Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331e.jpg" align="left" border="0" height="265" width="353">
Inflation in the Euro Area continues to climb. The flash
estimate for March was released today and reached 3.5%, up from 3.3% in
February and the highest level since the creation of the Euro Area in
January, 1999. Not surprisingly, business sentiment has been eroding as
a result, not only of rising inflation but also the turmoil in
financial markets. The Economic Sentiment Indicator for the entire
area, also released today, fell to 99.6 in March, the first time it has
been below its long term average of 100 since November, 2005. The first
chart show inflation and confidence in the Euro Area.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331d.jpg" align="right" border="0" height="265" width="353">
While sentiment for the entire area has declined, there has
been considerable variation in the way sentiment has changed among the
big four large countries--Germany, France, Italy and Spain. In Germany,
confidence actually rose slightly--0.3%--to 104.0 in March. In France,
it was unchanged at 105.6. In Italy, however, it was down 1.3% and in
Spain, 4.1%, taking their respective levels to 93.7 and 83.9, well
below their long term averages of 100. In year over year comparisons,
sentiment in Germany was down 4.9% compared with only 2.8% for France.
The big losses in sentiment were in Italy and Spain where the level of
sentiment was 16% and 17%, respectively, below the year ago levels.
Economic Sentiment Indicators for Germany, France, Italy and Spain are
shown in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">CONFIDENCE
MEASURES&nbsp;</th>
<th scope="col">Mar 08</th>
<th scope="col">Feb&nbsp; 08&nbsp;</th>
<th scope="col">Mar&nbsp; 07&nbsp;</th>
<th scope="col">M/M % Chg&nbsp;</th>
<th scope="col">Y/Y % Chg&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro Area: Inflation
(Percent)</td>
<td>3.5*</td>
<td>3.3</td>
<td>1.9</td>
<td>0.2</td>
<td>1.6</td>
<td>2.14</td>
<td>2.18</td>
<td>2.19</td>
</tr>
<tr>
<td class="firstcol" colspan="9">Euro Area: Economic
Sentiment Indicator (Long term average =100)&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total
</td>
<td>99.6</td>
<td>100.2</td>
<td>110.6</td>
<td>-0.60</td>
<td>-9.95</td>
<td>108.4</td>
<td>106.3</td>
<td>97.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Germany&nbsp;</td>
<td>104.0</td>
<td>103.7</td>
<td>109.3</td>
<td>0.29</td>
<td>-4.85</td>
<td>108.4</td>
<td>105.2</td>
<td>94.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; France</td>
<td>105.6</td>
<td>105.6</td>
<td>108.0</td>
<td>0.0</td>
<td>-2.76</td>
<td>109.8</td>
<td>106.2</td>
<td>102.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Italy&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>93.7</td>
<td>94.9</td>
<td>111.4</td>
<td>-1.26</td>
<td>-15.89</td>
<td>105.4</td>
<td>108.4</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Spain</td>
<td>83.9</td>
<td>87.5</td>
<td>101.5</td>
<td>-4.11</td>
<td>-17.34</td>
<td>97.7</td>
<td>98.9</td>
<td>100.6</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">*Flash Estimate (Changes are
differences)</td>
</tr>
</tbody>
</table>
</body></html>

Inflation in the Euro Area continues to climb. The flash estimate for March was released today and reached 3.5%, up from 3.3% in February and the highest level since the creation of the Euro Area in January, 1999. Not surprisingly, [...]

Inflation and Economic Sentiment in the Euro Area

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331a.jpg" width="353">
Not only have petroleum prices and gold prices surged, but in their wake has been broad based strength in commodity prices.
Industrial metals have remained strong recently despite the weakening of U.S. industrial sector activity. Continued strength in activity in the rest of the world accounts for the increase in metals prices. The table below indicates that aluminum prices are 10% above their 2007 average and they are 46% above 2005. Stainless steel scrap is up 6% from 2007 and more than double the 2005 average price. Prices for copper scrap round out the story of price strength and are 21% higher than last year and they are they are up one and a half times since 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331b.jpg" width="353">
Food prices show less broad based strength. Beef prices generally have moved sideways during the last few years. Milk prices have been volatile. Recently a sharp decline offset what previously was a huge milk price gain and left prices up by nearly one third from the 2005 average. Grain prices are another story with corn prices up strongly in part due to demand for ethanol. Corn prices have nearly tripled the 2005 average and wheat prices similarly have surged.
Strength in oil prices comes from several sources that have nearly doubled crude costs since 2005. 1) Growth in U.S. demand for oil remains firm. It only recently turned slightly negative y/y. 2) Demand from the rest of the world, notably China, is firm. 3) Supply is questionable with the War in Iraq ongoing.
Then there&#39;s the price of gold which has nearly doubled since 2005 and touched $1,000 per ounce mostly due to global unrest.
Why hasn&#39;t all this commodity price strength shown up more in consumer prices? That&#39;s because processing and distribution costs of food account for most of the price consumers pay. Distribution &amp; processing costs have gone up but not nearly as dramatically. The same is true for industrial materials prices, at least in the U.S. As for crude oil, the price gain has fed through and lifted gasoline prices by nearly 50% since 2005 (That&#39;s not to mention that gas prices have more than tripled since 1995.)<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331c.jpg" width="353">
How does all this shake out? For a while the price strength caused slower than anticipated declines in U.S. interest rates. That has now changed as the Federal Reserve is reacting more to the weakening in economic activity. For U.S. inflation the price gains likely will add further upward pressure, especially since labor costs are rising as is economic liquidity. Will consumer price inflation, therefore, move much higher? A Consensus of economists says no. Weaker U.S. economic growth is expected to diffuse the price pressure and leave the GDP price index up just 2.2% this year and next, down from a 2.7% rise last year and 3.2% during the prior two years.
The commodity price series in the table below can be found in Haver&#39;s WEEKLY database
Current Events in the Economy and Financial Markets is last week&#39;s speech by Sandra Pianalto, President and CEO Federal Reserve Bank of Cleveland and it can be found <a href="http://www.clevelandfed.org/NewsEvents/32708.cfm">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/SURVEYS/@S5/@S503/@S503.HTM">Commodity Prices</a></th>
<th scope="col">Latest Week</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">February &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;Industrial Metals</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Aluminum ($/ Metric Ton)</td>
<td>1.30</td>
<td>1.23</td>
<td>1.10</td>
<td>1.26</td>
<td>1.18</td>
<td>1.18</td>
<td>0.89</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Stainless Steel Scrap ($/Ton)</td>
<td>2,961</td>
<td>2,603</td>
<td>2,570</td>
<td>3,156</td>
<td>2,786</td>
<td>2,918</td>
<td>1,268</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Copper Scrap ($/lb)</td>
<td>3.70</td>
<td>3.57</td>
<td>3.20</td>
<td>2.61</td>
<td>3.06</td>
<td>3.04</td>
<td>2.28</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Foods</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Milk (Cents/lb.)</td>
<td>130</td>
<td>140</td>
<td>158</td>
<td>145</td>
<td>173</td>
<td>98</td>
<td>95</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Beef Carcass (Index Value)</td>
<td>133</td>
<td>138</td>
<td>139</td>
<td>139</td>
<td>141</td>
<td>136</td>
<td>136</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Corn ($/bushel)</td>
<td>5.10</td>
<td>4.88</td>
<td>4.54</td>
<td>3.87</td>
<td>3.49</td>
<td>2.41</td>
<td>1.90</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Wheat ($/bushel)</td>
<td>8.69</td>
<td>9.82</td>
<td>8.44</td>
<td>4.30</td>
<td>5.91</td>
<td>3.78</td>
<td>3.21</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Light Sweet Crude Oil, WTI ($/bbl.)</td>
<td>104.2</td>
<td>94.9</td>
<td>93.4</td>
<td>58.5</td>
<td>72.2</td>
<td>66.1</td>
<td>56.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Gold, Handy &amp; Harmon ($/oz.)</td>
<td>926.8</td>
<td>1,006.8</td>
<td>916.4</td>
<td>884.0</td>
<td>810.5</td>
<td>628.7</td>
<td>507.4</td>
</tr>
</tbody>
</table>
</body>
</html>

Not only have petroleum prices and gold prices surged, but in their wake has been broad based strength in commodity prices. Industrial metals have remained strong recently despite the weakening of U.S. industrial sector activity. [...]

Commodity Prices Surge

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331a.jpg" width="353">
Not only have petroleum prices and gold prices surged, but in their wake has been broad based strength in commodity prices.
Industrial metals have remained strong recently despite the weakening of U.S. industrial sector activity. Continued strength in activity in the rest of the world accounts for the increase in metals prices. The table below indicates that aluminum prices are 10% above their 2007 average and they are 46% above 2005. Stainless steel scrap is up 6% from 2007 and more than double the 2005 average price. Prices for copper scrap round out the story of price strength and are 21% higher than last year and they are they are up one and a half times since 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331b.jpg" width="353">
Food prices show less broad based strength. Beef prices generally have moved sideways during the last few years. Milk prices have been volatile. Recently a sharp decline offset what previously was a huge milk price gain and left prices up by nearly one third from the 2005 average. Grain prices are another story with corn prices up strongly in part due to demand for ethanol. Corn prices have nearly tripled the 2005 average and wheat prices similarly have surged.
Strength in oil prices comes from several sources that have nearly doubled crude costs since 2005. 1) Growth in U.S. demand for oil remains firm. It only recently turned slightly negative y/y. 2) Demand from the rest of the world, notably China, is firm. 3) Supply is questionable with the War in Iraq ongoing.
Then there&#39;s the price of gold which has nearly doubled since 2005 and touched $1,000 per ounce mostly due to global unrest.
Why hasn&#39;t all this commodity price strength shown up more in consumer prices? That&#39;s because processing and distribution costs of food account for most of the price consumers pay. Distribution &amp; processing costs have gone up but not nearly as dramatically. The same is true for industrial materials prices, at least in the U.S. As for crude oil, the price gain has fed through and lifted gasoline prices by nearly 50% since 2005 (That&#39;s not to mention that gas prices have more than tripled since 1995.)<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331c.jpg" width="353">
How does all this shake out? For a while the price strength caused slower than anticipated declines in U.S. interest rates. That has now changed as the Federal Reserve is reacting more to the weakening in economic activity. For U.S. inflation the price gains likely will add further upward pressure, especially since labor costs are rising as is economic liquidity. Will consumer price inflation, therefore, move much higher? A Consensus of economists says no. Weaker U.S. economic growth is expected to diffuse the price pressure and leave the GDP price index up just 2.2% this year and next, down from a 2.7% rise last year and 3.2% during the prior two years.
The commodity price series in the table below can be found in Haver&#39;s WEEKLY database
Current Events in the Economy and Financial Markets is last week&#39;s speech by Sandra Pianalto, President and CEO Federal Reserve Bank of Cleveland and it can be found <a href="http://www.clevelandfed.org/NewsEvents/32708.cfm">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/SURVEYS/@S5/@S503/@S503.HTM">Commodity Prices</a></th>
<th scope="col">Latest Week</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">February &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;Industrial Metals</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Aluminum ($/ Metric Ton)</td>
<td>1.30</td>
<td>1.23</td>
<td>1.10</td>
<td>1.26</td>
<td>1.18</td>
<td>1.18</td>
<td>0.89</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Stainless Steel Scrap ($/Ton)</td>
<td>2,961</td>
<td>2,603</td>
<td>2,570</td>
<td>3,156</td>
<td>2,786</td>
<td>2,918</td>
<td>1,268</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Copper Scrap ($/lb)</td>
<td>3.70</td>
<td>3.57</td>
<td>3.20</td>
<td>2.61</td>
<td>3.06</td>
<td>3.04</td>
<td>2.28</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Foods</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Milk (Cents/lb.)</td>
<td>130</td>
<td>140</td>
<td>158</td>
<td>145</td>
<td>173</td>
<td>98</td>
<td>95</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Beef Carcass (Index Value)</td>
<td>133</td>
<td>138</td>
<td>139</td>
<td>139</td>
<td>141</td>
<td>136</td>
<td>136</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Corn ($/bushel)</td>
<td>5.10</td>
<td>4.88</td>
<td>4.54</td>
<td>3.87</td>
<td>3.49</td>
<td>2.41</td>
<td>1.90</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Wheat ($/bushel)</td>
<td>8.69</td>
<td>9.82</td>
<td>8.44</td>
<td>4.30</td>
<td>5.91</td>
<td>3.78</td>
<td>3.21</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Light Sweet Crude Oil, WTI ($/bbl.)</td>
<td>104.2</td>
<td>94.9</td>
<td>93.4</td>
<td>58.5</td>
<td>72.2</td>
<td>66.1</td>
<td>56.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Gold, Handy &amp; Harmon ($/oz.)</td>
<td>926.8</td>
<td>1,006.8</td>
<td>916.4</td>
<td>884.0</td>
<td>810.5</td>
<td>628.7</td>
<td>507.4</td>
</tr>
</tbody>
</table>
 Inflation and Economic Sentiment in the Euro Area  
by <a href="/comment/Curley.html">Louise Curley</a> March 31, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331e.jpg" width="353">
Inflation in the Euro Area continues to climb. The flash estimate for March was released today and reached 3.5%, up from 3.3% in February and the highest level since the creation of the Euro Area in January, 1999. Not surprisingly, business sentiment has been eroding as a result, not only of rising inflation but also the turmoil in financial markets. The Economic Sentiment Indicator for the entire area, also released today, fell to 99.6 in March, the first time it has been below its long term average of 100 since November, 2005. The first chart show inflation and confidence in the Euro Area.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080331d.jpg" width="353">
While sentiment for the entire area has declined, there has been considerable variation in the way sentiment has changed among the big four large countries--Germany, France, Italy and Spain. In Germany, confidence actually rose slightly--0.3%--to 104.0 in March. In France, it was unchanged at 105.6. In Italy, however, it was down 1.3% and in Spain, 4.1%, taking their respective levels to 93.7 and 83.9, well below their long term averages of 100. In year over year comparisons, sentiment in Germany was down 4.9% compared with only 2.8% for France. The big losses in sentiment were in Italy and Spain where the level of sentiment was 16% and 17%, respectively, below the year ago levels. Economic Sentiment Indicators for Germany, France, Italy and Spain are shown in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CONFIDENCE MEASURES&nbsp;</th>
<th scope="col">Mar 08</th>
<th scope="col">Feb&nbsp; 08&nbsp;</th>
<th scope="col">Mar&nbsp; 07&nbsp;</th>
<th scope="col">M/M % Chg&nbsp;</th>
<th scope="col">Y/Y % Chg&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro Area: Inflation (Percent)</td>
<td>3.5*</td>
<td>3.3</td>
<td>1.9</td>
<td>0.2</td>
<td>1.6</td>
<td>2.14</td>
<td>2.18</td>
<td>2.19</td>
</tr>
<tr>
<td class="firstcol">Euro Area: Economic Sentiment Indicator (Long term average =100)&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>99.6</td>
<td>100.2</td>
<td>110.6</td>
<td>-0.60</td>
<td>-9.95</td>
<td>108.4</td>
<td>106.3</td>
<td>97.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Germany&nbsp;</td>
<td>104.0</td>
<td>103.7</td>
<td>109.3</td>
<td>0.29</td>
<td>-4.85</td>
<td>108.4</td>
<td>105.2</td>
<td>94.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; France</td>
<td>105.6</td>
<td>105.6</td>
<td>108.0</td>
<td>0.0</td>
<td>-2.76</td>
<td>109.8</td>
<td>106.2</td>
<td>102.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Italy&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>93.7</td>
<td>94.9</td>
<td>111.4</td>
<td>-1.26</td>
<td>-15.89</td>
<td>105.4</td>
<td>108.4</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Spain</td>
<td>83.9</td>
<td>87.5</td>
<td>101.5</td>
<td>-4.11</td>
<td>-17.34</td>
<td>97.7</td>
<td>98.9</td>
<td>100.6</td>
</tr>
<tr class="odd">
<td class="firstcol">*Flash Estimate (Changes are differences)</td>
<td></td>
<td></td>
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Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080328e.jpg" align="left" border="0" height="265" width="353">
Japan has been gradually making progress toward ridding itself
of its chronic deflation. Headline inflation now has turned positive
year-over-year and is positive over three months as well as over the
six-month horizon. The 12-month calculations are markedly different
from the year ago calculations which refer to the previous 12-month
period when the economy was more firmly in the grip of deflation.
Still, core inflation (ex-food and energy) has not yet moved up above
the zero mark.&gt;

In the quarter to date, inflation also has a positive tone.
Headline inflation is up at a 1% pace while the core is up at a 0.4%
pace and ex-food prices are rising at a 2.3% rate. Most CPI components
are rising in the first quarter of 2008 as well.

For Japan this mild inflation is a mark of success while other
countries are suffering with true inflation risks. Japan is emerging
from its battle with deflation, but it is still fighting to secure
growth.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">Japan CPI Trends </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>Qtr-to-Date</td>
</tr>
<tr>
<td class="firstcol">All items</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.8%</td>
<td>1.2%</td>
<td>1.0%</td>
<td>-0.8%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">All items less food and energy</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>-0.4%</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>-1.2%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">All items except fresh food</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>2.4%</td>
<td>1.8%</td>
<td>1.0%</td>
<td>-0.4%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol">seasonally
adjusted BY Haver</td>
</tr>
<tr>
<td class="firstcol">Food &amp; Beverage</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>0.0%</td>
<td>1.2%</td>
<td>0.4%</td>
<td>-0.5%</td>
</tr>
<tr>
<td class="firstcol">Housing</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>0.2%</td>
<td>0.0%</td>
<td>-1.2%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">Clothing and Personal&nbsp;</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>-0.2%</td>
<td>0.7%</td>
<td>1.6%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol">Education</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.8%</td>
<td>0.8%</td>
<td>0.7%</td>
<td>3.2%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol">Medical care</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>-0.8%</td>
<td>0.1%</td>
<td>-1.2%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">Miscellaneous</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.4%</td>
<td>0.5%</td>
<td>4.5%</td>
<td>0.1%</td>
</tr>
<tr>
<td class="firstcol">Reading &amp; Recreation</td>
<td>-0.3%</td>
<td>0.1%</td>
<td>-0.3%</td>
<td>-2.0%</td>
<td>-0.8%</td>
<td>-0.9%</td>
<td>-4.4%</td>
<td>-1.2%</td>
</tr>
<tr>
<td class="firstcol">Transport &amp;
Communication</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>1.0%</td>
<td>4.4%</td>
<td>5.0%</td>
<td>3.1%</td>
<td>-1.6%</td>
<td>5.7%</td>
</tr>
</tbody>
</table>
</body></html>

Japan has been gradually making progress toward ridding itself of its chronic deflation. Headline inflation now has turned positive year-over-year and is positive over three months as well as over the six-month horizon. The 12-month [...]

Japan’s Inflation Rate Rises but ‘Core’ Still Below Zero Y/Y

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080328c.jpg" width="353">
The University of Michigan&#39;s consumer sentiment index for all of March fell 1.8% m/m to 69.5. That was larger than the 0.4% decline in the preliminary reading and it was just slightly greater than Consensus expectations for a reading of 70.
The index of expected business conditions during the next year still accounted for all of the decline in March sentiment. The 3.7% decline followed an 8.4% February drop and left the index at its lowest since early 1992. Expectations for business conditions during the next year fell 14.8% (-51.6% y/y). hat m/m drop was double the decline in the preliminary report. And expectations for conditions over the next five years fell m/m rather than rose. Expectations for personal finances also were unchanged rather than posting a slight rise.
Opinions about government policy fell slightly m/m (-23.6% y/y) following the sharp 11.5% drop during February. The percentage of those surveyed who indicated that they thought government was doing a good job rose somewhat but 44% had a poor opinion.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080328d.jpg" width="353">
Expectations for inflation during the next twelve months surged to 4.6%, the highest level in nearly two years though inflation expectations during the next five to ten years fell slightly to 3.3%. That was the same expectation as in the preliminary reading.
The current conditions index fell 0.5% m/m after the 11.2% February plunge. The view of current conditions for buying large household goods improved slightly but the view of current personal finances fell for the fourth month in the last five (-16.2% y/y).
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database, with details in the proprietary UMSCA database.

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<colgroup><col><col><col><col><col><col><col><col></colgroup>
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<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">March (Prelim)</th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">March y/y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>&nbsp;69.5</td>
<td>70.5</td>
<td>70.8</td>
<td>78.4</td>
<td>-21.4% </td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>84.2</td>
<td>84.6</td>
<td>83.8</td>
<td>94.4</td>
<td>-18.6%</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>60.1</td>
<td>61.4</td>
<td>62.4</td>
<td>68.1</td>
<td>-23.6%</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
</body>
</html>

The University of Michigan's consumer sentiment index for all of March fell 1.8% m/m to 69.5. That was larger than the 0.4% decline in the preliminary reading and it was just slightly greater than Consensus expectations for a reading [...]

Michigan Consumer Sentiment Fell Further

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080328a.jpg" width="353">
Nominal personal income grew 0.5% last month and beat Consensus expectations for a 0.3% gain. The rise lifted the three-month growth in income to 4.8%, its best since September.
Wage &amp; salary income moderated a bit and rose 0.3% after January&#39;s 0.5% increase. Factory sector wages rose 0.3% (+0.4% y/y) and wages &amp; salaries in the private service-providing industries rose 0.3% (3.9% y/y). That y/y increase is much reduced from the 6.4% gain last year as well as from the 6.8% 2006 rise. Wages in the government sector rose a strong 0.5% (5.1% y/y) but here the story is one of acceleration after a 4.6% rise last year and a 4.1% 2006 increase.
Lower interest rates caused the fifth straight monthly decline in interest income (+3.6% y/y). That y/y increase was less than one third the rate of gain at the end of 2005. Dividend income rose another firm 0.6% (11.5% y/y), a double digit rate of gain that is down somewhat from its peak 16.3% in 2006.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080328b.jpg" width="353">
Disposable personal income growth improved last month to 0.5% which was its best increase since last August. The rise followed 0.4% gains during the prior two months. It raised the thee month growth rate to 5.5% (AR). Adjusted for prices, which moderated, real disposable income rose 0.3% and the three month growth rate picked up to 2.6%.
Personal consumption expenditures rose just the expected 0.1%. Real personal consumption expenditures were flat. That lowered the three-month growth rate to 0.3%, its worst since October 2005.
Real spending on discretionary items continued weak. Motor vehicle &amp; parts purchases did rise 0.3% but three month growth fell to -7.4%. Real spending on household furniture &amp; appliances also rose 0.3%, as it did in January, but three month growth fell to -2.1%. Real spending on apparel rose 1.4% however because of a sharp decline in December, three month growth improved only to -1.5%. These and other detailed spending figures are available in Haver&#39;s USNA database.
The PCE chain price index rose just 0.1% as energy prices fell 1.9%. The core PCE price index matched expectations and rose just 0.1%. The three month growth in prices fell to 2.1%, down from the three month gains of 2.7% registered last year.
The personal savings rate improved somewhat to all of 0.3% from the negative 0.1% during January. 
Yesterday&#39;s speech by Fed GovernorFrederic S. Mishkin on inflation titled Comfort Zones, Shmumfort Zones can be found <a href="http://www.federalreserve.gov/newsevents/speech/mishkin20080327a.htm">here</a>.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a> (%)</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.5</td>
<td>0.3</td>
<td>4.6</td>
<td>6.2</td>
<td>6.6</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Disposable Personal Income</td>
<td>0.5</td>
<td>0.4</td>
<td>4.7</td>
<td>5.7</td>
<td>5.9</td>
<td>4.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption</td>
<td>0.1</td>
<td>0.4</td>
<td>5.1%</td>
<td>5.5</td>
<td>5.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>0.3</td>
<td>-0.1</td>
<td>0.9 (Feb. 07)</td>
<td>0.4</td>
<td>0.4</td>
<td>0.5</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1</td>
<td>0.3</td>
<td>3.4</td>
<td>2.5</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.1</td>
<td>0.2</td>
<td>2.0</td>
<td>2.1</td>
<td>2.2</td>
<td>2.2</td>
</tr>
</tbody>
</table>
</body>
</html>

Nominal personal income grew 0.5% last month and beat Consensus expectations for a 0.3% gain. The rise lifted the three-month growth in income to 4.8%, its best since September. Wage & salary income moderated a bit and rose 0.3% after [...]

U.S. Real DPI Up 0.3%, Real PCE Flat, Prices Easy

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<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080328a.jpg" align="left" border="0" height="265" width="353">

Nominal personal income grew 0.5% last
month and beat Consensus expectations for a 0.3% gain. The rise lifted
the three-month growth in income to 4.8%, its best since September.
Wage &amp; salary income moderated a bit and rose 0.3%
after January's 0.5% increase. Factory sector wages rose 0.3% (+0.4%
y/y) and wages &amp; salaries in the private service-providing
industries rose 0.3% (3.9% y/y). That y/y increase is much reduced from
the 6.4% gain last year as well as from the 6.8% 2006 rise. Wages in
the government sector rose a strong 0.5% (5.1% y/y) but here the story
is one of acceleration after a 4.6% rise last year and a 4.1% 2006
increase.
Lower interest rates caused the fifth straight monthly decline
in interest income (+3.6% y/y). That y/y increase was less than one
third the rate of gain at the end of 2005. Dividend income rose another
firm 0.6% (11.5% y/y), a double digit rate of gain that is down
somewhat from its peak 16.3% in 2006.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080328b.jpg" align="right" border="0" height="265" width="353">
Disposable personal income growth improved
last month to 0.5% which was its best increase since last August. The
rise followed 0.4% gains during the prior two months. It raised the
thee month growth rate to 5.5% (AR). Adjusted for prices, which
moderated, real disposable income rose 0.3% and the three month growth
rate picked up to 2.6%.
Personal consumption expenditures rose just the expected 0.1%.
Real personal consumption expenditures were flat.
That lowered the three-month growth rate to 0.3%, its worst since
October 2005.
Real spending on discretionary items continued weak. Motor
vehicle &amp; parts purchases did rise 0.3% but three month growth
fell to -7.4%. Real spending on household furniture &amp;
appliances also rose 0.3%, as it did in January, but three month growth
fell to -2.1%. Real spending on apparel rose 1.4% however because of a
sharp decline in December, three month growth improved only to -1.5%.
These and other detailed spending figures are available in Haver's
USNA database.
The PCE chain price index rose just 0.1%
as energy prices fell 1.9%. The core PCE price index
matched expectations and rose just 0.1%. The three month growth in
prices fell to 2.1%, down from the three month gains of
2.7% registered last year.
The personal savings rate improved somewhat to all of 0.3%
from the negative 0.1% during January.
Yesterday's speech by Fed GovernorFrederic S. Mishkin on
inflation titled Comfort Zones, Shmumfort Zones can
be found <a href="http://www.federalreserve.gov/newsevents/speech/mishkin20080327a.htm">here</a>. 

</div>


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition
of Personal Income</a> (%)</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.5</td>
<td>0.3</td>
<td>4.6</td>
<td>6.2</td>
<td>6.6</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Disposable
Personal Income</td>
<td>0.5</td>
<td>0.4</td>
<td>4.7</td>
<td>5.7</td>
<td>5.9</td>
<td>4.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption</td>
<td>0.1</td>
<td>0.4</td>
<td>5.1%</td>
<td>5.5</td>
<td>5.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>0.3</td>
<td>-0.1</td>
<td>0.9 (Feb. 07)</td>
<td>0.4</td>
<td>0.4</td>
<td>0.5</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1</td>
<td>0.3</td>
<td>3.4</td>
<td>2.5</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>0.1</td>
<td>0.2</td>
<td>2.0</td>
<td>2.1</td>
<td>2.2</td>
<td>2.2</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment Fell
Further 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 28, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080328c.jpg" align="left" border="0" height="265" width="353">
The University of Michigan's consumer sentiment index for all
of March fell 1.8% m/m to 69.5. That was larger than the 0.4% decline
in the preliminary reading and it was just slightly greater than
Consensus expectations for a reading of 70.
The index of expected business conditions during the next year
still accounted for all of the decline in March sentiment. The 3.7%
decline followed an 8.4% February drop and left the index at its lowest
since early 1992. Expectations for business conditions during the next
year fell 14.8% (-51.6% y/y). hat m/m drop was double the decline in
the preliminary report. And expectations for conditions over the next
five years fell m/m rather than rose. Expectations for personal
finances also were unchanged rather than posting a slight rise.
Opinions about government policy fell slightly m/m (-23.6%
y/y) following the sharp 11.5% drop during February. The percentage of
those surveyed who indicated that they thought government was doing a
good job rose somewhat but 44% had a poor opinion.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080328d.jpg" align="right" border="0" height="265" width="353">
Expectations for inflation during the next twelve months
surged to 4.6%, the highest level in nearly two years though inflation
expectations during the next five to ten years fell slightly to 3.3%.
That was the same expectation as in the preliminary reading.
The current conditions index fell 0.5% m/m after the 11.2%
February plunge. The view of current conditions for buying large
household goods improved slightly but the view of current personal
finances fell for the fourth month in the last five (-16.2% y/y).
The University of Michigan survey is not seasonally
adjusted.The reading is based on telephone interviews with about 500
households at month-end; the mid-month results are based on about 300
interviews. The summary indexes are in Haver's USECON database,
with details in the proprietary UMSCA database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">March</th>
<th scope="col">March (Prelim)</th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">March y/y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>&nbsp;69.5</td>
<td>70.5</td>
<td>70.8</td>
<td>78.4</td>
<td>-21.4% </td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>84.2</td>
<td>84.6</td>
<td>83.8</td>
<td>94.4</td>
<td>-18.6%</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>60.1</td>
<td>61.4</td>
<td>62.4</td>
<td>68.1</td>
<td>-23.6%</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
Japan&#8217;s Inflation Rate Rises but&#8216;Core&#8217; Still Below Zero Y/Y&nbsp; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 28, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080328e.jpg" align="left" border="0" height="265" width="353">
Japan has been gradually making progress toward ridding itself
of its chronic deflation. Headline inflation now has turned positive
year-over-year and is positive over three months as well as over the
six-month horizon. The 12-month calculations are markedly different
from the year ago calculations which refer to the previous 12-month
period when the economy was more firmly in the grip of deflation.
Still, core inflation (ex-food and energy) has not yet moved up above
the zero mark.&gt;

In the quarter to date, inflation also has a positive tone.
Headline inflation is up at a 1% pace while the core is up at a 0.4%
pace and ex-food prices are rising at a 2.3% rate. Most CPI components
are rising in the first quarter of 2008 as well.

For Japan this mild inflation is a mark of success while other
countries are suffering with true inflation risks. Japan is emerging
from its battle with deflation, but it is still fighting to secure
growth.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">Japan CPI
Trends </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>Qtr-to-Date</td>
</tr>
<tr>
<td class="firstcol">All items</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.8%</td>
<td>1.2%</td>
<td>1.0%</td>
<td>-0.8%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">All items less food and energy</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>-0.4%</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>-1.2%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">All items except fresh food</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>2.4%</td>
<td>1.8%</td>
<td>1.0%</td>
<td>-0.4%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol">seasonally
adjusted BY Haver</td>
</tr>
<tr>
<td class="firstcol">Food &amp; Beverage</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>0.0%</td>
<td>1.2%</td>
<td>0.4%</td>
<td>-0.5%</td>
</tr>
<tr>
<td class="firstcol">Housing</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>0.2%</td>
<td>0.0%</td>
<td>-1.2%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">Clothing and Personal&nbsp;</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>-0.2%</td>
<td>0.7%</td>
<td>1.6%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol">Education</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.8%</td>
<td>0.8%</td>
<td>0.7%</td>
<td>3.2%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol">Medical care</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>-0.8%</td>
<td>0.1%</td>
<td>-1.2%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">Miscellaneous</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.4%</td>
<td>0.5%</td>
<td>4.5%</td>
<td>0.1%</td>
</tr>
<tr>
<td class="firstcol">Reading &amp; Recreation</td>
<td>-0.3%</td>
<td>0.1%</td>
<td>-0.3%</td>
<td>-2.0%</td>
<td>-0.8%</td>
<td>-0.9%</td>
<td>-4.4%</td>
<td>-1.2%</td>
</tr>
<tr>
<td class="firstcol">Transport &amp;
Communication</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>1.0%</td>
<td>4.4%</td>
<td>5.0%</td>
<td>3.1%</td>
<td>-1.6%</td>
<td>5.7%</td>
</tr>
</tbody>
</table>
</body></html>

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
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background-color:#c6c6c6;
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background-color:#b8b8b8;
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</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080327g.jpg" align="left" border="0" height="265" width="353">
Japanese retail sales strengthened late in 2007 but are giving
those gains back in Q1 2008. Inflation adjusted retail sales fell by 1%
in February 2008, unwinding the 0.8% gain in January. In the
quarter-to-date real retail sales are now shrinking at a 0.6% annual
rate. The inflation adjusted retail trends are somewhat distressed.
The detail for Japan&#8217;s retail sales is not seasonally adjusted
or inflation adjusted. But for those flows we can compare the last
12-month pace with that of 12-month previous to that (Yr-Ago). On that
basis there has been improvement across most of the retail sales
components. Growth is better over the recent 12 months than over the
previous 12 months, except for food and beverages.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col"> Japan Retail Sales Trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>Q-to-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">Total SA</td>
<td>-1.0%</td>
<td>0.8%</td>
<td>-0.7%</td>
<td>-3.5%</td>
<td>-2.0%</td>
<td>-0.4%</td>
<td>-2.0%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol" colspan="9">Not
seasonally adjusted</td>
</tr>
<tr class="odd">
<td class="firstcol">Total: Nominal</td>
<td>2.4%</td>
<td>0.6%</td>
<td>-0.8%</td>
<td>8.8%</td>
<td>4.9%</td>
<td>3.2%</td>
<td>-0.6%</td>
<td>7.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Vehicles</td>
<td>-3.0%</td>
<td>2.9%</td>
<td>-0.8%</td>
<td>-4.2%</td>
<td>-3.0%</td>
<td>3.3%</td>
<td>-18.8%</td>
<td>3.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food&amp; Beverage</td>
<td>1.9%</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>7.6%</td>
<td>4.6%</td>
<td>2.1%</td>
<td>6.2%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Fabric apparel&amp; access</td>
<td>5.0%</td>
<td>1.2%</td>
<td>-2.6%</td>
<td>14.7%</td>
<td>4.7%</td>
<td>2.3%</td>
<td>0.9%</td>
<td>12.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Rest of Retail</td>
<td>3.5%</td>
<td>0.2%</td>
<td>-0.9%</td>
<td>11.7%</td>
<td>6.9%</td>
<td>3.9%</td>
<td>-0.2%</td>
<td>8.7%</td>
</tr>
</tbody>
</table>
</body></html>

Japanese retail sales strengthened late in 2007 but are giving those gains back in Q1 2008. Inflation adjusted retail sales fell by 1% in February 2008, unwinding the 0.8% gain in January. In the quarter-to-date real retail sales are [...]

Japan Retail Sales Show Some Life in January and Give it Back in February

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

250430A.jpg

250430B.jpg

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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250430D.jpg

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

Personal Income, Consumption, and Prices in March

250430F20.jpg

250430G20.jpg

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 2008

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Inflation and Economic Sentiment in the Euro Area

Commodity Prices Surge

Commodity Prices Surge

Japan’s Inflation Rate Rises but ‘Core’ Still Below Zero Y/Y

Michigan Consumer Sentiment Fell Further

U.S. Real DPI Up 0.3%, Real PCE Flat, Prices Easy

U.S. Real DPI Up 0.3%, Real PCE Flat, Prices Easy

Japan Retail Sales Show Some Life in January and Give it Back in February