Robert Brusca

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<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080530g.jpg" align="left" border="0" height="265" width="353">

Industrial output is slowing sharply in Japan and across most
sectors. Consumer goods and intermediate goods are leading the way
down. Very sharp declines have come in textiles and transportation
goods in the past two months. Intermediate goods, in addition to
consumer goods, find weak trends in place over two months as well. Even
investment goods that have been relatively stronger on a worldwide
basis are showing some softness as the output of investment goods fell
in March in Japan and managed only a weak rebound in April.

In the new quarter-to-date all sectors and breakdowns show
steep declines except for mining. Japan like German is getting off to a
weak start in 2008-Q2. For Germany it is weak retail sales, for Japan
it&#8217;s weakness in output.




<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col"> Japan Industrial Production Trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/m %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
<td>Qtr-2-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">seasonally adjusted</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>% AR</td>
</tr>
<tr>
<td class="firstcol">Mining &amp; Manufacturing</td>
<td>-0.3%</td>
<td>-3.4%</td>
<td>1.6%</td>
<td>-8.2%</td>
<td>-6.8%</td>
<td>0.6%</td>
<td>1.1%</td>
<td>-11.6%</td>
</tr>
<tr>
<td class="firstcol">Total Industry</td>
<td>-0.1%</td>
<td>-3.8%</td>
<td>2.0%</td>
<td>-7.5%</td>
<td>-5.6%</td>
<td>0.6%</td>
<td>1.1%</td>
<td>-11.4%</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>-0.4%</td>
<td>-3.3%</td>
<td>1.6%</td>
<td>-8.2%</td>
<td>-6.8%</td>
<td>0.6%</td>
<td>1.0%</td>
<td>-11.7%</td>
</tr>
<tr>
<td class="firstcol">Textiles</td>
<td>-1.6%</td>
<td>-1.3%</td>
<td>-0.2%</td>
<td>-11.8%</td>
<td>-10.4%</td>
<td>-7.1%</td>
<td>-5.0%</td>
<td>-14.3%</td>
</tr>
<tr>
<td class="firstcol">Transportation</td>
<td>-2.2%</td>
<td>-5.6%</td>
<td>1.3%</td>
<td>-23.6%</td>
<td>-11.0%</td>
<td>4.2%</td>
<td>0.7%</td>
<td>-29.0%</td>
</tr>
<tr class="even">
<td colspan="9" class="firstcol">Product Group</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>-1.3%</td>
<td>-5.2%</td>
<td>2.7%</td>
<td>-14.7%</td>
<td>-9.0%</td>
<td>0.1%</td>
<td>-1.9%</td>
<td>-21.4%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>-0.7%</td>
<td>-1.3%</td>
<td>1.0%</td>
<td>-4.3%</td>
<td>-5.3%</td>
<td>2.1%</td>
<td>3.1%</td>
<td>-7.5%</td>
</tr>
<tr>
<td class="firstcol">Investment Goods</td>
<td>0.5%</td>
<td>-4.3%</td>
<td>1.1%</td>
<td>-10.8%</td>
<td>-7.2%</td>
<td>-2.5%</td>
<td>0.2%</td>
<td>-11.9%</td>
</tr>
<tr>
<td class="firstcol">Mining</td>
<td>4.2%</td>
<td>1.4%</td>
<td>2.3%</td>
<td>36.4%</td>
<td>-1.3%</td>
<td>0.6%</td>
<td>5.9%</td>
<td>41.3%</td>
</tr>
<tr>
<td class="firstcol">Electricity &amp; Gas</td>
<td>3.8%</td>
<td>-11.4%</td>
<td>9.7%</td>
<td>3.7%</td>
<td>3.5%</td>
<td>-0.2%</td>
<td>4.2%</td>
<td>-8.0%</td>
</tr>
</tbody>
</table>
</div></body></html>

Industrial output is slowing sharply in Japan and across most sectors. Consumer goods and intermediate goods are leading the way down. Very sharp declines have come in textiles and transportation goods in the past two months. [...]

Japan Industrial Sector in Steep Slowdown…or Worse

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<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080530f.jpg" align="left" border="0" height="265" width="353">

German retail sales are showing some real weakness in April.
Nominal sales ex-autos are off by 1.3% in April and 1.7% in real terms.
For the developing second quarter the results are grim. As of the first
month of the new quarter the growth rate of ex auto retail sales in
April over the Q1 base is at a minus 13.1% annualized growth rate for
nominal retail sales and -15.9% for inflation-adjusted retail sales. 
 

The table shows a steady menu of negative growth rates over
all horizons from one year in, with the pace of declines getting more
or less progressively weaker. 
 

The chart shows that retail sales trends in Germany have been
volatile even though these series exclude auto sales which can be even
more volatile. The current month is turning trends sharply lower. April
is the second deeply negative month in a row. Weakness in March and
April offset what had looked like a strong gain in February sales. The
trends in Europe have been more consistently negative. Like in the US,
consumer readings in Germany and in Europe are generally among some of
the weakest in the entire economy. Weak retail sales keep this trend in
play. 

</div>


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col"> German Real and Nominal Retail Sales</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Nominal</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>Yr Ago</td>
<td>QTR Saar</td>
</tr>
<tr>
<td class="firstcol">Retail Excl Auto</td>
<td>-1.3%</td>
<td>-2.2%</td>
<td>1.4%</td>
<td>-8.1%</td>
<td>-0.8%</td>
<td>-3.1%</td>
<td>1.7%</td>
<td>-13.1%</td>
</tr>
<tr>
<td class="firstcol">Food Beverage &amp; Tobacco</td>
<td>-1.0%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>-4.4%</td>
<td>-3.1%</td>
<td>-2.3%</td>
<td>1.7%</td>
<td>-6.4%</td>
</tr>
<tr>
<td class="firstcol">Clothing footwear</td>
<td>1.2%</td>
<td>-10.3%</td>
<td>6.2%</td>
<td>-13.4%</td>
<td>-4.0%</td>
<td>-9.9%</td>
<td>8.6%</td>
<td>-21.8%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">Real</td>
</tr>
<tr>
<td class="firstcol">Retail Excl auto</td>
<td>-1.7%</td>
<td>-2.2%</td>
<td>1.0%</td>
<td>-11.3%</td>
<td>-3.9%</td>
<td>-5.6%</td>
<td>0.9%</td>
<td>-15.9%</td>
</tr>
</tbody>
</table>
</body></html>

German retail sales are showing some real weakness in April. Nominal sales ex-autos are off by 1.3% in April and 1.7% in real terms. For the developing second quarter the results are grim. As of the first month of the new quarter the [...]

German Retail Sales by Sector

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080530a.jpg" width="353">
The final reading of consumer sentiment during May from the University of Michigan fell 4.5% from April to a level of 59.8. That was about as indicated in the preliminary report made two weeks ago and it nearly matched Consensus expectations. The latest level was the lowest since the brief &quot;credit crunch&quot; recession during 1980. 
During the last ten years there has been a 47% correlation between the level of sentiment and the three month change in real consumer spending.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080530b.jpg" width="353">
The current conditions index nearly matched the April decline and fell 6.9% after an 8.6% decline during April. The view of current conditions for buying large household goods fell a hard 6.3% (-34.4% y/y) and it was the third sharp m/m drop this year. Only 49% of respondents thought that now was a good time to buy versus 70%-plus during the last three years. Conversely, 44% thought it was a bad time to buy. That was the highest reading since 1990 and more than double the recent rates. The view of current personal finances fell to its lowest level since early 1981.
The expectations component of overall sentiment fell 3.0% after its 11.3% April dive. The index fell to its lowest level since late 1990. Expectations for personal finances fell slightly after a sharp April decline to the lowest level since 1980. Expectations for business conditions during the next year fell much more strongly by 12.5% (-63.9% y/y) to its lowest level since 1980. The index for expected business conditions over the next five years also fell but more mildly m/m (-21.3% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080530c.jpg" width="353">
Opinions about government policy, which apparently influence economic expectations, still showed a sharp 21.9% m/m (-43.2% y/y) drop. The percentage of those surveyed who indicated that they thought government was doing a good job amounted to only 6% but those who thought a poor job was being done shot up to a record 56% from 43% in April.
The mean expected rate of inflation during the next twelve months surged to 7.0% from 5.7% in April, the highest level since 1981.Has the Behavior of Inflation and Long-Term Inflation Expectations Changed? from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/1q08Clark.pdf">here</a>.
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database, with details in the proprietary UMSCA database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">May (Final)</th>
<th scope="col">May (Prelim.)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">May y/y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>59.8</td>
<td>59.5</td>
<td>62.6</td>
<td>&nbsp;69.5</td>
<td>-32.3% </td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>73.3</td>
<td>71.7</td>
<td>77.0</td>
<td>84.2</td>
<td>-30.3%</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>51.1</td>
<td>51.7</td>
<td>53.3</td>
<td>60.1</td>
<td>-34.1%</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
</body>
</html>

The final reading of consumer sentiment during May from the University of Michigan fell 4.5% from April to a level of 59.8. That was about as indicated in the preliminary report made two weeks ago and it nearly matched Consensus [...]

Michigan Consumer Sentiment Still the Lowest Since 1980

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080530d.jpg" width="353">
Nominal personal income rose 0.2% last month after a 0.4% March increase which was revised up slightly from the initial report. The April rise matched Consensus expectations. Nevertheless, slower growth in payrolls slowed the rise in income to a three-month growth rate of 4.2% after the 6.2% increase during all of last year.
Disposable personal income also rose a moderate 0.2% during April. Adjusted for price inflation, however, real income fell just slightly after no change in March. As a result of this recent and earlier weakness, the 1.5% three-month growth rate in real DPI was roughly half of that during all of 2007.
The PCE chain price index matched expectations and increased 0.2% after a 0.3% rise in March. The core PCE price index also matched expectations and ticked up just 0.1%. That weakness was enough to lower the three-month growth in core prices to 1.8%, its weakest since the middle of last year. Easier gains have been registered for goods prices but services prices have grown at a firmer 3.7% annual rate during the last three months.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080530e.jpg" width="353">
Wage &amp; salary income fell 0.2% (+4.4% y/y) after a 0.5% March increase. As a result of the April decline the three-month growth in wages fell to 2.5%, half of last year&#39;s growth and still well reduced from the 10% rate of growth early in 2007 and late in 2006. Factory sector wages fell 0.7% (+1.1% y/y) and the decline reversed all of the gains during the prior three months. Wages &amp; salaries in the private service-providing industries fell as well in April but remained relatively strong versus the goods producing sector. A 0.2% April drop (+5.1% y/y) pulled three-month growth to 3.2% or half the gain during 2007. Wages in the government sector rose 0.3% (4.9% y/y) for the second straight month and three-month growth of 4.5% was equal to last year&#39;s increase but it was down from the 7.3% growth during 1Q.
Interest income rose a modest 0.1% after lower interest rates had caused interest income to be flat or unchanged (+2.2% y/y) during the prior six months. That rise is down from 5% to 14% growth during each of the prior three years. Dividend income rose another firm 0.5% (10.3% y/y) and, again, a three-month gain of 7.2% is half, or more than half, the rates of growth during the prior four years.
Personal consumption expenditures rose just 0.2% last month or half the gain during March. Adjusted for price inflation, real spending fell just slightly in April and it has grown at a 0.1% annual rate during the last three months. That&#39;s after 2.9% growth in 2007 and much less than the 3.0% growth in each of the prior two years.
Real spending on discretionary items was mixed. Motor vehicle &amp; parts purchases fell 2.3% last month and three-month growth plummeted further to -15.3%. In a reversal, real spending on household furniture &amp; appliances surged 1.9%. That was the strongest increase since early 2006. Real spending on apparel grew another 0.5% and three-month growth held firm at 9.0%. These and other detailed spending figures are available in Haver&#39;s USNA database.
The personal savings rate improved slightly from the prior three year&#39;s average to 0.7%.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a> (%)</th>
<th scope="col">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 class="odd">
<td class="firstcol">Personal Income</td>
<td>0.2</td>
<td>0.4</td>
<td>4.8</td>
<td>6.2</td>
<td>6.6</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Disposable Personal Income</td>
<td>0.2</td>
<td>0.3</td>
<td>5.0</td>
<td>5.7</td>
<td>5.9</td>
<td>4.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption</td>
<td>0.2</td>
<td>0.4</td>
<td>4.8%</td>
<td>5.5</td>
<td>5.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>0.7</td>
<td>0.7</td>
<td>0.4 (April &#39;07)</td>
<td>0.5</td>
<td>0.4</td>
<td>0.5</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.2</td>
<td>0.3</td>
<td>3.2</td>
<td>2.5</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.1</td>
<td>0.2</td>
<td>2.1</td>
<td>2.1</td>
<td>2.2</td>
<td>2.2</td>
</tr>
</tbody>
</table>
</body>
</html>

Nominal personal income rose 0.2% last month after a 0.4% March increase which was revised up slightly from the initial report. The April rise matched Consensus expectations. Nevertheless, slower growth in payrolls slowed the rise in [...]

U.S. Income & Spending Rose Moderately in April; Real Income Flat

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<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080530d.jpg" align="left" border="0" height="265" width="353">

Nominal personal income rose 0.2% last
month after a 0.4% March increase which was revised up slightly from
the initial report. The April rise matched Consensus expectations.
Nevertheless, slower growth in payrolls slowed the rise in income to a
three-month growth rate of 4.2% after the 6.2% increase during all of
last year.
Disposable personal income also rose a
moderate 0.2% during April. Adjusted for price inflation, however, real
income fell just slightly after no change in March. As a result of this
recent and earlier weakness, the 1.5% three-month growth rate in real
DPI was roughly half of that during all of 2007.
The PCE chain price index matched
expectations and increased 0.2% after a 0.3% rise in March. The core
PCE price index also matched expectations and ticked up just
0.1%. That weakness was enough to lower the three-month growth in core
prices to 1.8%, its weakest since the middle of last year.
Easier gains have been registered for goods prices but services prices
have grown at a firmer 3.7% annual rate during the last three months.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080530e.jpg" align="right" border="0" height="265" width="353">
Wage &amp; salary income fell 0.2% (+4.4% y/y) after a
0.5% March increase. As a result of the April decline the three-month
growth in wages fell to 2.5%, half of last year's growth and still well
reduced from the 10% rate of growth early in 2007 and late in 2006.
Factory sector wages fell 0.7% (+1.1% y/y) and the decline reversed all
of the gains during the prior three months. Wages &amp; salaries in
the private service-providing industries fell as well in April but
remained relatively strong versus the goods producing sector. A 0.2%
April drop (+5.1% y/y) pulled three-month growth to 3.2% or half the
gain during 2007. Wages in the government sector rose 0.3% (4.9% y/y)
for the second straight month and three-month growth of 4.5% was equal
to last year's increase but it was down from the 7.3% growth during 1Q.
Interest income rose a modest 0.1% after lower interest rates
had caused interest income to be flat or unchanged (+2.2% y/y) during
the prior six months. That rise is down from 5% to 14% growth during
each of the prior three years. Dividend income rose another firm 0.5%
(10.3% y/y) and, again, a three-month gain of 7.2% is half, or more
than half, the rates of growth during the prior four years.
Personal consumption expenditures rose just 0.2% last month or
half the gain during March. Adjusted for price inflation, real
spending fell just slightly in April and it has grown at a
0.1% annual rate during the last three months. That's after 2.9% growth
in 2007 and much less than the 3.0% growth in each of the prior two
years.
Real spending on discretionary items was mixed. Motor vehicle
&amp; parts purchases fell 2.3% last month and three-month growth
plummeted further to -15.3%. In a reversal, real spending on household
furniture &amp; appliances surged 1.9%. That was the strongest
increase since early 2006. Real spending on apparel grew another 0.5%
and three-month growth held firm at 9.0%. These and other detailed
spending figures are available in Haver's USNA database.
The personal savings rate improved slightly from the prior
three year's average to 0.7%.
</div>


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<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition
of Personal Income</a> (%)</th>
<th scope="col">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 class="odd">
<td class="firstcol">Personal Income</td>
<td>0.2</td>
<td>0.4</td>
<td>4.8</td>
<td>6.2</td>
<td>6.6</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Disposable
Personal Income</td>
<td>0.2</td>
<td>0.3</td>
<td>5.0</td>
<td>5.7</td>
<td>5.9</td>
<td>4.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption</td>
<td>0.2</td>
<td>0.4</td>
<td>4.8%</td>
<td>5.5</td>
<td>5.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>0.7</td>
<td>0.7</td>
<td>0.4 (April '07)</td>
<td>0.5</td>
<td>0.4</td>
<td>0.5</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.2</td>
<td>0.3</td>
<td>3.2</td>
<td>2.5</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>0.1</td>
<td>0.2</td>
<td>2.1</td>
<td>2.1</td>
<td>2.2</td>
<td>2.2</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment Still
the Lowest Since 1980 
by <a href="/comment/Moeller.html">Tom
Moeller</a> May 30, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080530a.jpg" align="left" border="0" height="265" width="353">
The final reading of consumer sentiment during May from the
University of Michigan fell 4.5% from April to a level of 59.8. That
was about as indicated in the preliminary report made two weeks ago and
it nearly matched Consensus expectations. The
latest level was the lowest since the brief "credit crunch" recession
during 1980. 
During the last ten years there has been a 47% correlation
between the level of sentiment and the three month change in real
consumer spending.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080530b.jpg" align="right" border="0" height="265" width="353">
The current conditions index nearly matched the April decline
and fell 6.9% after an 8.6% decline during April. The view of current
conditions for buying large household goods fell a hard 6.3% (-34.4%
y/y) and it was the third sharp m/m drop this year. Only 49% of
respondents thought that now was a good time to buy versus 70%-plus
during the last three years. Conversely, 44% thought it was a bad time
to buy. That was the highest reading since 1990 and more than double
the recent rates. The view of current personal finances fell to its
lowest level since early 1981.
The expectations component of overall sentiment fell 3.0%
after its 11.3% April dive. The index fell to its lowest level since
late 1990. Expectations for personal finances fell slightly after a
sharp April decline to the lowest level since 1980. Expectations for
business conditions during the next year fell much more strongly by
12.5% (-63.9% y/y) to its lowest level since 1980. The index for
expected business conditions over the next five years also fell but
more mildly m/m (-21.3% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080530c.jpg" align="left" border="0" height="265" width="353">
Opinions about government policy, which apparently influence
economic expectations, still showed a sharp 21.9% m/m (-43.2% y/y)
drop. The percentage of those surveyed who indicated that they thought
government was doing a good job amounted to only 6% but those who
thought a poor job was being done shot up to a record 56% from 43% in
April.
The mean expected rate of inflation during the next twelve
months surged to 7.0% from 5.7% in April, the highest level since 1981.Has
the Behavior of Inflation and Long-Term Inflation Expectations Changed?
from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/1q08Clark.pdf">here</a>.
The University of Michigan survey is not seasonally
adjusted.The reading is based on telephone interviews with about 500
households at month-end; the mid-month results are based on about 300
interviews. The summary indexes are in Haver's USECON database,
with details in the proprietary UMSCA database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">May (Final)</th>
<th scope="col">May (Prelim.)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">May y/y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>59.8</td>
<td>59.5</td>
<td>62.6</td>
<td>&nbsp;69.5</td>
<td>-32.3% </td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>73.3</td>
<td>71.7</td>
<td>77.0</td>
<td>84.2</td>
<td>-30.3%</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>51.1</td>
<td>51.7</td>
<td>53.3</td>
<td>60.1</td>
<td>-34.1%</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
German Retail Sales by Sector 
by <a href="/comment/Brusca.html">Robert
Brusca</a> May 30, 2008



<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080530f.jpg" align="left" border="0" height="265" width="353">

German retail sales are showing some real weakness in April.
Nominal sales ex-autos are off by 1.3% in April and 1.7% in real terms.
For the developing second quarter the results are grim. As of the first
month of the new quarter the growth rate of ex auto retail sales in
April over the Q1 base is at a minus 13.1% annualized growth rate for
nominal retail sales and -15.9% for inflation-adjusted retail sales. 
 

The table shows a steady menu of negative growth rates over
all horizons from one year in, with the pace of declines getting more
or less progressively weaker. 
 

The chart shows that retail sales trends in Germany have been
volatile even though these series exclude auto sales which can be even
more volatile. The current month is turning trends sharply lower. April
is the second deeply negative month in a row. Weakness in March and
April offset what had looked like a strong gain in February sales. The
trends in Europe have been more consistently negative. Like in the US,
consumer readings in Germany and in Europe are generally among some of
the weakest in the entire economy. Weak retail sales keep this trend in
play. 

</div>


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> German
Real and Nominal Retail Sales</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Nominal</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>Yr Ago</td>
<td>QTR Saar</td>
</tr>
<tr>
<td class="firstcol">Retail Excl Auto</td>
<td>-1.3%</td>
<td>-2.2%</td>
<td>1.4%</td>
<td>-8.1%</td>
<td>-0.8%</td>
<td>-3.1%</td>
<td>1.7%</td>
<td>-13.1%</td>
</tr>
<tr>
<td class="firstcol">Food Beverage &amp; Tobacco</td>
<td>-1.0%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>-4.4%</td>
<td>-3.1%</td>
<td>-2.3%</td>
<td>1.7%</td>
<td>-6.4%</td>
</tr>
<tr>
<td class="firstcol">Clothing footwear</td>
<td>1.2%</td>
<td>-10.3%</td>
<td>6.2%</td>
<td>-13.4%</td>
<td>-4.0%</td>
<td>-9.9%</td>
<td>8.6%</td>
<td>-21.8%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">Real</td>
</tr>
<tr>
<td class="firstcol">Retail Excl auto</td>
<td>-1.7%</td>
<td>-2.2%</td>
<td>1.0%</td>
<td>-11.3%</td>
<td>-3.9%</td>
<td>-5.6%</td>
<td>0.9%</td>
<td>-15.9%</td>
</tr>
</tbody>
</table>
Japan Industrial Sector in SteepSlowdown&#8230;or Worse 
by <a href="/comment/Brusca.html">Robert
Brusca</a> May 30, 2008



<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080530g.jpg" align="left" border="0" height="265" width="353">

Industrial output is slowing sharply in Japan and across most
sectors. Consumer goods and intermediate goods are leading the way
down. Very sharp declines have come in textiles and transportation
goods in the past two months. Intermediate goods, in addition to
consumer goods, find weak trends in place over two months as well. Even
investment goods that have been relatively stronger on a worldwide
basis are showing some softness as the output of investment goods fell
in March in Japan and managed only a weak rebound in April.

In the new quarter-to-date all sectors and breakdowns show
steep declines except for mining. Japan like German is getting off to a
weak start in 2008-Q2. For Germany it is weak retail sales, for Japan
it&#8217;s weakness in output.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> Japan
Industrial Production Trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/m %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
<td>Qtr-2-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">seasonally adjusted</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>% AR</td>
</tr>
<tr>
<td class="firstcol">Mining &amp; Manufacturing</td>
<td>-0.3%</td>
<td>-3.4%</td>
<td>1.6%</td>
<td>-8.2%</td>
<td>-6.8%</td>
<td>0.6%</td>
<td>1.1%</td>
<td>-11.6%</td>
</tr>
<tr>
<td class="firstcol">Total Industry</td>
<td>-0.1%</td>
<td>-3.8%</td>
<td>2.0%</td>
<td>-7.5%</td>
<td>-5.6%</td>
<td>0.6%</td>
<td>1.1%</td>
<td>-11.4%</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>-0.4%</td>
<td>-3.3%</td>
<td>1.6%</td>
<td>-8.2%</td>
<td>-6.8%</td>
<td>0.6%</td>
<td>1.0%</td>
<td>-11.7%</td>
</tr>
<tr>
<td class="firstcol">Textiles</td>
<td>-1.6%</td>
<td>-1.3%</td>
<td>-0.2%</td>
<td>-11.8%</td>
<td>-10.4%</td>
<td>-7.1%</td>
<td>-5.0%</td>
<td>-14.3%</td>
</tr>
<tr>
<td class="firstcol">Transportation</td>
<td>-2.2%</td>
<td>-5.6%</td>
<td>1.3%</td>
<td>-23.6%</td>
<td>-11.0%</td>
<td>4.2%</td>
<td>0.7%</td>
<td>-29.0%</td>
</tr>
<tr class="even">
<td colspan="9" class="firstcol">Product
Group</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>-1.3%</td>
<td>-5.2%</td>
<td>2.7%</td>
<td>-14.7%</td>
<td>-9.0%</td>
<td>0.1%</td>
<td>-1.9%</td>
<td>-21.4%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>-0.7%</td>
<td>-1.3%</td>
<td>1.0%</td>
<td>-4.3%</td>
<td>-5.3%</td>
<td>2.1%</td>
<td>3.1%</td>
<td>-7.5%</td>
</tr>
<tr>
<td class="firstcol">Investment Goods</td>
<td>0.5%</td>
<td>-4.3%</td>
<td>1.1%</td>
<td>-10.8%</td>
<td>-7.2%</td>
<td>-2.5%</td>
<td>0.2%</td>
<td>-11.9%</td>
</tr>
<tr>
<td class="firstcol">Mining</td>
<td>4.2%</td>
<td>1.4%</td>
<td>2.3%</td>
<td>36.4%</td>
<td>-1.3%</td>
<td>0.6%</td>
<td>5.9%</td>
<td>41.3%</td>
</tr>
<tr>
<td class="firstcol">Electricity &amp; Gas</td>
<td>3.8%</td>
<td>-11.4%</td>
<td>9.7%</td>
<td>3.7%</td>
<td>3.5%</td>
<td>-0.2%</td>
<td>4.2%</td>
<td>-8.0%</td>
</tr>
</tbody>
</table>
</div>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080529h.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s retail sales have been floundering and in a downtrend
since 2005. But in December of 2007 and January of 2008 sales suddenly
spiked. They have since settled back down into the sleepy pattern we
have been used to. Indeed, sales are weakening sharply in 2008-Q2 after
a sales surge in 2008-Q1. Sales spiked to a 3.2% annual rate in Q1 on
the back of a 12.7% pace of sales in the auto sector. But in 2008-Q2
sales are starting out quite weak at an annual rate pace of -0.8%. Auto
sales are falling at a -2.7% annual rate. Fabric and apparel retail
sales are off at a 15.6% pace in the new quarter. The sales boom in
Japan appears to have been quite short-lived. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col"> Japan Retail Sales Trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>Q-to-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">Total SA</td>
<td>-0.1%</td>
<td>0.4%</td>
<td>-0.9%</td>
<td>-2.4%</td>
<td>-0.8%</td>
<td>0.4%</td>
<td>-0.8%</td>
<td>-0.8%</td>
</tr>
<tr>
<td class="firstcol" colspan="9">Not
seasonally adjusted</td>
</tr>
<tr class="odd">
<td class="firstcol">Total: Nominal</td>
<td>-0.8%</td>
<td>-2.4%</td>
<td>2.4%</td>
<td>-3.6%</td>
<td>-1.0%</td>
<td>0.1%</td>
<td>-3.1%</td>
<td>-9.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Vehicles</td>
<td>1.6%</td>
<td>-1.4%</td>
<td>-3.2%</td>
<td>-11.5%</td>
<td>-2.0%</td>
<td>4.1%</td>
<td>-27.8%</td>
<td>-2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food &amp; Beverage</td>
<td>-0.5%</td>
<td>-0.5%</td>
<td>1.9%</td>
<td>3.8%</td>
<td>1.7%</td>
<td>0.6%</td>
<td>4.6%</td>
<td>-1.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Fabric apparel &amp; access</td>
<td>-2.4%</td>
<td>-3.0%</td>
<td>5.0%</td>
<td>-2.3%</td>
<td>-1.1%</td>
<td>-2.5%</td>
<td>-6.4%</td>
<td>-15.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Rest of Retail</td>
<td>-1.3%</td>
<td>-3.7%</td>
<td>3.5%</td>
<td>-6.3%</td>
<td>-2.3%</td>
<td>-0.7%</td>
<td>-0.6%</td>
<td>-14.9%</td>
</tr>
</tbody>
</table>
</body></html>

Japan’s retail sales have been floundering and in a downtrend since 2005. But in December of 2007 and January of 2008 sales suddenly spiked. They have since settled back down into the sleepy pattern we have been used to. Indeed, sales [...]

Japan's Sales Wither After a Spike

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<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080529e.jpg" align="left" border="0" height="265" width="353">

The EU overall sentiment reading fell to 96.7 in May from 98
in April. The EMU area&#8217;s overall index was unchanged in the month. For
the EU area, the industrial sector continues to be the relative
strongest. We gauge this NOT from the absolute index value for the
month but from its ranking for the month within its own range (see
percentile or rank column). The industrial sector has a raw reading of
-3 but a range percentile standing of 70.6 percent. In contrast the
services sector has a stronger looking +6 raw reading, but that reading
resides in the bottom 30 percentile of its range. Since sectors have
different intrinsic averages and volatility we view the percentiles as
a superior way to assess the readings across the various measures.
Comparisons to the mean also makes this clear since the service sector
mean is +16 compared to its current reading of +6 while for the
industrial sector the average reading is -7 and the current reading is
-3. 
 

Retail and construction sectors are in moderately good shape
at the border of the top third of their respective ranges, consumer
confidence is quite weak residing in the 44th percentile of its range. 
 

Country indices are uniformly lower, with Germany having the
relative best reading of this group in the 65th percentile of its range
followed by France in the 60th percentile of its range. Italy is in the
47th percentile of its range, even with the sharp jump in its sentiment
index this month. Spain is in the 25th percentile of its range and the
UK, a large EU (not EMU) member, stands in the 44th percentile of its
range. 
 

The components readings: The EU/EMU region is still having
some difficulty. The EMU sentiment indicator stalled this month but the
EU measure continued to fall at a fairly rapid pace. The service sector
has been moving sideways for several months, while consumer sentiment,
having steadied in earlier months, fell sharply in May, amid some very
weak component readings. For industry, confidence has stayed aloft
while most components are showing decay. The production expectation
reading is the weakest relative component in the industrial sector
survey. Retailing shows encroaching weakness in employment expectations
and in orders placed. For services all of the main components are
around the bottom third of their respective ranges. Construction is a
relatively solid sector with firm component readings in the top third
of their respective ranges. While the industrial sector has the highest
range readings its components look weaker. Time will tell how ell
Europe holds up as the strong euro continues to take a toll along with
ebbing financial distress and a weakening global environment. 

</div>


<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 class="firstcol">EU</td>
<td>May 
08</td>
<td>Apr 
08</td>
<td>Mar 
08</td>
<td>Feb 
08</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
<td>R-SQ 
w/ 
Overall</td>
</tr>
<tr class="odd">
<td class="firstcol">Overall</td>
<td>96.7</td>
<td>98</td>
<td>101.9</td>
<td>100.3</td>
<td>54.7</td>
<td>132</td>
<td>116</td>
<td>73</td>
<td>43</td>
<td>100</td>
<td>1.00</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial</td>
<td>-3</td>
<td>-2</td>
<td>0</td>
<td>0</td>
<td>70.6</td>
<td>72</td>
<td>7</td>
<td>-27</td>
<td>34</td>
<td>-7</td>
<td>0.87</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confidence</td>
<td>-14</td>
<td>-12</td>
<td>-11</td>
<td>-11</td>
<td>44.8</td>
<td>149</td>
<td>2</td>
<td>-27</td>
<td>29</td>
<td>-10</td>
<td>0.83</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail</td>
<td>-3</td>
<td>-6</td>
<td>1</td>
<td>1</td>
<td>66.7</td>
<td>48</td>
<td>6</td>
<td>-21</td>
<td>27</td>
<td>-6</td>
<td>0.47</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>-12</td>
<td>-11</td>
<td>-9</td>
<td>-7</td>
<td>66.7</td>
<td>83</td>
<td>3</td>
<td>-42</td>
<td>45</td>
<td>-17</td>
<td>0.42</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>6</td>
<td>6</td>
<td>11</td>
<td>6</td>
<td>31.6</td>
<td>104</td>
<td>32</td>
<td>-6</td>
<td>38</td>
<td>16</td>
<td>0.81</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>% m/m</td>
<td ="">&nbsp;</td>
<td>May 
08</td>
<td>Based
 
on 
Level</td>
<td colspan="4">Level</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU</td>
<td>0.0%</td>
<td>-2.5%</td>
<td>-0.6%</td>
<td>97.1</td>
<td>54.6</td>
<td>123</td>
<td>117</td>
<td>73</td>
<td>44</td>
<td>99</td>
<td>0.95</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>0.2%</td>
<td>-1.2%</td>
<td>0.3%</td>
<td>103.0</td>
<td>65.1</td>
<td>83</td>
<td>116</td>
<td>79</td>
<td>37</td>
<td>99</td>
<td>0.73</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>-3.2%</td>
<td>-2.4%</td>
<td>0.0%</td>
<td>99.8</td>
<td>60.0</td>
<td>120</td>
<td>119</td>
<td>72</td>
<td>47</td>
<td>100</td>
<td>0.79</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>3.3%</td>
<td>-1.7%</td>
<td>-1.3%</td>
<td>95.1</td>
<td>47.6</td>
<td>144</td>
<td>121</td>
<td>71</td>
<td>50</td>
<td>100</td>
<td>0.79</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>-1.1%</td>
<td>-3.8%</td>
<td>-4.1%</td>
<td>79.8</td>
<td>25.5</td>
<td>194</td>
<td>118</td>
<td>67</td>
<td>51</td>
<td>100</td>
<td>0.62</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo:UK</td>
<td>-5.4%</td>
<td>-8.5%</td>
<td>10.7%</td>
<td>90.6</td>
<td>44.2</td>
<td>179</td>
<td>118</td>
<td>69</td>
<td>50</td>
<td>101</td>
<td>0.44</td>
</tr>
<tr class="odd">
<td colspan="7" class="firstcol">Since 1990
except Services (Oct
1996) 208 - &nbsp;Count</td>
<td colspan="2">Services:</td>
<td colspan="3">126 -Count</td>
</tr>
<tr class="odd">
<td colspan="12" class="firstcol">Sentiment
is an index, sector
readings are net balance diffusion measures</td>
</tr>
</tbody>
</table>
</body></html>

The EU overall sentiment reading fell to 96.7 in May from 98 in April. The EMU area’s overall index was unchanged in the month. For the EU area, the industrial sector continues to be the relative strongest. We gauge this NOT from the [...]

EU Index is Still Sinking Fast…Inflation in EMU Still High

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080529g.jpg" width="353">
The index of help-wanted advertising reported by the Conference Board held last month at its record low of 19.
During the last ten years there has been a 57% correlation between the level of help-wanted advertising and the three month change in non-farm payrolls.
The proportion of labor markets with rising want-ads also held at its downwardly revised March level of 35%. The latest was improved from 12% in August of lat year which was the lowest monthly reading since October 2001.</div>
Each region of the country held steady with the March level except the East South Central where the index fell.
The Conference Board surveys help-wanted print advertising volume in 51 major newspapers across the country every month. The latest help wanted report from the Conference Board is available <a href="http://www.conference-board.org/economics/helpwanted.cfm">here</a>.
In 2006, the Conference Board introduced its Help Wanted Online Data Series and the latest release can be found in this <a href="http://www.conference-board.org/pdf_free/HWOnLine3183_PR.pdf">link</a>.
Regulation and the Neo-Wicksellian Approach to Monetary Policy from the Federal Reserve Bank of Dallas is available <a href="http://dallasfed.org/research/papers/2008/wp0807.pdf"> here</a>.<div align="left"></div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">April 2007</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>19</td>
<td>19</td>
<td>22</td>
<td>26</td>
<td>33</td>
<td>39</td>
</tr>
</tbody>
</table>
</body>
</html>

The index of help-wanted advertising reported by the Conference Board held last month at its record low of 19. During the last ten years there has been a 57% correlation between the level of help-wanted advertising and the three month [...]

U.S. Help-Wanted Advertising Remained at a Record Low

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 2008

Jump to:

Japan Industrial Sector in Steep Slowdown…or Worse

German Retail Sales by Sector

Michigan Consumer Sentiment Still the Lowest Since 1980

U.S. Income & Spending Rose Moderately in April; Real Income Flat

U.S. Income & Spending Rose Moderately in April; Real Income Flat

Japan's Sales Wither After a Spike

EU Index is Still Sinking Fast…Inflation in EMU Still High

U.S. Help-Wanted Advertising Remained at a Record Low