a smaller decline to 6.25M. December sales were revised down.
The figures reflect closings of home sales in earlier months.
Sales were off through most of the nation. In the Northeast sales fell 12.5% (-6.0% y/y). In the Midwest sales dropped 13.2% (-3.3% y/y) and sales in the West sales slid 5.7% (+4.5% y/y). Sales in the South rose 2.0% (+6.1% y/y).
The median price of an existing home slipped 3.5% m/m to $168,700 (+5.4% y/y).
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/publicaffairsweb.nsf/Pages/JanEHS04?OpenDocument">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/@E9/@E905/@E90501/@E90501.HTM"> Existing Home Sales (000, AR)</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Existing Single-Family</td>
<td>&nbsp;6,040</td>
<td>&nbsp;6,370</td>
<td>2.0%</td>
<td>6,098</td>
<td>5,593</td>
<td>5,290</td>
</tr>
</tbody>
</table>
Chicago Fed National Activity Index Quite Positive 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 25, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040225c.jpg" width="353">
The Chicago Fed National Activity Index (CFNAI) for January (0.49) was positive for the sixth month in the last seven.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth.
During the last twenty years there has been a 76% correlation between the level of the CFNAI and quarterly growth in real GDP.
The three-month moving average of the CFNAI improved to 0.42, near the high of the last four years.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.
For a complete discussion of the latest Chicago Fed&#39;s National Activity Index click <a href="http://www.chicagofed.org/economicresearchanddata/national/pdffiles/CFNAI_november2003.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM"> Chicago Fed</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Jan &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>0.49</td>
<td>0.05</td>
<td>0.38</td>
<td>-0.13</td>
<td>-0.39</td>
<td>-1.17</td>
</tr>
</tbody>
</table>
</body>
</html>

The index of mortgage applications compiled by the Mortgage Bankers Association rose 2.1% last week following a 4.9% rise the week prior. The index is up 5.2% in February from the January average (-27.4% y/y). Purchase applications [...]

Mortgage Applications Up Again

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040224b.jpg" width="353">
Germany, Italy and the Netherlands have released February measures of business and/or consumer confidence. The picture is a mixed one. Business confidence in Germany and the Netherlands declined after having been on a rising trend since December 2002 in the case of Germany, and June 2003 in the case of the Netherlands. The new IFO index for all Germany declined 1.13% in February and the percent balance of producers in the Netherlands who expect better conditions fell 1.6 points. (For the first time, the IFO index covers all of Germany. Previously, data were published for West and East Germany separately, with the index for West Germany taken as the headline indicator. In addition the index has been rebased from 1991=100 to 2000=100.)
Consumer confidence in the Netherlands increased sharply, rising from -32 in January to -22 in February and is well above the year ago figure. In Italy, however, consumer confidence declined by a small 0.1%, but is almost 8.5% below the year ago figure. 

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Measures of Confidence</th>
<th scope="col">Feb 04</th>
<th scope="col">Jan&nbsp; 04</th>
<th scope="col">Feb&nbsp; 03</th>
<th scope="col">M/M&nbsp; %</th>
<th scope="col"> Y/Y&nbsp; %</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Confidence&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Germany IFO (2000=100)</td>
<td>96.4</td>
<td>97.5</td>
<td>89.3</td>
<td>-1.03</td>
<td>7.95</td>
<td>91.7</td>
<td>89.4</td>
<td>92.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Netherlands % balance</td>
<td>-3.0</td>
<td>-1.4</td>
<td>-6.6</td>
<td>-1.6</td>
<td>3.6</td>
<td>-5.6</td>
<td>-1.6</td>
<td>-1.1</td>
</tr>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Italy (1980=100)</td>
<td>98.8</td>
<td>98.9</td>
<td>102.9</td>
<td>-0.10</td>
<td>-8.43</td>
<td>106.1</td>
<td>115.8</td>
<td>122.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Netherlands % balance</td>
<td>-22</td>
<td>-32</td>
<td>-37</td>
<td>10</td>
<td>15</td>
<td>-35</td>
<td>-20</td>
<td>-1</td>
</tr>
</tbody>
</table>
</body>
</html>

Germany, Italy and the Netherlands have released February measures of business and/or consumer confidence. The picture is a mixed one. Business confidence in Germany and the Netherlands declined after having been on a rising trend [...]

February Indicators of Confidence in Reporting Euro-zone Countries Present a Mixed Picture

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: February 2004

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Japan Sees Gains in Production, Jobs and Spending

4Q U.S. GDP Growth Revised Up

Industry Outlook Improves in 4 Countries, but Some Consumers More Pessimistic

Industry Outlook Improves in 4 Countries, but Some Consumers More Pessimistic

Initial Jobless Insurance Claims Tick Up

Consumer Prices Inflation Modest in France, India and South Africa

Mortgage Applications Up Again

February Indicators of Confidence in Reporting Euro-zone Countries Present a Mixed Picture