Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080930i.jpg" align="left" border="0">
Headline is turning sharply in a favorable direction; core
remains high and &#8216;sticky&#8217;
In one of my favorite comedy skits of all times Dan Aykroyd of
the US TV show &#8220;Saturday Night Live&#8221; was imitating Jimmy Carter at the
height of the US inflation bubble. He launched his &#8216;inflation is your
friend&#8217; skit urging people (while imitating Carter) to enjoy wearing
$1,000 suits and living in million dollar houses and smoking $100
cigars. It was a great skit. But the view does not reflect the
realities of policy.
Since those days central banks have made it a real business of
stamping out inflation. But when oil prices spurt it is hard to keep a
lid on inflation. Oil is just too important and people do not
substitute away from it with enough vigor to damp its impact on overall
prices. Central banks that target headline inflation or pose ceilings
for it, have had their heads handed to them.
In the US the Fed has been criticized for its focus on CORE
inflation (since people live in a headline inflation world) but, in the
event, core inflation has been much more on track with the Fed&#8217;s
professed comfort zone (not a formal target). And that eventually
builds credibility.
In Europe the core rate is at 2.3% over three months and six
months (lagged since we do not have the core yet for September) it is
in improving shape even as it is at 2.6% Yr/Yr. That&#8217;s still a
percentage point better than (up-to-date) headline inflation. Had
Europe focused on this rate it would regard inflation as closer to the
target. Instead, while headline inflation is decelerating (0.7% annual
rate over three months) it is still running at a tortuous 3.6% Yr/Yr
pace that is light years away from a 2% ceiling, tying the hands of the
central bank.
I am not suggesting a shift to an &#8216;inflation is your friend&#8217;
monetary policy. But in targeting headline inflation the ECB has boxed
itself in. It is not able to be preemptive and will only be able to cut
rates once economic weakness is clearly in train and that will make the
hammer of economic downturn hit harder.
When this is all over the ECB would do well to reconsider what
it targets. As a general rule it makes no sense to target something you
cannot hit or will not hit. And a headline inflation rate of 2% &#8216;MAX&#8217;
with oil prices moving as they have is something no central bank in the
world would try to hit. Europe needs to do some re-thinking to avoid a
policy re-stinking. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Trends in
EMU HICP; Flash Index </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% mo/mo</td>
<td colspan="4">% saar</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="grey3">
<td class="firstcol">EMU-13</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>0.7%</td>
<td>2.4%</td>
<td style="color: red;">3.6%</td>
<td>2.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Core</td>
<td>#N/A</td>
<td>0.3%</td>
<td>0.1%</td>
<td style="color: red; background-color: rgb(204, 255, 255);">2.3%</td>
<td style="background-color: rgb(204, 255, 255);">2.3%</td>
<td style="color: red; background-color: rgb(204, 255, 255);">2.6%</td>
<td style="background-color: rgb(204, 255, 255);">2.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Goods</td>
<td>#N/A</td>
<td>-0.4%</td>
<td>-0.9%</td>
<td style="background-color: rgb(204, 255, 255);">-3.4%</td>
<td style="background-color: rgb(204, 255, 255);">4.0%</td>
<td style="color: red; background-color: rgb(204, 255, 255);">4.6%</td>
<td style="background-color: rgb(204, 255, 255);">1.2%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Services</td>
<td>#N/A</td>
<td>0.3%</td>
<td>0.9%</td>
<td style="color: red; background-color: rgb(204, 255, 255);">6.0%</td>
<td style="color: red; background-color: rgb(204, 255, 255);">4.3%</td>
<td style="color: red; background-color: rgb(204, 255, 255);">2.7%</td>
<td style="background-color: rgb(204, 255, 255);">2.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="8">&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="8">HICP</td>
</tr>
<tr class="grey3">
<td class="firstcol">Germany</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>0.4%</td>
<td>1.5%</td>
<td>2.1%</td>
<td style="color: red;">3.0%</td>
<td>2.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol">France</td>
<td>#N/A</td>
<td>-0.2%</td>
<td>0.1%</td>
<td style="background-color: rgb(204, 255, 255);">1.4%</td>
<td style="background-color: rgb(204, 255, 255);">3.0%</td>
<td style="color: red; background-color: rgb(204, 255, 255);">3.5%</td>
<td style="background-color: rgb(204, 255, 255);">1.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Italy</td>
<td>-0.2%</td>
<td>0.4%</td>
<td>-0.1%</td>
<td>0.4%</td>
<td>2.2%</td>
<td style="color: red;">3.7%</td>
<td>1.8%</td>
</tr>
<tr class="grey3">
<td class="firstcol">UK</td>
<td>#N/A</td>
<td>0.5%</td>
<td>0.4%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>1.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>-0.1%</td>
<td>0.4%</td>
<td style="background-color: rgb(204, 255, 255);">3.5%</td>
<td style="background-color: rgb(204, 255, 255);">3.8%</td>
<td style="color: red; background-color: rgb(204, 255, 255);">5.0%</td>
<td style="background-color: rgb(204, 255, 255);">2.2%</td>
</tr>
<tr class="grey2">
<td colspan="2">Core:xFE&amp;A</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">Germany</td>
<td>#N/A</td>
<td>0.3%</td>
<td>0.3%</td>
<td style="color: red; background-color: rgb(204, 255, 255);">2.7%</td>
<td style="background-color: rgb(204, 255, 255);">1.7%</td>
<td style="background-color: rgb(204, 255, 255);">1.9%</td>
<td style="background-color: rgb(204, 255, 255);">2.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Italy</td>
<td>#N/A</td>
<td>0.7%</td>
<td>-0.2%</td>
<td style="color: red; background-color: rgb(204, 255, 255);">3.4%</td>
<td style="color: red; background-color: rgb(204, 255, 255);">3.2%</td>
<td style="color: red; background-color: rgb(204, 255, 255);">3.2%</td>
<td style="background-color: rgb(204, 255, 255);">2.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">UK</td>
<td>#N/A</td>
<td>#N/A</td>
<td>0.3%</td>
<td style="background-color: rgb(204, 255, 255);">#N/A</td>
<td style="background-color: rgb(204, 255, 255);">#N/A</td>
<td style="background-color: rgb(204, 255, 255);">#N/A</td>
<td style="background-color: rgb(204, 255, 255);">1.8%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>0.3%</td>
<td>0.3%</td>
<td style="color: red; background-color: rgb(204, 255, 255);">3.8%</td>
<td style="background-color: rgb(204, 255, 255);">3.0%</td>
<td style="color: red; background-color: rgb(204, 255, 255);">3.5%</td>
<td style="background-color: rgb(204, 255, 255);">2.6%</td>
</tr>
<tr class="grey1">
<td style="background-color: rgb(204, 255, 255);" colspan="8" class="firstcol">Blue shaded
area data trail by one
month.</td>
</tr>
</tbody>
</table>
</body></html>

Headline is turning sharply in a favorable direction; core remains high and ‘sticky’ In one of my favorite comedy skits of all times Dan Aykroyd of the US TV show “Saturday Night Live” was imitating Jimmy Carter at the height of the [...]

CPI Soars as EMU Sentiment Tubes: Price Relief is Minor

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080930j.jpg" align="right" border="0" height="265" width="353">
Japanese gross domestic product declined at an annual rate of
2.96% in the second quarter of this year after having risen at an
annual rate of 2.76% in the first quarter. Monthly data released
recently for the third quarter suggest another down quarter.
After rising 1.3% in July, Japanese industrial production
declined 3.5% in August, the fastest decline in five years. The Family
Income and Expenditure Survey revealed that households reduced spending
in August by 4.7%. The household expenditure series, however, is
extremely volatile so the year- over- year changes are, perhaps, better
indicators of the trend than the month- to- month changes. The month-
to- month changes in the household expenditures and in industrial
production are shown in the first chart and the year- over- year
changes in the second chart.
Another ominous sign is the rise in unemployment rate in
August. It is now 4.2%, the highest level since June 2006 as can be
seen in the third chart.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080930k.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080930l.jpg" border="0" height="265" width="312"> 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN&nbsp;</th>
<th scope="col">Aug 08</th>
<th scope="col">Jun&nbsp; 08&nbsp;</th>
<th scope="col">Jul&nbsp;&nbsp;
07&nbsp;</th>
<th scope="col">M/M % chg&nbsp;</th>
<th scope="col">Y/Y % chg&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production
(2005=100)</td>
<td>104.5</td>
<td>108.3</td>
<td>109.7</td>
<td>-3.51</td>
<td>-4.74</td>
<td>107.1</td>
<td>104.3</td>
<td>100.1</td>
</tr>
<tr>
<td class="firstcol">Household Expenditures
(Thous Yen)&nbsp;&nbsp;</td>
<td>291.3</td>
<td>299.3</td>
<td>294.0</td>
<td>-2.69</td>
<td>-0.94</td>
<td>297.1</td>
<td>295.3</td>
<td>300.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment (10,000
persons)</td>
<td>275</td>
<td>264</td>
<td>252</td>
<td>4.17</td>
<td>91.3</td>
<td>256</td>
<td>275</td>
<td>294</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>4.2</td>
<td>4.0</td>
<td>3.8</td>
<td>0.2*</td>
<td>0.4*</td>
<td>3.9</td>
<td>4.1</td>
<td>4.4</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol">* Percentage point change</td>
</tr>
</tbody>
</table>
</body></html>

Japanese gross domestic product declined at an annual rate of 2.96% in the second quarter of this year after having risen at an annual rate of 2.76% in the first quarter. Monthly data released recently for the third quarter suggest [...]

More Signs of Recessions in Japan

Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080930g.jpg" align="left" border="0" height="265" width="353">
For September, the Conference Board reported that its index of
consumer confidence rose 2.2% to 59.8. That followed an upwardly
revised 12.7% increase during August. The latest rise contrasted with
Consensus expectations for a m/m decline to a reading of 55.0. The
increase clearly does not reflect the recent turbulence in the
financial markets.
The rise was fueled by an 11.8% m/m increase to 60.5 in the
expectations component of the index. It came on the heels of a 26.7%
jump during August. The latest index level was its highest since
January.
The percentage of respondents expecting business conditions to
worsen in six months fell while the percentage expecting improvement
rose to its highest level (13.5%) this year. Fewer jobs were seen by
the lowest percentage since January but a reduced 28.2% of respondents
planned to buy a major appliance within six months.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080930h.jpg" align="right" border="0" height="265" width="353">
In contrast, the present conditions index again fell sharply
to the lowest level since late 2003.
A slightly improved, but still negligible, 12.5% of
respondents perceived that business conditions were good. That was near
the lowest since early-2003. Jobs as plentiful were seen by a new low,
since 2003, of 12.2% while 32.8% felt that jobs were hard to get. That
was the highest since 2003.
Expectations for the inflation rate in twelve months fell
again, last month to 6.2%, the lowest level since March. 
<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">Conference
Board &nbsp;(SA, 1985=100)</th>
<th scope="col">September</th>
<th scope="col">August</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">Consumer
Confidence Index</td>
<td>59.8</td>
<td>58.5</td>
<td>-39.9</td>
<td>103.4</td>
<td>105.9</td>
<td>100.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Present Situation</td>
<td>58.8</td>
<td>65.0</td>
<td>-51.5</td>
<td>128.8</td>
<td>130.2</td>
<td>116.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Expectations</td>
<td>60.5</td>
<td>54.1</td>
<td>-40.8</td>
<td>86.4</td>
<td>89.7</td>
<td>89.7</td>
</tr>
</tbody>
</table>
</body></html>

For September, the Conference Board reported that its index of consumer confidence rose 2.2% to 59.8. That followed an upwardly revised 12.7% increase during August. The latest rise contrasted with Consensus expectations for a m/m [...]

Consumer Confidence Rose Further in September

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080930f.jpg" width="353">
For September, the Chicago Purchasing Manager&#39;s Association reported that its business barometer dipped. However, the 2.1% decline in the index to 56.7 reversed only a small part of its 14.0% m/m jump during August. Consensus expectations had been for a larger decline to a level of 53.0.
During the last ten years there has been a 67% correlation between the business barometer and the three-month change in US factory sector industrial production. There has been an 85% correlation between the Chicago figure and the national ISM index (due for release tomorrow) and that is the highest correlation of all the regional series with the national ISM index.
The largest decline came from the inventory sub-series. New orders and order backlogs also fell sharply. The production series reversed some of its recent gain but the employment index rose sharply to its highest level since March.
The prices paid index was roughly unchanged near its lowest level this year. During the last ten years there has been a 48% correlation between the price index and the three-month change in the finished goods PPI.
House Prices and the Stance of Monetary Policy from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/08/07/Jarocinski.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
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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/SURVEYS/@S2/@S203/@S203.htm">Chicago PMI</a></th>
<th scope="col">&nbsp;September</th>
<th scope="col">&nbsp; August</th>
<th scope="col">September &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Chicago PMI Business Barometer Index</td>
<td>56.7</td>
<td>57.9</td>
<td>53.2</td>
<td>54.4</td>
<td>56.8</td>
<td>60.4</td>
</tr>
</tbody>
</table>
</body>
</html>

For September, the Chicago Purchasing Manager's Association reported that its business barometer dipped. However, the 2.1% decline in the index to 56.7 reversed only a small part of its 14.0% m/m jump during August. Consensus [...]

Chicago Purchasing Managers' Barometer Dipped

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080930e.jpg" width="353">
According to the International Council of Shopping Centers, chain store sales inched down another 0.2% last week. It was the fourth consecutive weekly decline and it lowered the average level of September sales by 1.9% from August.
The level of sales during the latest week was the lowest since December of last year. Year-to-year growth in sales eased to 1.1% from the recent peak growth rate of 2.9%.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The leading indicator of chain store sales from ICSC-UBS reversed all of the prior week&#39;s rise and fell 0.7% (-4.4% y/y) to the highest level since mid-July.
The chain store sales figures are available in Haver&#39;s SURVEYW database.

<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">09/27/08</th>
<th scope="col">09/20/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>480.9</td>
<td>481.7</td>
<td>1.1%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>


</html>

According to the International Council of Shopping Centers, chain store sales inched down another 0.2% last week. It was the fourth consecutive weekly decline and it lowered the average level of September sales by 1.9% from August.

U.S. Chain Store Sales Off Sharply, Lowest Since 2007

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080930c.jpg" align="left" border="0" height="265" width="353">
The S&amp;P/Case-Shiller Composite 20
home price index during July fell another 0.9% after a 0.5% decline
during June. Since the peak in July 2006 prices have fallen 19.5% and by
16.3% during the last twelve months. The series dates back
only to 2000. The decline in July prices was about as expected.
The Case-Shiller index of 20 U.S. cities and their surrounding
areas is weighted to reflect price changes due to extensive remodeling,
adding a home addition or extreme neglect. For example, smaller weights
are assigned to sales of homes that have undergone extensive remodeling.
The Case-Shiller composite index of homes in 10 metropolitan
areas, which has a longer history and dates back to 1987, fell 1.1% in
July and was down 17.5% year-to-year.
Home prices in Las Vegas, Nevada continued to fall and they
were down 29.9% y/y. Prices in Miami also were off 28.2% and home
prices in Los Angeles fell 26.2%. In Phoenix prices were off 29.3%, in
San Diego prices fell 25.0% y/y and they were down 24.8% in San
Francisco. Prices in Tampa Florida posted a 19.4% y/y decline.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080930d.jpg" align="right" border="0" height="265" width="353">
In New York prices fell a lesser 7.4% and they were down 5.4%
in Boston. In Dallas prices also were off a modest 2.5% and by only
1.8% in Charlotte, North Carolina.
The S&amp;P/Case-Shiller home price series can be found in
Haver's USECON database but the city data is in the
REGIONAL database.
The latest press release from Standard &amp; Poor's can be
found <a href="http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_093042.pdf">here</a>.
An overview of the S&amp;P/Case-Shiller home price series
can be found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">here</a>.
How Much Have U.S. House Prices Fallen?
from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20080801/cover.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (NSA, Jan 00 = 100)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">20 City Composite
Index</td>
<td>166.23</td>
<td>167.71</td>
<td>-16.3%</td>
<td>-3.8%</td>
<td>7.6%</td>
<td>15.8%</td>
</tr>
</tbody>
</table>
</body></html>

The S&P/Case-Shiller Composite 20 home price index during July fell another 0.9% after a 0.5% decline during June. Since the peak in July 2006 prices have fallen 19.5% and by 16.3% during the last twelve months. The series dates back [...]

Case-Shiller Home Price Index Down 16.3%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080930a.jpg" width="353">
The U.S. pump price for a gallon of regular gasoline fell by nine cents last week to the lowest level since early May. The decline to an average of $3.63, according to the U.S. Department of Energy survey, was accompanied by a drop in the average price for all grades of gasoline to $3.77 per gallon.
Yesterday the spot market price for regular gasoline plunged twenty nine cents per gallon to $2.42. The drop lowered spot prices to their lowest since late this past March. In futures trading the November contract closed at $2.40 per gallon.
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database. Daily prices are in the DAILY database.
According to the U.S. Department of Energy, the demand for gasoline fell 1.8% during the last four weeks. That was the largest weekly decline since early 2005 and for the most part reflected the seasonal decline in driving. The weakness in gasoline demand goes beyond that, however, and it was down 3.4% y/y, also the most since mid-2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080930b.jpg" width="353">
The DOE figures are available in Haver&#39;s OILWKLY database.
The price for a barrel of West Texas Intermediate crude oil rose last week to an average $110.31 per barrel, still down from the high in July of $145.66. Damage to oil rigs from Hurricane Ike was again responsible for the increase. WTI crude prices were down to $96.38 /bbl. yesterday.
Yesterday, the futures price for crude oil also stood at $96.37 per barrel.
Last week, prices for natural gas fell slightly to an average $7.75 per mmbtu (+22.8% y/y). Prices fell further yesterday to $7.14/mmbtu. The high for natural gas prices was in early July at $13.19/mmbtu.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">09/29/08</th>
<th scope="col">09/22/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon)</td>
<td>3.63</td>
<td>3.72</td>
<td>30.3%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>110.31</td>
<td>97.29</td>
<td>34.4%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
</body>
</html>

The U.S. pump price for a gallon of regular gasoline fell by nine cents last week to the lowest level since early May. The decline to an average of $3.63, according to the U.S. Department of Energy survey, was accompanied by a drop in [...]

U.S. Gasoline Prices Down Last Week, Demand Off By Most in Three Years

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: September 2008

Jump to:

CPI Soars as EMU Sentiment Tubes: Price Relief is Minor

More Signs of Recessions in Japan

Consumer Confidence Rose Further in September

Chicago Purchasing Managers' Barometer Dipped

U.S. Chain Store Sales Off Sharply, Lowest Since 2007

Case-Shiller Home Price Index Down 16.3%

U.S. Gasoline Prices Down Last Week, Demand Off By Most in Three Years

U.S. Gasoline Prices Down Last Week, Demand Off By Most in Three Years