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/040528d.jpg" width="353">
Japan&#39;s economy gave more signs of building momentum in April. This has reached the consumer sector in a significant way. First, the labor force survey showed a sizable 240,000 increase in the number of people reporting they are employed. This followed March&#39;s 190,000 rise and cumulates to 770,000 from an apparent trough last November. The total number of employed persons was 63.64 million, the highest since 63.66 million in January 2002. The peak in employment was 65.84 million in July 1997, just as the Asian currency crisis hit full force.
Consumer spending data look better too in April. The index of living expenditure per household jumped to 105.6 from March&#39;s 96.7 (2000=100). Press reports highlighted this leap as a record monthly increase. However, March&#39;s index had fallen 4.0%, so the two-month gain averages &quot;just&quot; 2.5%. Even so, this itself is the fifth largest such two-month change in the 29-year history of the survey.
A month ago, the Cabinet Office&#39;s consumer sentiment survey had reported a sizable rise in confidence in the first quarter, as people felt better about their job situation, income prospects and standard of living (see Louise Curley&#39;s comment here on April 27). They also indicated that this seemed to be a good time to buy durable goods. Today&#39;s report on their spending for April shows they did that, with a huge increase in furniture and household utensils for April that put the two-month advance at the highest in over five years. Transportation, education, culture and miscellaneous were also strong in April, while categories that might described as &quot;necessities&quot;, food, clothing and housing, all declined. The more confident consumers are spending more vigorously on discretionary items than they have in quite some time.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</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>
Annual Average
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Employment (millions)</td>
<td>63.64</td>
<td>63.40</td>
<td>63.21</td>
<td>63.15</td>
<td>63.17</td>
<td>63.30</td>
<td>64.10</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Change&nbsp;&nbsp;&nbsp; (thousands or %)</td>
<td>+240</td>
<td>+190</td>
<td>-10</td>
<td>+490 (+0.8%)</td>
<td colspan="3">December/December</td>
</tr>
<tr>
<td class="firstcol">+0.3%</td>
<td>-1.1%</td>
<td>-1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate (%)</td>
<td>4.7%</td>
<td>4.7%</td>
<td>5.0%</td>
<td>5.4%</td>
<td colspan="3">Annual Average</td>
</tr>
<tr>
<td class="firstcol">5.3%</td>
<td>5.4%</td>
<td>5.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Spending (2000=100)</td>
<td>105.9</td>
<td>96.7</td>
<td>100.7</td>
<td>98.6</td>
<td>98.0</td>
<td>99.3</td>
<td>99.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>9.5%</td>
<td>-4.0%</td>
<td>-0.5%</td>
<td>7.5%</td>
<td colspan="3">December/December</td>
</tr>
<tr class="odd">
<td class="firstcol">0.9%</td>
<td>-3.1%</td>
<td>-4.8%</td>
</tr>
</tbody>
</table>
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<colgroup></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&middot; We&#39;ve seen a collection of Q1 GDP reports the last two days.&nbsp; The highlight, we&#39;ve judged, is the role of investment spending as a leading factor in better growth trends apparent in reports so far.&nbsp; Today we briefly summarize three more, Switzerland, Denmark and Hong Kong.&nbsp; The first two of these look somewhat different, with less buoyant investment sectors.&middot; Switzerland is climbing gradually out of a period of stagnation, with its year-on-year GDP growth running at 1.5%, the best since Q2 2001.&nbsp; Consumer spending is the main support.&nbsp; Investment, though, is erratic at best and has been unable to sustain a strong 2003 performance into this year.&middot; Denmark shows a similar current performance, although its behavior earlier differs from most economies.&nbsp; It seems not to have suffered much in the 2001 recession, and investment spending there was actually strong then.&nbsp; Thus, its investment cycle appears to have different timing from most, with a slowdown now after respectable gains in periods when capital spending elsewhere was weak.&nbsp;&middot; Hong Kong did experience the 2001 recession in sync with others, but has come back with some vigor.&nbsp; Investment there is moving ahead in a recovery phase, while exports and inventory building provided the largest part of the 2.4% growth in Q1.&nbsp;&nbsp;</th>
</tr>
</thead>

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GDP &amp; Select Components, % Changes</th>
Qtr/Qtr (Seas Adj)
<th scope="col">Year/ Year</th>
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">1st Qtr 2004</td>
<td>4th Qtr 2003</td>
<td>3rd Qtr 2003 &nbsp;</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Denmark (1995 Krone)</td>
<td>0.6</td>
<td>0.6</td>
<td>0.3</td>
<td>1.3</td>
<td>1.0</td>
<td>0.4</td>
<td>0.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;-&nbsp; Investment</td>
<td>-3.0</td>
<td>0.7</td>
<td>4.4</td>
<td>0.2</td>
<td>3.1</td>
<td>0.5</td>
<td>11.6</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">Switzerland (2000 Swiss Francs)</td>
<td>0.4</td>
<td>0.5</td>
<td>0.5</td>
<td>1.5</td>
<td>0.0</td>
<td>0.9</td>
<td>0.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;-&nbsp; Fixed Capital Formation</td>
<td>-0.1</td>
<td>0.8</td>
<td>0.8</td>
<td>0.6</td>
<td>4.9</td>
<td>-2.1</td>
<td>-9.2</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Hong Kong (2000 HK$)</td>
<td>2.4</td>
<td>2.5</td>
<td>4.9</td>
<td>6.8</td>
<td>4.9</td>
<td>4.8</td>
<td>-1.1&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;-&nbsp; Fixed Capital Formation</td>
<td>1.3</td>
<td>2.3</td>
<td>4.0</td>
<td>5.8</td>
<td>1.9</td>
<td>-0.3</td>
<td>-4.4</td>
</tr>
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Japan's economy gave more signs of building momentum in April. This has reached the consumer sector in a significant way. First, the labor force survey showed a sizable 240,000 increase in the number of people reporting they are [...]

Japan Employment and Consumer Spending Have Big Gains in April

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040528a.jpg" width="353">
Personal income rose 0.6% (+5.7% y/y) last month versus the Consensus expectation for a 0.5% gain.
While the upside surprise was slight, it reflected a firm 0.5% (4.8% y/y) rise in wages &amp; salaries that followed an upwardly revised 0.3% March increase. Firm wage gains were logged across industries.
Personal disposable income increased 0.5% following a 0.4% March increase. The 6.3% y/y increase in disposable income was the strongest since June 2002. After accounting for a 1.9% rise in prices, real disposable income rose 4.3%.
Consumer spending rose a modest 0.3% in April, held back by a 1.6% m/m decline unit light vehicle sales. A 0.2% gain in PCE had been expected. 
The PCE chain price index rose just 0.1%. Less food &amp; energy, prices rose 0.1% (1.4% y/y) following a 0.2% March gain. 
The savings rate moved higher to 2.4%, the highest level since last Summer. 

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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">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 class="odd">
<td class="firstcol">Personal Income</td>
<td>0.6%</td>
<td>0.4%</td>
<td>5.7%</td>
<td>3.3%</td>
<td>2.3%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.3%</td>
<td>0.5%</td>
<td>6.5%</td>
<td>5.0%</td>
<td>4.8%</td>
<td>4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>2.4%</td>
<td>2.2%</td>
<td>2.4%</td>
<td>2.1%</td>
<td>2.3%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1%</td>
<td>0.3%</td>
<td>1.9%</td>
<td>1.8%</td>
<td>1.4%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Down in May 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 28, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040528c.jpg" width="353">
The University of Michigan&#146;s consumer sentiment index for the full month of May fell to90.2 from 94.2 in April. The reading reflected deterioration late in the month versus a mid-month reading of 94.2. Consensus expectations had been for a slight rise to 95.0.
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 fell 1.3% following the 1.7% decline in April. The expectations index dropped a sharp 6.5% m/m and added to a 1.7% April dip. Both readings were down from mid-month.
The decline in Sentiment in May contrasted with the very slight rise in Consumer Confidence 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.

<table border="0" cellspacing="0" width="100%">
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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"> May</th>
<th scope="col"> April</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>90.2</td>
<td>94.2</td>
<td>-2.1%</td>
<td>87.6</td>
<td>89.6</td>
<td>89.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>103.6</td>
<td>105.0</td>
<td>11.2%</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>81.6</td>
<td>87.3</td>
<td>-10.7%</td>
<td>81.4</td>
<td>84.6</td>
<td>82.3</td>
</tr>
</tbody>
</table>
Chicago Purchasing Agents' Index Again Strong 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 28, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040528b.jpg" width="353">
The Chicago Purchasing Managers Business Barometer for May rose to 68.0 from 63.9 in April. The rise reflected strength versus Consensus expectations for a slight decline to 62.5 and was to the highest level since July 1988.
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 led the increase to 74.4, the highest level since 1988. Production also rose a hefty 6.3 points to 71.1 and moved closer to the January high of 76.5.
Employment surged 3.9 points to 54.8, the current cycle high. 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 jumped to 80.0, the highest since February 1995.

<table border="0" cellspacing="0" width="100%">
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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF05/@EF05.HTM"> Chicago Purchasing Managers Index, SA</a></th>
<th scope="col"> May</th>
<th scope="col">April</th>
<th scope="col">May&nbsp; &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Barometer</td>
<td>68.0</td>
<td>63.9</td>
<td>51.6</td>
<td>54.7</td>
<td>52.7</td>
<td>41.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>74.4</td>
<td>65.1</td>
<td>54.5</td>
<td>58.0</td>
<td>56.2</td>
<td>42.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>80.0</td>
<td>76.1</td>
<td>52.6</td>
<td>55.8</td>
<td>56.9</td>
<td>50.4</td>
</tr>
</tbody>
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Personal income rose 0.6% (+5.7% y/y) last month versus the Consensus expectation for a 0.5% gain. While the upside surprise was slight, it reflected a firm 0.5% (4.8% y/y) rise in wages & salaries that followed an upwardly revised [...]

U.S. Personal Income Up More Than Expected

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040527d.jpg" width="353">
US financial markets are on alert during the middle of the first month of each quarter as companies report profits, a period that investors and traders refer to informally as &quot;earnings season&quot;. Similarly, the second half of the middle month of each quarter could be dubbed &quot;GDP season&quot;, as country after country publishes its prior quarter growth performance.
Today, Brazil and the Philippines released their first quarter results. Brazil&#39;s growth edged higher, to 1.6% quarter-on-quarter from 1.4% in the final period of 2003. This lifted the year-on-year rate to 2.7% after three quarters of contraction. Notably, as with the UK and Spain&#39;s data discussed here yesterday, investment is playing a roll in the improving trend in demand in Brazil. Investment growth was slower in Q1, at 2.3% compared with Q4&#39;s 4.0%. But these two gains, plus a similar one in the prior period, mark a distinct turnaround from a previous stretch of outright declines. Over longer periods, such as two and four years, overall growth in Brazil seems to be settling into a pace around 2%, not as high as some years, but less volatile.
Growth in the Philippines, by contrast, has been fairly steady over the last couple of years at rates higher than 5%. Even in the recession-plagued year of 2001, Philippine GDP did not contract year-over-year, and moreover, during the Asian crisis in 1997-98 there was only a modest and brief reduction in economic activity. Steady growth in the consumer sector, which constitutes about three-quarters of the Philippine economy (more than in many countries), is a source of stability. In the latest quarter, total GDP growth was 1.9%, down from Q4&#39;s 2.5%; however, the Q1 rate is hardly &quot;low&quot;, and it included a firming of private consumption from 1.5% to 1.6%. Investment is more erratic here than elsewhere, and it rose 7.1% in Q1 after falling 2.9% in Q4.
The gains in investment in many varied countries, which have been evident in most of the recently issued Q1 reports, suggest that low world interest rates are helping support world economic activity.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GDP &amp; Select Components, % Changes</th>
Qtr/Qtr (Seasonally Adjusted)
<th scope="col">Year/ Year</th>
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">1st Qtr&nbsp; 2004</td>
<td>4th Qtr 2003</td>
<td>3rd Qtr 2003 &nbsp;</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Brazil - Chain Index, 1990=100</td>
<td>1.6</td>
<td>1.4</td>
<td>0.5</td>
<td>2.7</td>
<td>-0.1</td>
<td>3.9</td>
<td>-0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; -&nbsp; Investment</td>
<td>2.3</td>
<td>4.0</td>
<td>3.2</td>
<td>2.2</td>
<td>-5.0</td>
<td>4.1</td>
<td>-8.2</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">Philippines - 1985 Pesos</td>
<td>1.9</td>
<td>2.5</td>
<td>1.1</td>
<td>6.4</td>
<td>5.0</td>
<td>5.6</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; -&nbsp; Fixed Capital Formation</td>
<td>7.1</td>
<td>-2.9</td>
<td>1.6</td>
<td>4.8</td>
<td>1.2</td>
<td>5.8</td>
<td>-15.5</td>
</tr>
</tbody>
</table>
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US financial markets are on alert during the middle of the first month of each quarter as companies report profits, a period that investors and traders refer to informally as "earnings season". Similarly, the second half of the middle [...]

Steadying GDP Trends in Brazil, Philippines; Investment Grows

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040527b.jpg" width="353">
US real GDP growth in 1Q was revised slightly higher to 4.4% (AR) from the advance report of 4.2% growth. The Consensus expectation was for a revision to 4.5% growth.
Growth in operating earnings slowed. Before tax corporate profits with inventory valuation adjustment (IVA) &amp; capital consumption adjustment (CCA) dropped to 4.9% (AR, 31.6% y/y) from the barnburner growth rates of 32.3%, 46.0% and 48.1% during the prior three quarters. After tax operating earnings grew 5.6% (AR) last quarter.
Operating profits for nonfinancial corporations grew 3.6% (AR, 37.7% y/y). Profit margins at nonfinancial corporations did not grow last quarter as indicated by an unchanged level of operating earnings per unit real value added. Nevertheless, margins were about two thirds higher than in 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040527a.jpg" width="353">
&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>.
Personal consumption expenditures growth was little changed at 3.9% (4.3% y/y) rate. Durables spending fell 4.2% due to lower light vehicle sales but nondurables grew 6.6% and services were up 4.2%.
Nonresidential fixed investment growth was revised higher to 9.8% (AR, 12.5% y/y) from 7.2%. Investment in equipment &amp; software was revised to 17.0% (19.4% y/y) from 11.4%. Residential investment growth also was revised up to 3.8% (9.3% y/y) from 2.1%.
Additional investment in inventories is now estimated to have added 0.8 percentage points to GDP growth, up from the initial estimate of a 0.3% add.
The trade sector, however, is now estimated to have subtracted 0.4 percentage points from GDP growth as imports were revised up to 5.9% (AR, 7.9% y/y) from 2.0%. Export growth of 4.9% (8.3% y/y) was a little better than first estimated.
Inflation was little revised at 2.6% for the chain price index. The gain in the PCE chain price index actually was revised down to 3.0% (1.6% y/y) from 3.2%. Business equipment &amp; software prices were revised up to a 0.2% decline (0.0% y/y) from -0.5%.
&quot;Technology, Globalization, and Economic Policy&quot; from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/iet/20040501/cover.pdf"> here</a>.<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 (Prelim.)</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">4.4%</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">5.0%</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">0.8%</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">3.7%</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">-0.4%</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">3.9%</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">4.8%</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">2.6%</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>

<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;04 (Prelim.)</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>4.4%</td>
<td>4.2%</td>
<td>4.1%</td>
<td>&nbsp;5.0%</td>
<td>3.1%</td>
<td>2.2%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.8%</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>3.7%</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>-0.4%</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>3.9%</td>
<td>3.7%</td>
<td>3.6%</td>
<td>4.8%</td>
<td>3.4%</td>
<td>2.4%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.6%</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>
Initial Jobless Insurance Claims Dip 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 27, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040527c.jpg" width="353">
Initial claims for jobless insurance dipped 3,000 last week to 344,000 following the 14,000 increase during the prior week that was revised up slightly. Consensus expectations had been for 335,000 initial claims.
The 4-week moving average of initial claims ticked up to 335,500 (-20.3% y/y).
Continuing claims for unemployment insurance rose 19,000 following a 30,000 decline the prior week that was deeper than originally estimated.
The insured rate of unemployment was unchanged at 2.3% where it has been for four weeks.

<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">5/22/04</th>
<th scope="col">5/15/04</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; 344</td>
<td>347</td>
<td>-17.9%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>2,943</td>
<td>-19.8%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
Help-Wanted Advertising Down Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 27, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040527e.jpg" width="353">
The Conference Board&#146;s National Index of Help-Wanted Advertising fell for the second month to 38 from 39 in March and from 40 in February.
The decline runs counter to the improvement in hiring portended by the Manpower Employment Outlook Survey for 2Q04. 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.
The proportion of labor markets with rising want-ad volume recovered some of the slump in March and rose to 43% from 22%.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">April &#39;03</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>38</td>
<td>39</td>
<td>37</td>
</tr>
</tbody>
</table>
</body>
</html>

US real GDP growth in 1Q was revised slightly higher to 4.4% (AR) from the advance report of 4.2% growth. The Consensus expectation was for a revision to 4.5% growth. Growth in operating earnings slowed. Before tax corporate profits [...]

Q1 2004 GDP Revised Up Slightly, Corporate Profit Growth Slowed

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040526d.jpg" width="353">
GDP reported today for Q1 2004 in the UK, Spain and Malaysia showed slower growth than in the final quarter of 2003, but important segments of each of those economies still show signs of strength.
This was the second report of the UK data, and they were virtually unchanged from last month&#39;s preliminary figures. The newly released detail show the downshift in growth from 0.9% in Q4 to 0.6% in Q1 due to an outright decline in exports and a smaller gain in fixed capital formation. However, this latter item still had a quite respectable performance that lifted its four-quarter growth to 6.9%, the strongest since late 1998.
Total growth in Spain eased to 0.6% in Q1 from 0.7% the period before.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040526e.jpg" width="353"> Consumption by households and nonprofit institutions was the main source of the lesser advance. Capital formation actually strengthened, up 0.9% relative to 0.6% before; the machinery segment firmed from a sluggish 0.1% to 1.6% in Q1.
Growth in Malaysia had a bigger slowdown, to 0.8% from 2.7% in Q4. But the more remarkable aspect was the Q4 number, which was the highest since early 2000. So some consolidation was hardly surprising. An industrial breakdown of the data shows that most sectors had slower growth in Q1, and manufacturing activity fell by 0.9%. However, after its surge in Q4, the year-on-year pace in manufacturing sustained its huge 12%-plus Q4 amount.
So the lower growth rates in these countries in Q1 don&#39;t look to spell slowdown; they are more likely signals of desirable reversion toward underlying trends in these very diverse economies.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GDP &amp; Select Components, % Changes</th>
Qtr/Qtr (Seasonally Adjusted)
<th scope="col">Year/ Year</th>
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">1st Qtr 2004</td>
<td>4th Qtr 2003</td>
<td>3rd Qtr &nbsp;2003 &nbsp;</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">UK - GDP, 2000 Pounds</td>
<td>0.6</td>
<td>0.9</td>
<td>0.8</td>
<td>3.0</td>
<td>2.7</td>
<td>1.9</td>
<td>1.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; -&nbsp; Fixed Capital Formation</td>
<td>1.1</td>
<td>2.4</td>
<td>1.9</td>
<td>6.9</td>
<td>3.7</td>
<td>5.3</td>
<td>-1.8</td>
</tr>
<tr>
<td class="firstcol">Spain - GDP, 1995 Euros</td>
<td>0.6</td>
<td>0.7</td>
<td>0.6</td>
<td>2.9</td>
<td>2.8</td>
<td>2.1</td>
<td>2.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp; Fixed Capital Formation</td>
<td>0.9</td>
<td>0.6</td>
<td>1.7</td>
<td>3.0</td>
<td>2.6</td>
<td>3.1</td>
<td>2.9</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">Malaysia - GDP, 1987 Ringgit</td>
<td>0.8</td>
<td>2.7</td>
<td>2.0</td>
<td>7.6</td>
<td>6.6</td>
<td>5.6</td>
<td>-0.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - Manufacturing</td>
<td>-0.9</td>
<td>6.0</td>
<td>3.3</td>
<td>12.5</td>
<td>12.2</td>
<td>5.8</td>
<td>-6.4</td>
</tr>
</tbody>
</table>
</body>
</html>

GDP reported today for Q1 2004 in the UK, Spain and Malaysia showed slower growth than in the final quarter of 2003, but important segments of each of those economies still show signs of strength. This was the second report of the UK [...]

GDP Growth Moderates in 3 Countries, But Key Sectors Remain Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040526b.jpg" width="353">
Sales of new one-family homes fell 11.8% in April to 1.093M. Consensus estimates had been for a lesser decline to 1.200 million. March sales were revised slightly higher.
The figures contrast with yesterday&#39;s report of a 2.5% m/m gain sales of existing single family homes. These new home sales data from the US Census Department reflect current sales versus the existing home sale figures which reflect closings on past sales.
Nevertheless, sales last month were up 6.4% from April 2003, although the rate of gain has eased considerably from the peaks above 20%. 
Sales fell hardest in the South with a 22.0% (-5.5% y/y) drop. Sales also fell 2.5% (+1.3% Y/Y) in the Northeast, down for the third consecutive month, and in the West where they fell 9.4% (+16.5% y/y). Sales rose 10.8% (25.6% y/y) in the Midwest.
The median price of a new single family home rose 8.8% to $221,200 (16.7% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E904/@E90401/@E90401.HTM"> Homes Sales (000s, AR)</a></th>
<th scope="col">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">New Single-Family</td>
<td>1,093</td>
<td>1,239</td>
<td>6.4%</td>
<td>1,088</td>
<td>977</td>
<td>907</td>
</tr>
</tbody>
</table>
Mortgage Applications & Business Borrowing Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 26, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040526a.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association fell another 3.3% (-61.3% y/y) last week.
A similar pattern of decline has been exhibited by commercial &amp; industrial (C&amp;I) loans. C&amp;I loans extended by all commercial banks in the US were down 7.0% y/y in the latest week, a decline that began early in 2001.
&quot;Why No Business Loan Growth?&quot; from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20040501/cover.pdf"> here</a>.
Applications to refinance mortgages cratered 6.7% last week on top of the double digit declines of the prior several periods. Purchase applications fell another 1.0% w/w but for the month still are 1.8% ahead of the April 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.
The effective interest rate on a conventional 30-Year mortgage rose slightly to 6.53% from 6.48% the week prior. The average for April was 6.16% versus 5.65% averaged in March. The effective rate on a 15-year mortgage also ticked up to 5.97% from 5.93% the week prior. The average for April was 5.54% versus 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">05/21/04</th>
<th scope="col">05/14/04</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>632.4</td>
<td>654.1</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>449.8</td>
<td>454.2</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,694.9</td>
<td>1,816.9</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
U.S. Durable Goods Orders Down More Than Expected, But ... 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 26, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040526c.jpg" width="353">
Durable goods orders fell 2.9% last month but the increase in March was revised up to a 5.7% jump from the advance report of a 3.4% gain. Consensus expectations had been for a 0.5% decline in April orders.
Transportation orders dropped 4.7% following a 4.1% jump in March, pulled down by a decline in motor vehicle orders and lower aircraft orders. Excluding the transportation sector, durable goods orders fell 2.1% (+16.9% y/y) following a 6.3% surge in March.
Non-defense capital goods orders fell 2.7% but the gain in March is now pegged at 6.0% versus the advance report of a 2.1% gain. Excluding aircraft and parts, orders fell 3.5% (+13.2% y/y) after a 6.0% March jump, revised up from 2.4%.
Orders for computers &amp; electronic products lost all of the March gain, posting a 4.1% (+13.9% y/y) decline. Lower orders for semiconductors dragged the sector down while computer orders surged 5.4% (8.8% y/y) and orders for communications equipment jumped 16.6% (15.2% y/y).
Machinery orders fell 4.9% (18.9% y/y) but orders for electrical equipment, appliances &amp; components jumped 3.4% (11.9% y/y).
Shipments of durable goods slipped 0.8% (12.5% y/y) following an upwardly revised 4.3% gain in March. Excluding transportation, shipments added 0.4% (13.8% y/y) to the upwardly revised 5.6% gain in March.
Durable inventories rose 0.5% (-0.9% y/y) for the sixth gain in the last seven months.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM"> NAICS Classification</a></th>
<th scope="col">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">Durable Goods Orders</td>
<td>2.9%</td>
<td>5.7%</td>
<td>13.9%</td>
<td>2.6%</td>
<td>-1.7%</td>
<td>-10.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non-defense Capital Goods</td>
<td>-2.7%</td>
<td>6.0%</td>
<td>12.6%</td>
<td>5.6%</td>
<td>-7.2%</td>
<td>-15.5%</td>
</tr>
</tbody>
</table>
</body>
</html>

Sales of new one-family homes fell 11.8% in April to 1.093M. Consensus estimates had been for a lesser decline to 1.200 million. March sales were revised slightly higher. The figures contrast with yesterday's report of a 2.5% m/m gain [...]

New Home Sales Down

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040525d.jpg" width="353">
May data on consumer and business confidence are available for Belgium and the Netherlands, and business confidence for Germany (the IFO measure.) Confidence among both business and consumers had generally been steadily improving since early 2003 throughout Europe, but these recent data suggest that doubts are rising.
In May Consumer confidence fell in both Belgium and the Netherlands. Business confidence in Germany slipped for the third month in a row and, and in Belgium, fell sharply; but business confidence in the Netherlands rose by 2.3 percentage points and registered the first positive balance of opinion since August, 2002.
One factor eroding confidence is the rise in oil prices and its persistence. While these concerns have been reflected in the stock markets of the area, the recent declines in the stock markets probably reflect more uncertainties than just the price of oil and have affected confidence. In the attached chart we show the daily price of oil (West Texas Intermediate) inverted and the daily price of the German stock market over the past few months. (Trends in the German stock market are fairly typical of other European markets.) The rise in the stock market earlier this year has been virtually eliminated and similarly for the earlier decline in the price of oil.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Confidence</th>
<th scope="col">May 04</th>
<th scope="col">Apr 04</th>
<th scope="col">May 03</th>
<th scope="col">M/M %</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">Belgium</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business</td>
<td>-1.7</td>
<td>0.6</td>
<td>-14.9</td>
<td>-2.3</td>
<td>13.2</td>
<td>-12.9</td>
<td>-7.9</td>
<td>-9.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer</td>
<td>-6</td>
<td>-4</td>
<td>-9</td>
<td>-2</td>
<td>3</td>
<td>-11</td>
<td>-2</td>
<td>-0</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Business</td>
<td>1.8</td>
<td>-1.4</td>
<td>-6.9</td>
<td>3.2</td>
<td>&nbsp;8.7</td>
<td>-5.6</td>
<td>-1.6</td>
<td>-1.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer</td>
<td>-28</td>
<td>-25</td>
<td>-36</td>
<td>-3</td>
<td>&nbsp;8</td>
<td>-35</td>
<td>-20</td>
<td>-1</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business IFO</td>
<td>96.1</td>
<td>96.3</td>
<td>89.4</td>
<td>-0.2</td>
<td>6.7</td>
<td>91.7</td>
<td>89.4</td>
<td>92.1</td>
</tr>
</tbody>
</table>
</body>
</html>

May data on consumer and business confidence are available for Belgium and the Netherlands, and business confidence for Germany (the IFO measure.) Confidence among both business and consumers had generally been steadily improving [...]

A Mixed Picture in European Confidence as Oil Prices Rise and Stock Markets Fall

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040525a.jpg" width="353">
Chain store sales fell 0.5% last week on top of a 0.8% decline the week prior, according to the International Council of Shopping Centers (ICSC)-UBS.
Retail gasoline prices rose to an average $2.06 per gallon last week (+38.8% y/y), up 14.8% from the April average of $1.80.
So far in May, chain store sales are 1.0% above the April average due to a 1.5% jump at the end of last month.
During the last ten years there has been a 59% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
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.

<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">05/22/04</th>
<th scope="col">05/15/04</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>439.8</td>
<td>442.2</td>
<td>5.5%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Consumer Confidence Held The Higher Ground 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 25, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040525c.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence for May was about unchanged at 93.2 versus the upwardly revised April reading of 93.0. Confidence in April had improved 5.1% versus March. Consensus expectations were for a slight rise in May to 94.0.
The present situation reading was little changed at 90.3 (+34.2% y/y) and the index of consumer expectations ticked 0.4% higher (+0.7% y/y).
While perceptions of current business conditions improved to the highest level since June 2001, jobs were viewed as hard to get by 30.6% of respondents. The increase in this measure erased all of the improvement (decline) logged earlier this year.
Expectations for business conditions in six months jumped in May to the highest level since January as 19.2% of respondents expected there to be more jobs in six months, the highest percentage since January.
The May Confidence reading was right in line with the unchanged level of Consumer Sentiment in mid-May 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 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">May</th>
<th scope="col">April</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>93.2</td>
<td>93.0</td>
<td>11.5%</td>
<td>79.8</td>
<td>96.6</td>
<td>106.6</td>
</tr>
</tbody>
</table>
Existing Home Sales Rose Unexpectedly to Near-Record 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 25, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040525b.jpg" width="353">
Sales of existing single family homes reported by the National Association of Realtors added another 2.5% in April to the gains of the prior two months. Sales of 6.640M were near the record of 6.68M set in September of last year. Consensus expectations had been for April sales 6.40M. March was unrevised.
Housing affordability has continued to rise despite higher mortgage rates as home price inflation has been stable near 7% and growth in real disposable income has accelerated to 4.0% from 2.6% last year.
Sales rose in all regions of the nation. In the Midwest sales rose 4.4% (+11.0% y/y) and in the South they rose 3.5% (+16.6% y/y). Lesser gains were logged in the Northeast where sales rose 1.4% (12.3% y/y) and in the West where sales rose 0.5% (17.9% y/y).
The median price of an existing home rose 1.1% m/m to $176,000 (+7.3% y/y). The prior month&#39;s figure was revised down.
The figures reflect closings of home sales in earlier months.
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/publicaffairsweb.nsf/Pages/AprilEHS04?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">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">Existing Single-Family</td>
<td>&nbsp;6,640</td>
<td>&nbsp;6,480</td>
<td>15.1%</td>
<td>6,098</td>
<td>5,593</td>
<td>5,290</td>
</tr>
</tbody>
</table>
</body>
</html>

Chain store sales fell 0.5% last week on top of a 0.8% decline the week prior, according to the International Council of Shopping Centers (ICSC)-UBS. Retail gasoline prices rose to an average $2.06 per gallon last week (+38.8% y/y), [...]

Chain Store Sales Lower Again As Gasoline Prices Rose Further

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: May 2004

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