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/040331d.jpg" width="353">
The Canadian economy paused in January after four successive gains in monthly GDP. The decrease was a modest -0.1%, including a similar slip in industrial production and a minuscule easing in service-producing industries. Manufacturing and mining were both off markedly, although it is not really possible to tell if their contractions were simply reactions to December increases, or whether they might have been related to the very cold weather in January or to some fundamental slowing in demand. The role of the cold weather is evident, however, in a counter move in utilities, where output was up 4.1% as people and business needed more heat.
Other industries showed increases as well. Retail trade was up 1.0%, and information and communications were up 1.1%. Among service industries, these were offset by sharp falls in wholesale trade, 3.4%, and transportation and warehousing, 0.8%. Weather was possibly responsible for the reduced volume of transportation, although, as with other sectors, it had been strong at the end of 2003, so this might be no more than a pause after a long climb. If either of these conditions is the primary source of the January slowdown both in this specific sector and in total GDP, an early spring bounce might be in the offing.

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<th scope="col" class="firstcol">% Chg except where noted</th>
<th scope="col">Jan 2004: Bil.Chn. 1997C$</th>
<th scope="col">Jan 2004</th>
<th scope="col">Dec 2003</th>
<th scope="col">Jan 04/ Jan 03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">Total GDP</td>
<td>1,025.4</td>
<td>-0.1</td>
<td>0.5</td>
<td>1.6</td>
<td>1.9</td>
<td>3.4</td>
<td>1.9</td>
</tr>
<tr>
<td class="firstcol">Industrial Production</td>
<td>243.3</td>
<td>-0.1</td>
<td>0.5</td>
<td>0.5</td>
<td>0.1</td>
<td>2.4</td>
<td>-2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>177.6</td>
<td>-0.7</td>
<td>1.2</td>
<td>-0.7</td>
<td>-0.4</td>
<td>2.9</td>
<td>-3.6</td>
</tr>
<tr>
<td class="firstcol">Mining; Oil &amp; Gas</td>
<td>37.3</td>
<td>-1.4</td>
<td>1.5</td>
<td>3.9</td>
<td>3.1</td>
<td>0.8</td>
<td>1.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Utilities</td>
<td>27.1</td>
<td>4.1</td>
<td>0.2</td>
<td>0.5</td>
<td>-2.3</td>
<td>2.2</td>
<td>-2.3</td>
</tr>
<tr>
<td class="firstcol">Service Producing</td>
<td>703.4</td>
<td>-0.0</td>
<td>0.3</td>
<td>1.7</td>
<td>2.2</td>
<td>4.2</td>
<td>3.5</td>
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The Canadian economy paused in January after four successive gains in monthly GDP. The decrease was a modest -0.1%, including a similar slip in industrial production and a minuscule easing in service-producing industries. [...]

Canada GDP Slowed in January

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040331a.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association eased another 2.1% last week. That followed a 0.2% dip the prior period. Despite these recent backpedals, mortgage applications are up 25.1% in March versus February.
The effective interest rate on a conventional 30-Year mortgage rose to 5.75% from 5.62% during the prior two weeks. The effective rate on a 15-year mortgage rose to 5.08%.
Purchase applications fell 1.1% w/w (+21.7% y/y) for the second weekly decline. March purchase applications are 6.7% ahead of the February average.
During the last ten years there has been a 56% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance fell 2.6% (-25.1% y/y) following six weeks of gain.
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>.

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<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">03/26/04</th>
<th scope="col">03/19/04</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
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<td class="firstcol">Total Market Index</td>
<td>1,091.3</td>
<td>1,114.9</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>443.8</td>
<td>449.9</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>4,857.6</td>
<td>4,988.7</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
Chicago Purchasing Agents' Index Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 31, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040331b.jpg" width="353">
The Chicago Purchasing Managers Business Barometer for March fell to 57.6 from 63.6 in February. A lesser decline to 61.0 had been the Consensus expectation.
During the last twenty years there has been a 75% correlation between the level of the Chicago Business Barometer and quarterly growth in factory sector industrial output. There has been a 49% correlation with quarterly growth in real GDP.
The new orders index fell sharply to 60.4, the lowest level since September, and production fell to 59.1, also the lowest level since September. Still, the 1Q averages for orders and production are up versus 4Q03.
Employment fell to 49.2 but the 1Q average is up versus 4Q. During the last twenty years there has been a 71% correlation between the level of the employment index and the y/y change in factory sector payroll employment.
The index of prices paid jumped to 75.7, the highest level since May 1995.

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<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">Mar &#39;04</th>
<th scope="col">Feb &#39;04</th>
<th scope="col">Mar&nbsp; &#39;03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">Business Barometer</td>
<td>57.6</td>
<td>63.6</td>
<td>49.9</td>
<td>54.7</td>
<td>52.7</td>
<td>41.4</td>
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<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>60.4</td>
<td>67.5</td>
<td>53.9</td>
<td>58.0</td>
<td>56.2</td>
<td>42.3</td>
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<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>75.7</td>
<td>66.9</td>
<td>63.7</td>
<td>55.8</td>
<td>56.9</td>
<td>50.4</td>
</tr>
</tbody>
</table>
Factory Orders & Inventories Rose 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 31, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040331c.jpg" width="353">
Factory orders rose 0.3% m/m in February but the gain was dominated by a surge in aircraft. Orders for commercial aircraft jumped 33.8% (29.8% y/y) and defense aircraft orders ballooned 61.4% (30.3% y/y). Excluding the transportation sector altogether orders fell 1.2% (7.4% y/y) following several months of strong gain.
Non-durable goods orders which equal shipments fell 2.0% (+4.9% y/y) due to declines in virtually all industries. The advance report of a 2.5% rise in orders for durable goods was unrevised.
Factory inventories rose 0.5% in February and that was the strongest monthly gain since January 2001. The swing to inventory accumulation from decumulation has been scattered across industries with the notable exceptions of the information technology and furniture industries.
Factory shipments fell 0.5% but the January gain was revised away.

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM"> Factory Survey</a> (NAICS)</th>
<th scope="col">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>
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<td class="firstcol">Inventories</td>
<td>0.5%</td>
<td>0.3%</td>
<td>-0.8%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>0.3%</td>
<td>-0.9%</td>
<td>7.0%</td>
<td>3.7%</td>
<td>-1.9%</td>
<td>-6.7%</td>
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<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-0.5%</td>
<td>-0.0%</td>
<td>6.5%</td>
<td>2.6%</td>
<td>-2.0%</td>
<td>-5.4%</td>
</tr>
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<td class="firstcol">Unfilled Orders</td>
<td>0.6%</td>
<td>-0.0%</td>
<td>5.0%</td>
<td>4.2%</td>
<td>-6.1%</td>
<td>-5.9%</td>
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The index of mortgage applications compiled by the Mortgage Bankers Association eased another 2.1% last week. That followed a 0.2% dip the prior period. Despite these recent backpedals, mortgage applications are up 25.1% in March [...]

Mortgage Applications Eased As Rates Ticked Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040330a.jpg" width="353">
Chain store sales dropped 1.9% last week according to the International Council of Shopping Centers (ICSC)-UBS survey.The decline reversed all of the weekly gains during the prior two months.
The latest decline left sales so far in March 0.1% below the February average.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
During the last ten years there has been a 51% correlation between the year-to-year percent change in the ICSC-UBS measure of chain store sales and consumer sentiment.

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM"> ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">03/27/04</th>
<th scope="col">03/20/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>431.0</td>
<td>439.5</td>
<td>6.6%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
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</table>
Consumer Confidence Remained Depressed 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 30, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040330b.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence for March slipped 0.2% to 88.3 versus February&#39;s level, revised up slightly to 88.5 from 87.3 .
In contrast, the March reading of Consumer Sentiment from the University of Michigan rose 1.5% from February. The drop in Confidence was more moderate than Consensus expectations for a decline to 86.0.
During the last ten years there has been a 67% correlation between the level of consumer confidence and the y/y % change in real PCE.
The present situation reading rose 1.0% to 84.1 (+37.0% y/y) and prior month&#39;s levels were revised up sharply. The index of consumer expectations fell by 1.0% (+48.2% y/y), the third consecutive monthly decline, and prior month&#39;s levels were revised down.
Jobs were viewed as hard to get by 30.0% of respondents, an increase from prior month&#39;s levels which were revised down. The low for this series was in 2000 when 11.2% of respondents viewed jobs as hard to get.
Expectations for business conditions in six months held steady in March but only 19.3% of respondents expected conditions to improve, the lowest since last April.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM"> Conference Board</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">Consumer Confidence</td>
<td>88.3</td>
<td>88.5</td>
<td>43.8%</td>
<td>79.8</td>
<td>96.6</td>
<td>106.6</td>
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Chain store sales dropped 1.9% last week according to the International Council of Shopping Centers (ICSC)-UBS survey.The decline reversed all of the weekly gains during the prior two months. The latest decline left sales so far in [...]

Chain Store Sales Flop

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040329a.jpg" width="353">
Home prices as tallied by the Office of Federal Housing Enterprise Oversight (OFHEO) surged in 4Q 2003 by the most for any one period since 1Q 1979. The 3.7% jump last quarter pulled home price appreciation for the year to 6.9%.
The acceleration in home prices was notable versus the prior two years when prices rose an average of 1.6% each quarter. It was attributed to the economy&#39;s emergence from recession combined with the continued low level of interest rates. 
Home price appreciation accelerated across the country&#39;s regions. The greatest accelerations occurred in Vermont, New York and the District of Columbia.
The OFHEO house price index is a geometric weighted average based on more than 26.5 million repeat transactions over 29 years and 12,000 transactions annually.
View the latest OFHEO release <a href="http://www.ofheo.gov/media/pdf/4q03hpi.pdf">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E911/@E91101/@E91101.HTM"> OFHEO</a></th>
<th scope="col">4Q03</th>
<th scope="col">3Q03</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">House Price Index</td>
<td>3.7%</td>
<td>1.6%</td>
<td>8.0%</td>
<td>6.9%</td>
<td>7.1%</td>
<td>8.0%</td>
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</tbody>
</table>
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Home prices as tallied by the Office of Federal Housing Enterprise Oversight (OFHEO) surged in 4Q 2003 by the most for any one period since 1Q 1979. The 3.7% jump last quarter pulled home price appreciation for the year to 6.9%. The [...]

Home Prices Surged in 4Q03

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040326a.jpg" width="353">
Consumer spending rose just 0.2% in February following an upwardly revised 0.5% January increase. A 0.5% gain in total PCE had been the Consensus expectation.
Despite a modest increase in light vehicle sales last month, durable goods spending fell 0.2%. Spending on non-durables rose a slight 0.1% (6.5% y/y). After accounting for a 0.4% rise in the price deflator for non-durables, real non-durables spending fell 0.4% (+5.0% y/y). Services spending rose 0.4% (5.3% y/y).
Personal income rose 0.4% (+4.6% y/y) in February versus Consensus expectations for a 0.3% gain.
Wages &amp; salaries were strong with a 0.5% (+3.6% y/y) rise after an upwardly revised 0.7% January pop. Strength in wages was again spread evenly across industries.
Personal disposable income rose 0.4% (5.6% y/y) following an upwardly revised 0.9% January jump. Tax payments rose slightly (-3.6% y/y) after the 4.8% January skid. 
The PCE chain price index rose 0.2%. Less food &amp; energy prices rose 0.1% (1.1% y/y) last month after a like gain in January, but earlier figures were revised up slightly. 
The savings rate ticked up to 1.9%. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM"> Disposition of Personal Income</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>
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</thead>
<tbody>
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<td class="firstcol">Personal Income</td>
<td>0.4%</td>
<td>0.3%</td>
<td>4.6%</td>
<td>3.3%</td>
<td>2.3%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.2%</td>
<td>0.5%</td>
<td>5.8%</td>
<td>5.0%</td>
<td>4.8%</td>
<td>4.5%</td>
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<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>1.9%</td>
<td>1.8%</td>
<td>2.0%</td>
<td>2.1%</td>
<td>2.3%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.2%</td>
<td>0.3%</td>
<td>1.5%</td>
<td>1.8%</td>
<td>1.4%</td>
<td>2.0%</td>
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</tbody>
</table>
Surprise Gain in U.S. Consumer Sentiment 
by <a href="/comment/Stone.html">Carol Stone</a> March 26, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040326d.jpg" width="353">
The University of Michigan&#146;s consumer sentiment index rebounded unexpectedly in the latter part of March to give a 95.8 reading for the month as a whole. The mid- month index was 94.1, and Consensus expectations had called for further erosion to 93.2. Instead, the late March results put the month at the best level since mid-2002, apart from the unusual and unsustainable spurt in January.
The gain in sentiment may be related to the reduced number of claims for unemployment insurance. That recently favorable trend is probably the most positive sign about the labor market in many months. A comparison of the Michigan Index with monthly claims data shows 71%-83% correlation over various parts of the last 25 years. So if there are fewer layoffs, people &quot;feel better&quot; enough to push up the Michigan results. In turn, over the last ten years there has been a 76% 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. While it might go without saying that better labor market conditions should lead to more spending, what we have in the latest jobless claims data and the Michigan Survey is a very early indication that labor markets are getting better and that people may be noticing that. Moreover, the higher sentiment readings are somewhat surprising in light of the sharp nationwide surge in gasoline prices, the recent lackluster stock market, and the renewed terrorist concerns.
Perceptions of both current economic conditions and expectations shared in the more positive economic picture. The assessment of current conditions improved by more than a point from the mid-month result, and expectations reversed their earlier decline to show a net gain for the month, albeit a small one.
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><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">March</th>
<th scope="col">Mid- March</th>
<th scope="col">Feb</th>
<th scope="col">March 2003</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>95.8</td>
<td>94.1</td>
<td>94.4</td>
<td>77.6</td>
<td>87.6</td>
<td>89.6</td>
<td>89.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>106.8</td>
<td>105.7</td>
<td>103.6</td>
<td>90.0</td>
<td>97.2</td>
<td>97.5</td>
<td>100.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Expectations</td>
<td>88.8</td>
<td>86.6</td>
<td>88.5</td>
<td>69.6</td>
<td>81.4</td>
<td>84.6</td>
<td>82.3</td>
</tr>
</tbody>
</table>
</body>
</html>

Consumer spending rose just 0.2% in February following an upwardly revised 0.5% January increase. A 0.5% gain in total PCE had been the Consensus expectation. Despite a modest increase in light vehicle sales last month, durable goods [...]

U.S. Personal Spending Growth Slowed

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040325a.jpg" width="353">
The &quot;final&quot; release of U.S. GDP for Q4-2003 showed virtually no revision from the &quot;preliminary&quot; 4.1% growth. Upward revisions to PCE-services and nonresidential structures were offset by downward shifts in inventories and state and local government outlays.
This report brought the first reading on Q4 corporate profits; these had their third strong quarterly gain in a row, when measured to include inventory valuation and capital consumption adjustments. The resulting &quot;operating profits&quot; were up at quarterly rates of 10.3%, 9.9% and 7.2% in Q2, Q3 and Q4, respectively. Without the accounting adjustments, profits were also strong in Q3 and Q4, but had been soft in Q2, when a tax law change sharply increased depreciation charges calculated for tax purposes.
Whichever way profits are measured, they benefited from both volume gains and cost constraints in the second half of last year. As seen in the table below, value added by domestic non-financial corporations was even stronger than GDP in both Q3 and Q4. Prices increased modestly. But labor costs fell in both periods, and non-labor costs, especially &quot;interest and miscellaneous payments&quot;, were down in Q3 and flat in Q4. Unit profits, that is, profit &quot;margins&quot;, thus widened significantly. Indeed, at $0.122 per unit value added, operating profit margins were the largest since Q4 of 1997.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">SAAR, % Changes&nbsp;&nbsp;(except as noted)</th>
<th scope="col">Q4-2003</th>
<th scope="col">Q3-2003</th>
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Real GDP</td>
<td>4.1</td>
<td>8.2</td>
<td>3.1</td>
<td>2.2</td>
<td>0.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Real Value Added:&nbsp; Domestic Non-financial Corporations</td>
<td>5.0</td>
<td>9.3</td>
<td>5.4</td>
<td>3.5</td>
<td>-1.4</td>
</tr>
<tr>
<td class="firstcol">Price per Unit:&nbsp;&nbsp; Dollars</td>
<td>$1.019</td>
<td>$1.016</td>
<td>$1.015</td>
<td>$1.013</td>
<td>$1.012</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; % Change</td>
<td>1.2</td>
<td>0.8</td>
<td>0.5</td>
<td>-0.2</td>
<td>1.2</td>
</tr>
<tr>
<td class="firstcol">Compensation/Unit</td>
<td>-0.6</td>
<td>-4.2</td>
<td>-1.8</td>
<td>-2.8</td>
<td>0.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Non-labor Cost/Unit</td>
<td>0.0</td>
<td>-3.2</td>
<td>-3.6</td>
<td>0.0</td>
<td>4.1</td>
</tr>
<tr>
<td class="firstcol">Profits*/Unit (Qtrly % Chg)</td>
<td>2.5</td>
<td>10.2</td>
<td>27.1</td>
<td>20.0</td>
<td>-1.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Profits After Tax** (Qtrly % Chg)</td>
<td>12.4</td>
<td>9.4</td>
<td>20.7</td>
<td>24.1</td>
<td>-5.3</td>
</tr>
</tbody>
</table>
Jobless Claims Edge Upward, But Remain in 3-Year Low Ranges 
by <a href="/comment/Stone.html">Carol Stone</a> March 25, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040325b.jpg" width="353">
Initial claims for jobless insurance edged upward last week, interrupting a 3-week- long decline. Even so, the rise was only 1,000 and despite a 2,000 upward revision to the prior week, still allowed the 4-week moving average to decrease to 341,500, its lowest since the end of January 2001.
Continuing claims for unemployment insurance fell 46,000 in the March 13 week from a downwardly revised level in the the prior week, which now shows a 36,000 increase. The latest figure of 3.004 million continuing claims is the lowest since July 27, 2001, i.e., as the economy was experiencing that year&#39;s recessionary contraction.
The insured rate of unemployment was unchanged at 2.4% for a fifth consecutive week.

<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></th>
<th scope="col">3/20/04</th>
<th scope="col">3/13/04</th>
<th scope="col">3/06/04</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>&nbsp;&nbsp; 339</td>
<td>338</td>
<td>342</td>
<td>-15.9%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>3,004</td>
<td>3,050</td>
<td>-13.5%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
</body>
</html>

The "final" release of U.S. GDP for Q4-2003 showed virtually no revision from the "preliminary" 4.1% growth. Upward revisions to PCE-services and nonresidential structures were offset by downward shifts in inventories and state and [...]

Volume Gains & Cost Cutting Lift Q4 Corporate Profits

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040324e.jpg" width="353">
The South Korean economy ended 2003 on a firm note as GDP grew 2.7% (seasonally adjusted) in the fourth quarter, that is, 11.3% annualized. It stood 3.9% above the fourth quarter of 2002 and for the year as a whole, GDP was 3.1% above 2002.
The Q4 performance is an encouraging sign after outright contraction early in 2003 and a modest increase in Q3. Private consumption remained weak throughout, but investment and net exports made important positive contributions. In particular, investment in machinery and equipment turned upward distinctly after three negative quarters, yielding its best outturn since early in 2000.
The upturn in growth toward year-end is reassuring for Korea, as 2003 otherwise had a lackluster performance by recent historical standards. Only 1998, in the aftermath of the Asian-wide currency crises, saw more weakness. In the absence of such cataclysmic events, 2003 was indeed sluggish, so the fourth quarter improvement is beneficial. It gives a firmer base now that the nation is beset with political uncertainty in the face of the impeachment of its president. [N.B. The Bank of Korea is revising these national accounts data, including rebasing them to 2000 prices from 1995. Not all the detail is available to us from this source yet, and the data in real terms presently begin only in 1995.]

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GDP &amp; Selected Components</th>
Seasonally&nbsp; Adjusted &nbsp;Quarterly % Chg
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Q4-2003</td>
<td>Q3-2003 </td>
<td>Q2-2003</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">GDP&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>2.7</td>
<td>1.6</td>
<td>-0.1</td>
<td>3.9</td>
<td>7.5</td>
<td>4.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Year/Year</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>3.1</td>
<td>7.0</td>
<td>3.8</td>
</tr>
<tr>
<td class="firstcol">Private Consumption</td>
<td>-0.5</td>
<td>0.3</td>
<td>-0.8</td>
<td>-2.2</td>
<td>5.5</td>
<td>7.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Fixed Investment</td>
<td>3.2</td>
<td>-0.7</td>
<td>0.0</td>
<td>3.6</td>
<td>9.1</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>2.6</td>
<td>1.7</td>
<td>0.7</td>
<td>7.4</td>
<td>8.4</td>
<td>10.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Machinery &amp; Equipment</td>
<td>4.3</td>
<td>-4.9</td>
<td>-1.0</td>
<td>-2.4</td>
<td>9.6</td>
<td>-1.3</td>
</tr>
<tr>
<td class="firstcol">Net Exports (Bil.won)</td>
<td>SKW14.1</td>
<td>SKW9.3</td>
<td>SKW7.3</td>
<td>SKW37.3</td>
<td>SKW19.4</td>
<td>SKW21.1</td>
</tr>
</tbody>
</table>
</body>
</html>

The South Korean economy ended 2003 on a firm note as GDP grew 2.7% (seasonally adjusted) in the fourth quarter, that is, 11.3% annualized. It stood 3.9% above the fourth quarter of 2002 and for the year as a whole, GDP was 3.1% above [...]

Q4 Pick-Up in Investment Helps South Korean Economy

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: March 2004

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