Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080430h.jpg" align="left" border="0" height="265" width="353">
If they were ski runs, they&#8217;d be black diamonds.

The EU sentiment index fell sharply in April with declines in
all sectors and with all sector readings south of zero except services.
Ironically the service sector is the weakest of the lot in terms of its
standing as a percentile of its range. That standing is the 31st
percentile Consumer confidence is the next weakest measure in its 51st
percentile followed by retailing in the 55th percentile. The industrial
sector for which we get the most data is in its 73rd range percentile,
the strongest of the lot. Overall the EU index is in its 57th
percentile and above its average and range midpoint.

Percentiles give us an idea of the relative standing of each
sector since each has a different intrinsic range and variability.
Looking at percentiles helps us to see where the weakness is hitting
the hardest.

EMU is in the 54.6th percentile of its range. Within EMU among
the large countries France ranks in its 67th percentile, Germany is in
its 60th, Italy is in the 41st, and Spain is in the weakest of these,
27th percentile of its range.

The chart shows that the pace of the slide is as yet,
unabated.

For industrial production expectations and order volumes are
still firm in their respective 65th and 77th range percentiles. Among
large EMU countries Germany and France are in league unto themselves as
their respective 78th and 71st percentile standings are high; Italy and
Spain are at lower rankings in percentile terms.

The consumer situation is best in Germany where consumer
sentiment still in the 75th percentile of its range; in France
confidence is down to the 50th percentile Italy&#8217;s consumer sentiment is
in the 37th percentile and for Spain its the 27th percentile. For the
UK the confidence measure is in its 42nd percentile.

Notwithstanding these results the French retail sector is in
the 80th percentile of its range in April followed by Italy in the 75th
percentile &#8211; despite a sour consumer. Germany, with the most upbeat
consumer, finds retail confidence in the 40th percentile. Spain&#8217;s
consumers are weak with retailing in the bottom 4 percent of its range.
The UK retail sector reading fell sharply in April to -17 from -1 in
March marking a 28th percentile reading in its range.

The services sector rankings show France&#8217;s service sector is
in the 58th percentile, and Germany&#8217;s in the 41st percentile. For Italy
the service sector is much worse off, in the bottom 6% of it range near
Spain&#8217;s reading that is at an all time low reading in April. Spain&#8217;s
service sector shed 6 points to drop from -8 to -14 in raw terms in one
month. UK services also fell hard to -6 from +13 and to a 29 percentile
ranking.

On balance the EMU and EU readings show a great deal of
distress and some of it quite recent. The country by country findings
are revealing. What remains curious is that amid all the concern about
the strong euro the service sector is getting hit so hard. Some of that
may be financial turbulence. In any event the extent of financial
sector weakness is striking. It seems a good time to put Europe on a
weakness watch. For the industrial sector even selling price
expectations have been reduced somewhat to the 61st percentile they are
not one of the stronger industrial components anymore. Does that mean
that inflation is not so much of a risk?


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="12" scope="col"> EU
Sectors and Country level Overall Sentiment</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td style="font-weight: bold;" class="firstcol">EU</td>
<td style="font-weight: bold;">Apr 
08</td>
<td style="font-weight: bold;">Mar 
08</td>
<td style="font-weight: bold;">Feb 
08</td>
<td style="font-weight: bold;">Jan 
08</td>
<td style="font-weight: bold;">%tile</td>
<td style="font-weight: bold;">Rank</td>
<td style="font-weight: bold;">Max</td>
<td style="font-weight: bold;">Min</td>
<td style="font-weight: bold;">Range</td>
<td style="font-weight: bold;">Mean</td>
<td style="font-weight: bold;">R-SQ 
w/ 
Overall</td>
</tr>
<tr class="odd">
<td class="firstcol">Overall</td>
<td>98.1</td>
<td>101.9</td>
<td>100.3</td>
<td>103.3</td>
<td>57.9</td>
<td>122</td>
<td>116</td>
<td>73</td>
<td>43</td>
<td>100</td>
<td style="font-weight: bold;">1.00</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial</td>
<td>-2</td>
<td>0</td>
<td>0</td>
<td>2</td>
<td>73.5</td>
<td>64</td>
<td>7</td>
<td>-27</td>
<td>34</td>
<td>-7</td>
<td style="font-weight: bold;">0.88</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confid</td>
<td>-12</td>
<td>-11</td>
<td>-11</td>
<td>-10</td>
<td>51.7</td>
<td>124</td>
<td>2</td>
<td>-27</td>
<td>29</td>
<td>-10</td>
<td style="font-weight: bold;">0.83</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail</td>
<td>-6</td>
<td>1</td>
<td>1</td>
<td>-3</td>
<td>55.6</td>
<td>100</td>
<td>6</td>
<td>-21</td>
<td>27</td>
<td>-6</td>
<td style="font-weight: bold;">0.47</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>-11</td>
<td>-9</td>
<td>-7</td>
<td>-4</td>
<td>68.9</td>
<td>75</td>
<td>3</td>
<td>-42</td>
<td>45</td>
<td>-17</td>
<td style="font-weight: bold;">0.43</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>6</td>
<td>11</td>
<td>6</td>
<td>11</td>
<td>31.6</td>
<td>105</td>
<td>32</td>
<td>-6</td>
<td>38</td>
<td>17</td>
<td style="font-weight: bold;">0.81</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td style="font-weight: bold;" colspan="3">%
m/m&nbsp;</td>
<td style="font-weight: bold;">Apr 
08</td>
<td style="font-weight: bold;" colspan="2">Based on Level</td>
<td style="font-weight: bold;" colspan="4">Level</td>
<td style="font-weight: bold;">&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU</td>
<td style="color: red;">-2.5%</td>
<td style="color: red;">-0.6%</td>
<td style="color: red;">-1.5%</td>
<td>97.1</td>
<td>54.6</td>
<td>124</td>
<td>117</td>
<td>73</td>
<td>44</td>
<td>99</td>
<td style="font-weight: bold;">0.95</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td style="color: red;">-1.2%</td>
<td>0.3%</td>
<td>0.6%</td>
<td>102.8</td>
<td>60.0</td>
<td>85</td>
<td>119</td>
<td>79</td>
<td>40</td>
<td>99</td>
<td style="font-weight: bold;">0.70</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td style="color: red;">-2.4%</td>
<td>0.0%</td>
<td style="color: red;">-1.3%</td>
<td>103.1</td>
<td>67.1</td>
<td>97</td>
<td>119</td>
<td>72</td>
<td>47</td>
<td>100</td>
<td style="font-weight: bold;">0.79</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td style="color: red;">-1.7%</td>
<td style="color: red;">-1.3%</td>
<td style="color: red;">-3.7%</td>
<td>92.1</td>
<td>41.6</td>
<td>167</td>
<td>121</td>
<td>71</td>
<td>50</td>
<td>100</td>
<td style="font-weight: bold;">0.78</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td style="color: red;">-3.8%</td>
<td style="color: red;">-4.1%</td>
<td style="color: red;">-3.4%</td>
<td>80.7</td>
<td>27.2</td>
<td>193</td>
<td>118</td>
<td>67</td>
<td>51</td>
<td>100</td>
<td style="font-weight: bold;">0.63</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo: UK</td>
<td style="color: red;">-8.5%</td>
<td>10.7%</td>
<td style="color: red;">-8.7%</td>
<td>95.8</td>
<td>54.7</td>
<td>147</td>
<td>118</td>
<td>69</td>
<td>50</td>
<td>101</td>
<td style="font-weight: bold;">0.43</td>
</tr>
<tr class="odd">
<td colspan="5" class="firstcol">Since 1990
except Services (Oct
1996): 208</td>
<td>-Count</td>
<td>Services:</td>
<td>126</td>
<td>-Count</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol">Sentiment is
an index, sector
readings are net balance diffusion measures</td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body></html>

If they were ski runs, they’d be black diamonds. The EU sentiment index fell sharply in April with declines in all sectors and with all sector readings south of zero except services. Ironically the service sector is the weakest of the [...]

EU Indices in Steady State Decline…

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080430g.jpg" width="353">
The Federal Open Market Committee again lowered the Federal funds rate today by 25 basis points to 2.00% in a move that was widely expected. The funds rate was last this low in December, 2004.
The discount rate was lowered another 25 basis points to 2.25%.
The Fed indicated &quot;Recent information indicates that economic activity remains weak. Household and business spending has been subdued and labor markets have softened further.&quot;
Regarding price inflation it was stated &quot;Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months.&quot;
Voting against taking the action was Richard W. Fisher, President of the Federal Reserve Bank of Dallas and Charles I. Plosser, President of the Philadelphia Fed, who preferred no change in rates.
For the complete text of the Fed&#39;s latest press release please follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20080430a.htm"> link</a>.
Are Global Imbalances Due to Financial Underdevelopment in Emerging Economies? from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-12.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">March</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>2.00</td>
<td>2.25</td>
<td>2.64</td>
<td>5.05</td>
<td>4.96</td>
<td>3.19</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>2.25</td>
<td>2.50</td>
<td>3.17</td>
<td>5.88</td>
<td>5.95</td>
<td>4.18</td>
</tr>
</tbody>
</table>
</body>
</html>

The Federal Open Market Committee again lowered the Federal funds rate today by 25 basis points to 2.00% in a move that was widely expected. The funds rate was last this low in December, 2004. The discount rate was lowered another 25 [...]

FOMC Lowers Fed Funds Rate by 25 Basis Points

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080430c.jpg" width="353">
Rising 0.8% last quarter, the employment cost index for private industry workers remained about steady with the 4Q &#39;07 increase. The gain matched Consensus expectations. In addition, the gain in total compensation in 1Q was roughly steady at 3.2% with the gains since 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080430d.jpg" width="353">
During the last twenty years there has been a 54% correlation between the growth in employee compensation and the rise in the PCE price index. That level of correlation goes neither up or down, when either series is led or lagged the other. This suggests a self reinforcing effect between the two series.
Wage and salary growth held steady at 0.8%. Wages account for roughly 70% of the compensation index. Wages in the services industries rose 0.7% (3.2% y/y). Wages in the goods producing industries rose at an accelerated 1.0% (3.2% y/y).
The rise in benefit costs eased to 0.6% after a 0.8% 4Q rise. The rise in benefit costs in the service producing industries slipped to 0.6% (3.3% y/y) but in the goods producing sector benefits rose 0.8% (3.1% y/y). That is double the recent rates of growth. 
Health benefit costs rose a steady 4.6% y/y.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB08/@EB08.HTM">ECI- Private Industry Workers</a></th>
<th scope="col">1Q &#39;08</th>
<th scope="col">4Q &#39;07</th>
<th scope="col">3Q &#39;07</th>
<th scope="col">1Q 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">Compensation</td>
<td>0.8%</td>
<td>0.9%</td>
<td>0.8%</td>
<td>3.2%</td>
<td>3.1%</td>
<td>2.9%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp; Salaries</td>
<td>0.8%</td>
<td>0.8%</td>
<td>0.8%</td>
<td>3.2%</td>
<td>3.4%</td>
<td>2.9%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>0.6%</td>
<td>0.8%</td>
<td>0.8%</td>
<td>3.2%</td>
<td>2.4%</td>
<td>2.9%</td>
<td>4.6%</td>
</tr>
</tbody>
</table>


</html>

Rising 0.8% last quarter, the employment cost index for private industry workers remained about steady with the 4Q '07 increase. The gain matched Consensus expectations. In addition, the gain in total compensation in 1Q was roughly [...]

U.S. Employment Cost Index Steady At 0.8% Quarterly Increase

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080430e.jpg" width="353">
The ADP National Employment Report, from the payroll processor, reported that private nonfarm payrolls rose 10,000 this month after a slightly revised increase of 3,000 during March.
The U.S. Bureau of Labor Statistics employment figure for April will be published this Friday.Last month the 3,000 worker rise in ADP&#39;s measure of private nonfarm payrolls was accompanied by a 98,000 worker decline in private sector payrolls as reported by BLS.
According to ADP and Macro Advisers, the correlation between the monthly percentage change in the ADP estimate and that in the BLS data is 0.90.
The ADP sub-index for large payrolls fell 18,000 (-0.9% y/y) after a 53,000 worker decline during March.
A 42,000 worker increase (1.3% y/y) in small sized payrolls during April followed the 53,000 March rise.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080430f.jpg" width="353">
Medium sized payrolls fell 14,000 (+0.8% y/y) and that followed a 3,000 worker March increase.
Employment in the goods producing industries fell 54,000 (-2.0% y/y) and the rate of decline has intensified as this year has progressed. Services payrolls rose 64,000 (1.4% y/y).
ADP compiled the estimate from its database of individual companies&#39; payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator.
The ADP National Employment Report data is maintained in Haver&#39;s USECON database; historical data go back to December 2000. The figures in this report cover only private sector jobs and exclude employment in the public sector, which rose an average 11,083 during the last twelve months. 
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/PDF/FINAL_Report_Apr_08.pdf">here</a>, and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">April</th>
<th scope="col">March</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>
<td class="firstcol">Nonfarm Private Payroll Employment (m/m Chg.)</td>
<td>10,000</td>
<td>3,000</td>
<td>0.7%</td>
<td>1.1%</td>
<td>1.7%</td>
<td>1.8%</td>
</tr>
</tbody>
</table>


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The ADP National Employment Report, from the payroll processor, reported that private nonfarm payrolls rose 10,000 this month after a slightly revised increase of 3,000 during March.

ADP Report: April Private Sector Payrolls Again Rose Slightly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080430a.jpg" width="353">
U.S. real GDP growth during 1Q&#39;08 remained stable with the prior quarter at 0.6%, about as expected. Together, growth during the last two quarters was the weakest since the end of the last recession in 2001.
Negative 0.4% 1Q growth in final sales to domestic purchasers was the first sub-zero reading since the earlier recession in 1991.
Residential construction led that slip with a 26.6% (-21.2% y/y) drop which was the fastest rate of decline since the recession in 1981. For the quarter it alone reduced overall real GDP growth by 1.2 percentage points. 
Business fixed investment also was weak and posted a 2.5% (+5.8% y/y) decline which was its first negative print since 4Q&#39;06 and the largest negative reading since early 2004. Overall it reduced 1Q GDP growth by 0.3 percentage points. The decline was paced by a 6.2% (+11.5% y/y) decline in investment in structures while equipment spending fell at a 0.7% rate (+3.3% y/y). That decline represented a shortfall in investment in transportation equipment while growth in information processing equipment and also industrial equipment remained positive. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080430b.jpg" width="353">
Growth in real personal consumption also weakened to just 1.0% (1.9% y/y) which was its weakest since the recession year 2001. Fewer purchases of autos &amp; light trucks reduced spending here at an 11.4% (-4.3% y/y) while spending on furniture &amp; other household equipment also fell. In the nondurable area, spending on food as well as gasoline both dropped. Spending on services actually accelerated slightly due to faster growth in spending on household operation. Growth in real PCE added 0.7 percentage point to 1Q real GDP growth.
Earlier sizable additions to GDP growth from an improved foreign trade deficit eased to just a 0.2 percentage point contribution in 1Q. The lessened addition was due to weaker growth in exports of 5.5% after an 8.1% rise last year and an 8.4% gain in 2006. Imports grew at a 2.5% rate after a 1.9% rise last year and a 5.9% 2006 rise. 
Faster inventory accumulation added 0.8 percentage points to 1Q GDP growth but that only made up some of the 1.8 point subtraction in 4Q.
The GDP chain price index grew at a 2.6% annual rate which was its fastest gain in three quarters. The PCE price index rose at a 3.5% rate (3.4% y/y) which was down slightly from the 3.9% rise in 4Q. Less food &amp; energy consumer prices rose at a 2.2% rate which was stable with growth during the prior four years. The price index for business fixed investment fell a slight 0.1% which was the third decline in the last four quarters but prices for residential investment fell at a 2.3% rate which was the fastest rate of decline since 1970 (no typo). Quicker growth in the overall GDP price index was due to exports (9.0% y/y) and government consumption (6.9% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">1Q &#39;08</th>
<th scope="col">4Q &#39;07</th>
<th scope="col">3Q &#39;07</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">GDP</td>
<td>0.6</td>
<td>0.6</td>
<td>4.9</td>
<td>2.5</td>
<td>2.2</td>
<td>2.9</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.8</td>
<td>-1.8</td>
<td>0.9</td>
<td>0.1</td>
<td>-0.3</td>
<td>0.1</td>
<td>-0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>-0.2</td>
<td>2.4</td>
<td>4.0</td>
<td>2.4</td>
<td>2.5</td>
<td>2.8</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>0.2</td>
<td>1.0</td>
<td>1.4</td>
<td>1.0</td>
<td>0.7</td>
<td>-0.1</td>
<td>-0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>-0.4</td>
<td>1.3</td>
<td>2.5</td>
<td>1.4</td>
<td>1.8</td>
<td>2.7</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.6</td>
<td>2.4</td>
<td>1.0</td>
<td>2.2</td>
<td>2.7</td>
<td>3.2</td>
<td>3.2</td>
</tr>
</tbody>
</table>


</html>

U.S. real GDP growth during 1Q'08 remained stable with the prior quarter at 0.6%, about as expected. Together, growth during the last two quarters was the weakest since the end of the last recession in 2001. Negative 0.4% 1Q growth in [...]

U.S. 1Q'08 GDP Stable at 0.6%, Two Quarter Growth At Recession Level

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080429l.jpg" align="left" border="0" height="265" width="353">
The INSEE household confidence reading is at its lowest mark
since 1990. Living standards in the past and next 12-months are
assessed as being in the bottom several percentage points of their
range for the period. The same is true of the assessment of their
financial situation by households.

Unemployment expectations remain subdued however in the lower
35% of their range and they are not on a clear rising trend either.
Price developments are, however, high and rising reading in the 96th
percentile of their range. The spending environment is assessed as
beginning in the bottom quarter of its range since 1990. On balance
French consumers are under pressure and showing some of the same
conditions we see in Italy and in the UK. The last German assessment by
consumers was up. So Germany has some very different dynamics in play
despite the fact its industrial indicators are a tattered its consumers
have gotten a second wind. The Euro Area is generally showing the
impact from financial turmoil and high commodity prices along with a
too-strong currency. 
 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> INSEE
Household Monthly Survey</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="2">Since Jan 1990</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Percentile</td>
<td>Rank</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Confidence</td>
<td>-37</td>
<td>-36</td>
<td>-35</td>
<td>-35</td>
<td>0.0</td>
<td>215</td>
</tr>
<tr>
<td class="firstcol" colspan="7">Living
Standards</td>
</tr>
<tr class="odd">
<td class="firstcol">Past 12-Mos</td>
<td>-69</td>
<td>-71</td>
<td>-68</td>
<td>-65</td>
<td>2.2</td>
<td>214</td>
</tr>
<tr class="odd">
<td class="firstcol">Next 12-Mos</td>
<td>-43</td>
<td>-40</td>
<td>-42</td>
<td>-44</td>
<td>1.7</td>
<td>214</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment: Next 12</td>
<td>3</td>
<td>11</td>
<td>11</td>
<td>9</td>
<td>36.4</td>
<td>176</td>
</tr>
<tr>
<td class="firstcol" colspan="7">Price
Developments</td>
</tr>
<tr class="odd">
<td class="firstcol">Past 12-Mos</td>
<td>56</td>
<td>60</td>
<td>43</td>
<td>39</td>
<td>96.6</td>
<td>2</td>
</tr>
<tr class="odd">
<td class="firstcol">Next 12-Mos</td>
<td>-36</td>
<td>-41</td>
<td>-25</td>
<td>-12</td>
<td>26.4</td>
<td>108</td>
</tr>
<tr>
<td class="firstcol" colspan="7">Savings</td>
</tr>
<tr class="odd">
<td class="firstcol">Favorable to Save</td>
<td>24</td>
<td>25</td>
<td>24</td>
<td>27</td>
<td>55.6</td>
<td>101</td>
</tr>
<tr class="odd">
<td class="firstcol">Ability to Save Next 12 Mos</td>
<td>-13</td>
<td>-16</td>
<td>-13</td>
<td>-12</td>
<td>34.5</td>
<td>161</td>
</tr>
<tr>
<td class="firstcol" colspan="7">Spending</td>
</tr>
<tr class="odd">
<td class="firstcol">Favorable for major purchase</td>
<td>-28</td>
<td>-28</td>
<td>-26</td>
<td>-25</td>
<td>24.1</td>
<td>198</td>
</tr>
<tr>
<td class="firstcol" colspan="7">Financial
Situation</td>
</tr>
<tr class="odd">
<td class="firstcol">Current</td>
<td>12</td>
<td>13</td>
<td>13</td>
<td>14</td>
<td>42.9</td>
<td>104</td>
</tr>
<tr class="odd">
<td class="firstcol">Past 12-Mos</td>
<td>-29</td>
<td>-30</td>
<td>-27</td>
<td>-25</td>
<td>4.0</td>
<td>214</td>
</tr>
<tr class="odd">
<td class="firstcol">Next 12-Mos</td>
<td>-16</td>
<td>-14</td>
<td>-14</td>
<td>-14</td>
<td>0.0</td>
<td>214</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Number of observations in the period</td>
<td>220</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

The INSEE household confidence reading is at its lowest mark since 1990. Living standards in the past and next 12-months are assessed as being in the bottom several percentage points of their range for the period. The same is true of [...]

Household Confidence in Near Free Fall in France

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080429k.jpg" align="left" border="0" height="265" width="353">
The CBI survey shows sharp weakness on the part of consumers
in April. Sales from one year ago register a -26 on this net balance
scale. Orders are a -28.and sales for the time of year are assessed an
even weaker looking -38. Indeed, sales for the time of year are in the
bottom 9% of their range, the same as for year-ago sales. Orders are in
the bottom 12 percent of their range. The expected readings that apply
to May are similarly weak with orders in the bottom 25 percentile of
their range. Sales for the time of year, as well as the Yr/Yr change in
sales, stand in the lower 10 percentile of their respective readings.
The UK retail sector is beginning to feel some pain. Inventories are
rising and are expected to rise further next month. That could compound
problems in the sector. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">UK Retail
volume data CBI Survey </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reported:</td>
<td>May-08</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>12Mo Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr>
<td class="firstcol">Sales/Year Ago</td>
<td>&nbsp;</td>
<td>-26</td>
<td>1</td>
<td>-3</td>
<td>8</td>
<td>9%</td>
<td>67</td>
<td>-35</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">Orders/Year Ago</td>
<td>&nbsp;</td>
<td>-28</td>
<td>-10</td>
<td>-4</td>
<td>7</td>
<td>12%</td>
<td>48</td>
<td>-38</td>
<td>86</td>
</tr>
<tr>
<td class="firstcol">Sales: Time/Year</td>
<td>&nbsp;</td>
<td>-38</td>
<td>-14</td>
<td>-7</td>
<td>-5</td>
<td>9%</td>
<td>41</td>
<td>-46</td>
<td>87</td>
</tr>
<tr>
<td class="firstcol">Stocks: Sales</td>
<td>&nbsp;</td>
<td>17</td>
<td>10</td>
<td>11</td>
<td>14</td>
<td>57%</td>
<td>30</td>
<td>0</td>
<td>30</td>
</tr>
<tr class="odd">
<td class="firstcol">Expected:</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>May-08</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Sales/Year Ago</td>
<td>-15</td>
<td>-3</td>
<td>-2</td>
<td>10</td>
<td>8</td>
<td>9%</td>
<td>67</td>
<td>-23</td>
<td>90</td>
</tr>
<tr>
<td class="firstcol">Orders/Year Ago</td>
<td>-14</td>
<td>-6</td>
<td>-3</td>
<td>10</td>
<td>6</td>
<td>25%</td>
<td>47</td>
<td>-34</td>
<td>81</td>
</tr>
<tr>
<td class="firstcol">Sales: Time/Year</td>
<td>-26</td>
<td>-15</td>
<td>-10</td>
<td>-5</td>
<td>-5</td>
<td>11%</td>
<td>45</td>
<td>-35</td>
<td>80</td>
</tr>
<tr>
<td class="firstcol">Stocks: Sales</td>
<td>18</td>
<td>11</td>
<td>10</td>
<td>11</td>
<td>12</td>
<td>65%</td>
<td>26</td>
<td>3</td>
<td>23</td>
</tr>
</tbody>
</table>
</body></html>

The CBI survey shows sharp weakness on the part of consumers in April. Sales from one year ago register a -26 on this net balance scale. Orders are a -28.and sales for the time of year are assessed an even weaker looking -38. Indeed, [...]

CBI Sales and Order Trends Weaken

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 2008

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