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/040430d.jpg" width="353">
A couple of weeks ago, we commented on Japanese industry employment data that showed some improvement through February, although the gain was narrowly focused on the service sector. Today, the comprehensive labor force survey for March, along with separate wage and hour data, shows a similar pattern of scattered advance.
Improvement in the unemployment picture is unequivocal. The rate dropped from 5.0% in February to 4.7% in March, the lowest since March 2001. This accompanied a rise in total employment of 0.3% from February. However, while unemployment rate is well down from its peak of 5.5% in early 2003, employment seems not to have much of a growth trend in place yet.
A good sign of promise is contained in the hours data. This is a separate survey of companies with 5 or more employees conducted by the Ministry of Health, Labor and Welfare. Hours worked at these companies surged in March by 4.2% to 102.2, the highest level since May 1997, nearly seven years ago. But other results of that survey are not as strong, as cash earnings for March actually fell. This could suggest that jobs growth is in lower-paying sectors or positions.
Thus, despite the better look of some of the labor market data, household spending has yet to respond definitively. In data for March also released today, workers&#39; household expenditures decreased 6.7%, more than erasing the gains in January and February. Several of these measures, then -- employment, earnings and spending -- look to be forming a base toward expansion, but are not yet climbing with any resolve.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Selected Indicators for Japan</th>
<th scope="col">Mar 2004</th>
<th scope="col">Feb 2004</th>
<th scope="col">Jan 2004</th>
<th scope="col">Year Ago</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">Employment* (millions)&nbsp;</td>
<td>63.40</td>
<td>63.21</td>
<td>63.22</td>
<td>63.28</td>
<td>63.17</td>
<td>63.30</td>
<td>64.10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>+0.3</td>
<td>-0.0</td>
<td>+0.1</td>
<td>+0.2</td>
<td>-0.2</td>
<td>-1.2</td>
<td>-0.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate* (%)</td>
<td>4.7</td>
<td>5.0</td>
<td>5.0</td>
<td>5.4</td>
<td>5.3</td>
<td>5.4</td>
<td>5.0</td>
</tr>
<tr>
<td class="firstcol">Hours Worked** (2000=100)</td>
<td>102.2</td>
<td>98.1</td>
<td>99.4</td>
<td>97.8</td>
<td>98.0</td>
<td>98.0</td>
<td>99.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Cash Earnings** (2000=100)</td>
<td>93.5</td>
<td>96.5</td>
<td>96.2</td>
<td>96.0</td>
<td>95.2</td>
<td>96.0</td>
<td>98.7</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Workers&#39; Household Spending* (2000=100)</td>
<td>94.4</td>
<td>101.2</td>
<td>98.4</td>
<td>95.0</td>
<td>95.6</td>
<td>97.0</td>
<td>98.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>-6.7</td>
<td>2.8</td>
<td>4.1</td>
<td>-0.6</td>
<td>-1.5</td>
<td>-1.3</td>
<td>-1.7</td>
</tr>
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A couple of weeks ago, we commented on Japanese industry employment data that showed some improvement through February, although the gain was narrowly focused on the service sector. Today, the comprehensive labor force survey for [...]

More Japanese Labor Data Extend Mixed Improvement

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040430a.jpg" width="353">
Personal income rose 0.4% (+4.9% y/y) last month following an upwardly revised 0.5% gain in February. Consensus expectations had been for a 0.4% rise.
Wage &amp; salary growth cooled to 0.2% (+3.7% y/y) after 0.5% and 0.7% gains in the prior two months. A modest decline in manufacturing wages (1.8% y/y) was accompanied by a slower 0.2% (4.4% y/y) rise in service industry wages.
Personal disposable income rose 0.4% (5.7% y/y) following a 0.5% February increase. Tax payments rose 0.4% (-1.1% y/y).
Consumer spending rose the same 0.4% in March as during the month prior. A 0.7% gain in PCE had been the Consensus expectation. Services PCE slowed to a modest 0.2% (5.5% y/y) versus 0.4% and 0.8% gains in the prior two months. Durable spending rose 0.4% (6.0% y/y) as unit light vehicle sales rose 1.7% (2.9% y/y). 
The PCE chain price index rose 0.3%. Less food &amp; energy prices rose 0.2% (1.4% y/y) in March. Since October monthly increases in the core PCE price index have been either 0.1% or 0.2%. 
The savings rate held steady at 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">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>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.4%</td>
<td>0.5%</td>
<td>4.9%</td>
<td>3.3%</td>
<td>2.3%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.4%</td>
<td>0.4%</td>
<td>5.9%</td>
<td>5.0%</td>
<td>4.8%</td>
<td>4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>1.9%</td>
<td>1.9%</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>0.3%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>1.8%</td>
<td>1.4%</td>
<td>2.0%</td>
</tr>
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</table>
U.S. Consumer Sentiment Improved Late in April, But Fell For The Month 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 30, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040430b.jpg" width="353">
The University of Michigan&#146;s consumer sentiment index for the full month of April fell to 94.2 from 95.8 in March. The reading about equaled Consensus expectations and represented an improvement from the mid-month reading of 93.2.
During the last ten years there has been a 75% correlation between the level of consumer sentiment and the y/y change in real PCE. That correlation has risen to 82% during the last five years.
Perceptions of current economic conditions slipped 1.7% in April to 105.0. The expectations index fell 1.7% to 87.3. Both figures were slightly improved from the mid-month readings.
The figures contrasted with the moderate improvement in Consumer Confidence in April reported earlier by the Conference Board. During the last ten years there has been an 84% correlation between the y/y change in the two measures.
The University of Michigan survey is not seasonally adjusted.The mid-month survey 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.

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<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"> April</th>
<th scope="col">Mar</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
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<td class="firstcol">Consumer Sentiment</td>
<td>94.2</td>
<td>95.8</td>
<td>9.5%</td>
<td>87.6</td>
<td>89.6</td>
<td>89.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>105.0</td>
<td>106.8</td>
<td>8.9%</td>
<td>97.2</td>
<td>97.5</td>
<td>100.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>87.3</td>
<td>88.8</td>
<td>10.1%</td>
<td>81.4</td>
<td>84.6</td>
<td>82.3</td>
</tr>
</tbody>
</table>
Chicago Purchasing Agents' Index Strong 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 30, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040430c.jpg" width="353">
The April Chicago Purchasing Managers Business Barometer rose to 63.9 from 57.6 in March. The increase beat Consensus expectations for a gain to 61.0 and was to a level just short of the ten year high in January.
During the last ten years there has been an 83% correlation between the level of the Chicago Business Barometer and quarterly growth in factory sector industrial output. There has been a 48% correlation with growth in real GDP.
The new orders index jumped to 65.1 from 60.4, recovering much of the 7.1 point drop in March. Production rose 5.7 points to 64.8 but this index still is well off the January high of 76.5.
Employment improved modestly to 50.9 versus 49.2 in March and versus 50.8 in 1Q. During the last twenty years there has been a 71% correlation between the level of this employment index and the y/y change in factory sector payroll employment.
The index of prices paid was again firm and rose to 76.1.

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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"> April</th>
<th scope="col">Mar</th>
<th scope="col">April&nbsp; &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Barometer</td>
<td>63.9</td>
<td>57.6</td>
<td>47.3</td>
<td>54.7</td>
<td>52.7</td>
<td>41.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>65.1</td>
<td>60.4</td>
<td>44.0</td>
<td>58.0</td>
<td>56.2</td>
<td>42.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>76.1</td>
<td>75.7</td>
<td>54.9</td>
<td>55.8</td>
<td>56.9</td>
<td>50.4</td>
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Personal income rose 0.4% (+4.9% y/y) last month following an upwardly revised 0.5% gain in February. Consensus expectations had been for a 0.4% rise. Wage & salary growth cooled to 0.2% (+3.7% y/y) after 0.5% and 0.7% gains in the [...]

U.S. Personal Income & Spending Rose Moderately

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040429e.jpg" width="353">
Business leaders in France and Italy tend to think alike, as suggested by the chart at left. The French &quot;General Outlook&quot; index for production has a 75% correlation with the Business Confidence Indicator in Italy.
However, in recent months, these gauges have had opposing moves. In France, a firm recovery in business sentiment during much of 2003 looks to be fading, as the INSEE outlook measure for April slipped back below zero. In Italy, though, improvement persists after a brief setback right at year-end 2003. The &quot;business outlook indicator&quot; sits at 96.5, its highest since May 2002. The accompanying measure of the current assessment of orders for total industry gained from -17 in February and March to -12 in April, also the best reading since the spring of 2002.
Possibly, these divergent movements -- and they&#39;re not dramatic, so we shouldn&#39;t make too much of them -- are tied to currently uncertain prospects for prices. In France, the &quot;general industrial price level trend&quot; jumped in April to +18 from +6 in both prior months, but expectations for selling prices deteriorated to -6, the weakest in seven months. We can surmise that rising commodity prices, especially for energy, are pushing up input prices, but clearly businesses in France are not optimistic about being able to pass those through to their customers.
In Italy, though, forecast sales prices remain firm. At +11 in both March and April, this is the most favorable outlook for pricing in over three years. Thus, it looks that a better market tone is keeping Italian business executives relatively more upbeat than those in France.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol">% Balance, except where noted</th>
<th scope="col">Apr 2004</th>
<th scope="col">Mar 2004</th>
<th scope="col">Feb 2004</th>
<th scope="col">Year Ago</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">France INSEE Survey: Outlook for Production Trend</td>
<td>-10</td>
<td>5</td>
<td>11</td>
<td>-60</td>
<td>-29</td>
<td>-22</td>
<td>-23</td>
</tr>
<tr>
<td class="firstcol">Price Trend</td>
<td>18</td>
<td>6</td>
<td>6</td>
<td>1</td>
<td>-7</td>
<td>3</td>
<td>12</td>
</tr>
<tr class="odd">
<td class="firstcol">Likely Sales Price</td>
<td>-6</td>
<td>-3</td>
<td>-1</td>
<td>-6</td>
<td>-7</td>
<td>-5</td>
<td>-1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy ISAE Survey: Business Confidence Indicator (1995=100)</td>
<td>96.5</td>
<td>93.6</td>
<td>92.7</td>
<td>90.5</td>
<td>92.4</td>
<td>93.9</td>
<td>91.9</td>
</tr>
<tr>
<td class="firstcol">Total Industry Assessment of Orders</td>
<td>-12</td>
<td>-17</td>
<td>-17</td>
<td>-23</td>
<td>-19</td>
<td>-15</td>
<td>-14</td>
</tr>
<tr class="odd">
<td class="firstcol">Production Forecast</td>
<td>20</td>
<td>19</td>
<td>18</td>
<td>11</td>
<td>14</td>
<td>16</td>
<td>13</td>
</tr>
<tr>
<td class="firstcol">Selling Prices</td>
<td>11</td>
<td>11</td>
<td>9</td>
<td>8</td>
<td>6</td>
<td>6</td>
<td>8</td>
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</tbody>
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Business leaders in France and Italy tend to think alike, as suggested by the chart at left. The French "General Outlook" index for production has a 75% correlation with the Business Confidence Indicator in Italy. However, in recent [...]

Business Sentiment Up in Italy, Down in France

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040429a.jpg" width="353">
US real GDP grew a less than expected 4.2% last quarter, about the same as in 4Q03. During the last four quarters GDP growth of 4.9% is an improvement from 0.0% at the end of 2001 and the fastest since 1984. The Consensus expectation was for 5.0% growth in 1Q.
Personal consumption expenditures grew at a 3.8% (4.3% y/y) rate, up a bit from 3.2% growth in 4Q. The increase was held back by a 4.7% decline in durables spending, down due to lower light vehicle sales.
Nonresidential fixed investment rose 7.2% (AR, 9.4% y/y), down slightly from the 10.9% and 12.8% growth during the prior two quarters. Structures investment fell for the third straight quarter but equipment &amp; software investment held firm at 11.4% (12.9% y/y).
Residential investment growth was light at 2.1% (8.8% y/y), down from 7.9% and 21.9% growth in the prior two quarters. The rise actually was a bit better than suggested by the monthly reports on construction.
Government spending rose at only a 2.0% rate due to a 2.6% (-0.5% y/y) decline in state &amp; local. Federal spending jumped 10.1% (8.5% y/y) on a 15.1% (13.5% y/y) rise in defense spending.
Additional investment in inventories added 0.3 percentage points to GDP growth, half the contribution in 4Q.
Trade sector improvement added marginally to GDP growth as exports grew 3.2% (7.8% y/y) and imports rose 2.0% (6.9% y/y).
Corporate profits for 4Q03 were unrevised. Operating profits rose 7.2% (29.0% y/y) following a 9.9% jump in 3Q. &quot;Recent Revisions to Corporate Profits: What We Know and When We Knew It&quot; from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/newsevents/news/research/2004/rp040323.html"> here</a>.
Prices rose at the fastest clip since 2Q 2001. The 2.5% rise in the chain price index was goosed by a 3.2% rise in the PCE price index. Non-durable prices surged 5.3% on higher gasoline prices. Durable goods prices have been falling since 1995 though the rate of decline was a modest 0.3% in 1Q. Business equipment &amp; software prices fell 0.5% (-0.0% y/y). <table border="1" cellpadding="0" cellspacing="0" width="100%"><tr><td valign="top" width="211"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM"> Chained 2000$, % AR</a></td><td align="center" valign="top" width="118"> 1Q &#39;04 (Advance)</td><td align="center" valign="top" width="86"> 4Q &#39;03 (Final)</td><td align="center" valign="top" width="60"> Y/Y</td><td align="center" valign="top" width="60">2003</td><td align="center" valign="top" width="60">2002</td><td align="center" valign="top" width="60">2001</td></tr><tr><td valign="top" width="211">GDP</td><td align="center" valign="top" width="118">4.2%</td><td align="center" valign="top" width="86">4.1%</td><td align="center" valign="top" width="60">4.9%</td><td align="center" valign="top" width="60">3.1%</td><td align="center" valign="top" width="60">2.2%</td><td align="center" valign="top" width="60">0.5%</td></tr><tr><td valign="top" width="211"> Inventory Effect</td><td align="center" valign="top" width="118">0.3%</td><td align="center" valign="top" width="86">0.7%</td><td align="center" valign="top" width="60">0.2%</td><td align="center" valign="top" width="60">-0.1%</td><td align="center" valign="top" width="60">0.4%</td><td align="center" valign="top" width="60">-0.9%</td></tr><tr><td valign="top" width="211">Final Sales</td><td align="center" valign="top" width="118">3.9%</td><td align="center" valign="top" width="86">3.4%</td><td align="center" valign="top" width="60">4.7%</td><td align="center" valign="top" width="60">3.2%</td><td align="center" valign="top" width="60">1.8%</td><td align="center" valign="top" width="60">1.4%</td></tr><tr><td valign="top" width="211"> Trade Effect</td><td align="center" valign="top" width="118">0.0%</td><td align="center" valign="top" width="86">-0.3%</td><td align="center" valign="top" width="60">0.0%</td><td align="center" valign="top" width="60">-0.2%</td><td align="center" valign="top" width="60">-0.6%</td><td align="center" valign="top" width="60">-0.2%</td></tr><tr><td valign="top" width="211">Domestic Final Demand</td><td align="center" valign="top" width="118">3.7%</td><td align="center" valign="top" width="86">3.6%</td><td align="center" valign="top" width="60">4.7%</td><td align="center" valign="top" width="60">3.4%</td><td align="center" valign="top" width="60">2.4%</td><td align="center" valign="top" width="60">1.6%</td></tr><tr><td valign="top" width="211">Chained GDP Price Index</td><td align="center" valign="top" width="118">2.5%</td><td align="center" valign="top" width="86">1.5%</td><td align="center" valign="top" width="60">1.7%</td><td align="center" valign="top" width="60">1.7%</td><td align="center" valign="top" width="60">1.5%</td><td align="center" valign="top" width="60">2.4%</td></tr></table>

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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM"> Chained 2000$, % AR</a></th>
<th scope="col"> 1Q &#39;04 (Advance)</th>
<th scope="col"> 4Q &#39;03 &nbsp; &nbsp;(Final)</th>
<th scope="col"> Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>4.2%</td>
<td>4.1%</td>
<td>&nbsp;4.9%</td>
<td>3.1%</td>
<td>2.2%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.3%</td>
<td>0.7%</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>0.4%</td>
<td>-0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>3.9%</td>
<td>3.4%</td>
<td>4.7%</td>
<td>3.2%</td>
<td>1.8%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>0.0%</td>
<td>-0.2%</td>
<td>-0.6%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>3.7%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>3.4%</td>
<td>2.4%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.5%</td>
<td>1.5%</td>
<td>1.7%</td>
<td>1.7%</td>
<td>1.5%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>
Benefits Drove 1Q'04 Employment Cost Index 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 29, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040429c.jpg" width="353">
The employment cost index for workers in private industry jumped 1.1% last quarter, ahead of Consensus expectations for a 0.9% gain.
Benefit costs in private industry surged 2.6% in 1Q, the fastest quarterly increase since 1982. The gain was driven by a rise in payments by companies to defined benefit pension plans. Health insurance benefit inflation cooled slightly to 9.3% y/y from 10.5% in 2003.
Wages and salaries, which account for roughly 70% of the compensation index, grew 0.6% last quarter versus 0.5% gain in 4Q.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB08/@EB08.HTM"> ECI- Private Industry Workers</a></th>
<th scope="col"> 1Q&#39;04</th>
<th scope="col">4Q&#39;03</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Compensation</td>
<td>1.1%</td>
<td>0.8%</td>
<td>3.9%</td>
<td>4.0%</td>
<td>3.2%</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp; Salaries</td>
<td>0.6%</td>
<td>0.5%</td>
<td>2.6%</td>
<td>3.0%</td>
<td>2.7%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>2.6%</td>
<td>1.4%</td>
<td>7.0%</td>
<td>6.4%</td>
<td>4.7%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
Jobless Claims Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 29, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040429d.jpg" width="353">
Initial claims for jobless insurance fell 18,000 last week to 338,000, the lowest level in three weeks. Consensus expectations had been for a decline to 345,000 claims. Claims during the prior week were revised up slightly.
The 4-week moving average of initial claims fell slightly to 346,500 (-20.0% y/y).
Continuing claims for unemployment insurance rose 3,000 but the prior week&#39;s jump was revised down to 43,000.
The insured rate of unemployment was unchanged at 2.4% for the eighth consecutive week. This unemployment rate averaged 2.8% during 2002 and 2003.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col"> 4/24/04</th>
<th scope="col">4/17/04</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; 338</td>
<td>356</td>
<td>-23.0%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>3,013</td>
<td>-17.3%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
Help-Wanted Advertising Dipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 29, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040429b.jpg" width="353">
The Conference Board&#146;s National Index of Help-Wanted Advertising ticked lower to 39 last month versus 40 in February. Despite the drop, the 1Q average improved slightly versus most of last year.
Improvement in the Manpower Employment Outlook Survey for 2Q04 portends a gain in the help wanted index. During the last ten years there has been a 74% correlation between the help wanted index and the Manpower Survey.
There has been a 93% correlation between the level of help-wanted advertising and the year-to-year change in non-farm payrolls.
A note of caution came as the proportion of labor markets with rising want-ad volume fell sharply to 22% from over 60% in January &amp; February.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#39;03</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>39</td>
<td>40</td>
<td>39</td>
</tr>
</tbody>
</table>
</body>
</html>

US real GDP grew a less than expected 4.2% last quarter, about the same as in 4Q03. During the last four quarters GDP growth of 4.9% is an improvement from 0.0% at the end of 2001 and the fastest since 1984. The Consensus expectation [...]

Q1 2004 GDP Light at 4.2%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040428b.jpg" width="353">
The Chicago Fed National Activity Index (CFNAI) slipped in March to 0.17 from 0.47 in February. The latest was the lowest reading since October.
The three-month moving average of the CFNAI was about unchanged at 0.35.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth.
During the last twenty years there has been a 75% correlation between the level of the CFNAI and quarterly growth in real GDP.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.
The latest release of the Chicago Fed&#39;s National Activity Index is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_april2004.pdf"> here</a>.
Comments from Michael H. Moskow, President &amp; CEO of the Federal Reserve Bank of Chicago, on the U.S. Economic Outlook can be found <a href="http://www.chicagofed.org/news_and_conferences/speeches/2004-04-23_economic_outlook.cfm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM"> Chicago Fed</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>0.17</td>
<td>0.47</td>
<td>-0.66</td>
<td>-0.11</td>
<td>-0.40</td>
<td>-1.18</td>
</tr>
</tbody>
</table>
Gasoline Prices at Record 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 28, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040428a.jpg" width="353">
The US average retail gasoline price for all formulations settled last week at $1.81 per gallon versus an average of $1.74 in March and $1.65 February.
Relative to all consumer prices for non-energy goods &amp; services, gasoline prices are back to the highs of a year ago. The current level of relative gasoline prices is up nearly 50% from the low in late 2001 and it is up 60% from the 1999 low.
Despite these gains, relative gasoline prices are down 40% versus the peak in early 1981 and versus disposable personal income (purchasing power) retail gasoline prices are down roughly two-thirds during that period.
Wholesale natural gas prices last week averaged 5.56/mmbtu (+0.9% y/y) and have meandered this year between 5.14 &amp; 6.67/mmbtu.
Crude oil prices have moved higher this year with the price of West Texas Intermediate crude at $37.25 (+47.6% y/y) yesterday.
For the latest Short Term Energy Outlook from the US Department of Energy click <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">here</a>.
Federal Reserve Chairman Alan Greenspan&#39;s testimony yesterday on energy is available <a href="http://www.federalreserve.gov/BoardDocs/Speeches/2004/20040427/default.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/weekly/@W4/@W403/@W40303/@W40303.HTM"> US Retail Gasoline Prices</a></th>
<th scope="col">04/26/04</th>
<th scope="col">12/29/03</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">All Formulations ($/Gal.)</td>
<td>$1.81</td>
<td>$1.48</td>
<td>16.4%</td>
<td>$1.56</td>
<td>$1.34</td>
<td>$1.42</td>
</tr>
</tbody>
</table>
Mortgage Applications Ticked Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 28, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040428c.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association ticked 0.5% (-28.8% y/y) higher last week following four weeks of sharp decline.
The increase was fueled by a 6.8% w/w rise in purchase applications (+30.2% y/y). So far in April purchase applications are 1.9% ahead of the March 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 dropped another 5.8% (-52.8% y/y), the fifth consecutive steep weekly decline.
The effective interest rate on a conventional 30-Year mortgage jumped to 6.27% from 6.11% the week prior and from 5.65% averaged in March. The effective rate on a 15-year mortgage rose to 5.63% from 5.49% the week prior and from 5.00% in March.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">04/23/04</th>
<th scope="col">04/16/04</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>748.0</td>
<td>744.5</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>463.5</td>
<td>434.1</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,403.0</td>
<td>2,550.3</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
</body>
</html>

The Chicago Fed National Activity Index (CFNAI) slipped in March to 0.17 from 0.47 in February. The latest was the lowest reading since October. The three-month moving average of the CFNAI was about unchanged at 0.35. A zero value of [...]

Chicago Fed Nat'l Activity Index Slipped in March

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040428d.jpg" width="353">
Yesterday, the US Conference Board reported a jump in US consumer confidence in April. The comparable survey in Japan, also issued yesterday, was favorable as well. Today, three smaller economies in Europe all reported that their consumers &quot;feel better&quot; -- or at least, less bad.
In the Czech Republic, April&#39;s consumer survey shows a marked improvement from the very low levels of the prior two months. But at -16, this result remains below readings of a year ago and the averages for all of the past three years. Notably, this survey, which is not quite four years old, has never had a reading above zero. Thus, Czech consumers have shown some degree of uneasiness throughout the last four years.
In neighboring Slovakia, the net consumer sentiment reading is also negative. However, positive movements in both March and April appear to mark a real break-out from much recent experience, as the overall index reached its highest (least negative) since September 2002.
Finally, in Sweden, the readings are in positive territory, although their month-to-month swings made April&#39;s gain from 5.1 to 9.1 look less convincing as a indication of a sustainable uptrend in consumer optimism.
Reasons for these moves are not consistent in all of these countries. Industry sentiment weakened in Slovakia, although recent industrial production data and the Slovak stock market both look better. Industry sentiment in the Czech Republic rose in February and March, but flattened in April. Unemployment remains high there and not improved. However, industrial production and stock prices are maintaining uptrends. In Sweden, the unemployment picture is the same, unimproved, and employment itself is even down somewhat on a year ago. Stock prices are edging higher, however.
Thus, stock prices look to be the common element in the consumer sentiment picture in each country. Better equity markets buoy consumers, and hopefully will translate into more consumer spending.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">% Balance</th>
<th scope="col">Apr 2004</th>
<th scope="col">Mar 2004</th>
<th scope="col">Feb 2004</th>
<th scope="col">Year Ago</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">&nbsp; Czech Republic</td>
<td>-16</td>
<td>-23</td>
<td>-26</td>
<td>-11</td>
<td>-15</td>
<td>-7</td>
<td>-5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Slovakia</td>
<td>-25.1</td>
<td>-28.3</td>
<td>-35.9</td>
<td>-34.9</td>
<td>-34.8</td>
<td>-30.2</td>
<td>-32.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Sweden</td>
<td>+9.1</td>
<td>+5.1</td>
<td>+9.1</td>
<td>-6.9</td>
<td>+0.9</td>
<td>+7.2</td>
<td>+3.5</td>
</tr>
</tbody>
</table>
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Yesterday, the US Conference Board reported a jump in US consumer confidence in April. The comparable survey in Japan, also issued yesterday, was favorable as well. Today, three smaller economies in Europe all reported that their [...]

Consumer Sentiment Gains in Czech Republic, Slovakia & Sweden

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040427d.jpg" width="353">
Consumer confidence in Japan, as reported by the Economic and Social Research Institute, rose to 42.5% in the first quarter of this year, the highest level since the fourth quarter of 2000.
All of the components of the total index, except for prices, rose sharply in the first quarter and were well above the levels of the first quarter of 2003. The sharpest quarter-to-quarter rise took place in consumers&#39; appraisal of the job outlook over the next six months. This component was up 7.69% in the quarter and 66.67% above the first quarter of 2003.
Even the price index that showed a decline is a positive indicator for Japan. A price diffusion index below 50% and going down means an expectation of a general upward trend in prices at a faster rate. Any sign of rising prices in Japan is a welcome sign in view of the deflation that has plagued the country over the past several years.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Japan:&nbsp; Diffusion Indexes of Consumer Sentiment %</th>
<th scope="col">Q1 O4</th>
<th scope="col">Q4 O3</th>
<th scope="col">Q1 O3</th>
<th scope="col">Q/Q %</th>
<th scope="col">Y/Y %&nbsp;</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>42.5</td>
<td>40.6</td>
<td>36.2</td>
<td>4.68</td>
<td>17.40</td>
<td>38.4</td>
<td>38.8</td>
<td>38.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Standard of living</td>
<td>42.8</td>
<td>40.2</td>
<td>36.9</td>
<td>6.47</td>
<td>15.99</td>
<td>38.8</td>
<td>39.0</td>
<td>39.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Change in income</td>
<td>&nbsp;39.9</td>
<td>38.0</td>
<td>35.6</td>
<td>5.00</td>
<td>12.08</td>
<td>36.8</td>
<td>37.4</td>
<td>38.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Job prospects</td>
<td>42.0</td>
<td>39.0</td>
<td>25.2</td>
<td>7.69</td>
<td>66.67</td>
<td>31.7</td>
<td>27.7</td>
<td>25.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Prices</td>
<td>41.0</td>
<td>41.2</td>
<td>42.0</td>
<td>-0.49</td>
<td>-2.38</td>
<td>41.4</td>
<td>46.3</td>
<td>47.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Timing and willingness to buy durable goods</td>
<td>47.2</td>
<td>45.7</td>
<td>41.6</td>
<td>3.28</td>
<td>13.46</td>
<td>43.6</td>
<td>43.8</td>
<td>42.6</td>
</tr>
</tbody>
</table>
</body>
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Consumer confidence in Japan, as reported by the Economic and Social Research Institute, rose to 42.5% in the first quarter of this year, the highest level since the fourth quarter of 2000. All of the components of the total index, [...]

Japanese Consumer Confidence Rises Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040427b.jpg" width="353">
Sales of existing single family homes reported by the National Association of Realtors jumped 5.7% last month to a 6.48M annual rate. The previously reported decline in February sales was revised to show a 2.2% increase. Consensus expectations had been for March sales 6.20M.
The figures reflect closings of home sales in earlier months.
Sales rose in most regions of the nation. In the West sales surged 10.2% (18.1% y/y) and sales in the Midwest rose 6.3% (+7.1% y/y). In the South sales rose 3.6% (+12.2% y/y) but in the Northeast sales were flat (10.8% y/y).
The median price of an existing home rose 3.6% m/m to $174,100 (+7.4% y/y) but the prior month&#39;s figure was revised down.
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/publicaffairsweb.nsf/Pages/MarchEHS04?OpenDocument">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM"> Existing Home Sales (000, AR)</a></th>
<th scope="col">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>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Existing Single-Family</td>
<td>&nbsp;6,480</td>
<td>&nbsp;6,130</td>
<td>12.7%</td>
<td>6,098</td>
<td>5,593</td>
<td>5,290</td>
</tr>
</tbody>
</table>
Consumer Confidence Jumped On Improved Assessment of Job Market 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 27, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040427a.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence for April jumped 5.0% from March to 92.9. The latest is the highest Confidence reading since January and the jump passed Consensus expectations for a rise to 88.5.
Jobs were viewed as hard to get by 27.6% of respondents, the lowest level since November 2002.
Expectations for business conditions in six months improved moderately in April and 18.2% of respondents expected there to be more jobs in six months, the highest percentage since January.
The improvement in April Confidence contrasted with the deterioration in Consumer Sentiment reported earlier by the University of Michigan.
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 surged 7.3% to 90.6 (+20.5% y/y), the highest level since August of 2002. The index of consumer expectations also advanced 3.5% (+11.4% y/y), the first m/m increase since December.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM"> Conference Board</a></th>
<th scope="col">April</th>
<th scope="col">Mar</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">Consumer Confidence</td>
<td>92.9</td>
<td>88.5</td>
<td>14.7%</td>
<td>79.8</td>
<td>96.6</td>
<td>106.6</td>
</tr>
</tbody>
</table>
Chain Store Sales Slip 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 27, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040427c.jpg" width="353">
Chain store sales slipped 0.5% last week following a 1.0% jump the prior week, according to the International Council of Shopping Centers (ICSC)-UBS survey.
With one week left to tally the level of sales in April is up 0.1% from March.
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.

<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/surveyw/@S2/@S2.HTM"> ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">04/24/04</th>
<th scope="col">04/17/04</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">Total Weekly Retail Chain Store Sales</td>
<td>438.2</td>
<td>440.3</td>
<td>7.1%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

Sales of existing single family homes reported by the National Association of Realtors jumped 5.7% last month to a 6.48M annual rate. The previously reported decline in February sales was revised to show a 2.2% increase. Consensus [...]

Existing Home Sales Jumped to Second Highest on Record

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: April 2004

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