Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031126h.jpg" width="353">
As in the US, GDP in the UK was revised higher for Q3. From 0.6% reported a month ago, it was raised to 0.75%, the largest quarterly growth rate since the first quarter of 2001. The year-on-year growth rose to 2.0% from 1.9% reported initially. This is marginally faster than in Q2, making the best four-quarter performance since the middle of 2001.
Construction activity, up 2.5% on the quarter, and production of business services, up 1.0%, were both larger than originally estimated. Weakness remains, however, in manufacturing, mining, and transportation.
By type of expenditure, consumers and non-profit institutions continue to lead the UK expansion. Business investment has been erratic, falling in this latest period by 1.6%, which reversed a 2.0% advance in Q2. After the pre-Y2K buildup, a 12-quarter growth trend in private capital spending has been ratcheting lower, just piercing zero to -0.3% in Q3 (see chart nearby). More optimistically, recent movement in business investment has been less negative and these expenditures might firm up in coming months if domestic demand continues to grow and as the UK&#39;s trading partners also see renewed expansion that could lift foreign demand for its products.
Notably, unlike other countries, exports have not been a leader in recent UK growth. They were basically unchanged in Q3 and four-quarter &quot;growth&quot; is down at -4.3%. Imports have been relatively flat in recent periods, but the softness in exports has produced a net export deficit (in volume terms) averaging &pound;11.3 billion over the last four quarters, a record by far. One assumes, however, that continuing prosperity among the UK&#39;s neighbors would help narrow that trade imbalance.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Percent Changes</th>
Qtr/Qtr
<th scope="col">Year/ Year</th>
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">3rd Qtr 2003</td>
<td>2nd Qtr 2003</td>
<td>1st Qtr 2003 &nbsp;</td>
<td>2002</td>
<td>2001</td>
<td>2000</td>
</tr>
<tr>
<td class="firstcol">GDP, Volume, Chained 2000 Prices</td>
<td>0.7</td>
<td>0.6</td>
<td>0.2</td>
<td>2.0</td>
<td>2.0</td>
<td>1.9</td>
<td>2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>0.0</td>
<td>0.5</td>
<td>-0.1</td>
<td>-0.4</td>
<td>-1.9</td>
<td>-4.3</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>2.4</td>
<td>4.4</td>
<td>-1.8</td>
<td>6.9</td>
<td>7.9</td>
<td>6.3</td>
<td>-0.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Business Services</td>
<td>1.0</td>
<td>-0.3</td>
<td>1.5</td>
<td>3.0</td>
<td>1.8</td>
<td>3.2</td>
<td>4.7</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Households</td>
<td>0.7</td>
<td>0.7</td>
<td>-0.2</td>
<td>2.5</td>
<td>3.2</td>
<td>4.7</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">Gross Fixed Capital&nbsp; Formation</td>
<td>-1.3</td>
<td>1.2</td>
<td>-0.7</td>
<td>0.0</td>
<td>4.8</td>
<td>-1.8</td>
<td>5.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Business Investment</td>
<td>-1.6</td>
<td>2.0</td>
<td>-0.2</td>
<td>0.7</td>
<td>-0.6</td>
<td>-5.1</td>
<td>9.8</td>
</tr>
<tr>
<td class="firstcol">Exports</td>
<td>0.1</td>
<td>-2.6</td>
<td>2.9</td>
<td>-4.3</td>
<td>-1.9</td>
<td>-2.9</td>
<td>9.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports</td>
<td>1.0</td>
<td>-2.5</td>
<td>1.7</td>
<td>-0.9</td>
<td>3.6</td>
<td>0.6</td>
<td>8.7</td>
</tr>
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As in the US, GDP in the UK was revised higher for Q3. From 0.6% reported a month ago, it was raised to 0.75%, the largest quarterly growth rate since the first quarter of 2001. The year-on-year growth rose to 2.0% from 1.9% reported [...]

UK Growth in Q3 Strongest in 2-1/2 Years

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031126a.jpg" width="353">
Initial claims for jobless insurance fell 11,000 last week to 351,000, the lowest level since January 2001. Consensus expectations had been for claims of 360,000 and the prior week&#39;s level was revised up.
The four-week moving average of initial claims fell to 358,750 (-8.5% y/y).
Continuing claims for unemployment insurance plummeted 105,000 in the latest week and the prior week was revised to a decline of 3,000 versus the 21,000 increase reported initially. Continuing claims were at the lowest level since late-January.
The insured rate of unemployment was steady at 2.7% for the fourth consecutive week versus the high of 3.0% in June.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">11/22</th>
<th scope="col">11/15</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>351.0</td>
<td>362.0</td>
<td>-9.5%</td>
<td>404.3</td>
<td>406.0</td>
<td>299.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,368</td>
<td>-2.3%</td>
<td>3,575</td>
<td>3,022</td>
<td>2,114</td>
</tr>
</tbody>
</table>
U.S. Personal Income Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 26, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031126c.jpg" width="353">
Personal income rose an expected 0.4% (+3.7% y/y) in October following 0.3% gains in each of the prior three months. Personal disposable income rebounded 0.4% (4.8% y/y) following the 1.0% decline in September.
Wages and salaries rose 0.2% (2.3% y/y). Wages fell 0.2% (-1.0% Y/Y) in the factory sector and have fallen 11.3% since the peak in early 2000. During the last twenty years there has been a 73% correlation between the y/y growth in total wages and the growth in personal consumption expenditures.
Consumer spending fell slightly, as expected, following a revised 0.3% drop in September. Spending on durable goods fell 2.3% (+6.6% y/y) as sales of light vehicles fell for the second month, down 9.5% m/m to 15.64M units. Spending on nondurable goods fell 0.1% (6.4% y/y) as lower gasoline prices pulled the price deflator for nondurables down 0.4%. Services spending rose 0.5% (4.6% y/y).
The PCE price deflator fell 0.1%. Less food and energy prices rose 0.1% (1.2% y/y) for the third consecutive month. The durables&#39; price deflator fell 0.4% (-3.9% y/y) and services prices rose 0.2% (2.9% y/y) for the fourth month.
The savings rate rose to 3.3% but remained at the low end of the range of the last two years.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.4%</td>
<td>0.3%</td>
<td>3.7%</td>
<td>2.7%</td>
<td>3.3%</td>
<td>8.0%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>-0.0%</td>
<td>-0.3%</td>
<td>5.4%</td>
<td>4.5%</td>
<td>4.5%</td>
<td>7.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>3.3%</td>
<td>3.0%</td>
<td>3.8%</td>
<td>3.7%</td>
<td>2.3%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">PCE Price Deflator</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>2.0%</td>
<td>1.4%</td>
<td>2.0%</td>
<td>2.5%</td>
</tr>
</tbody>
</table>
U.S. Durable Goods Orders Surged 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 26, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031126b.jpg" width="353">
Durable goods orders surged 3.3% in October following an upwardly revised 2.1% September gain. Consensus expectations had been for a 0.5% October rise.
Excluding the volatile transportation sector durable goods orders jumped 2.8% following a 5.1% September gain that was double the initial estimate. Orders for transportation equipment jumped 5.5% last month as orders for nondefense aircraft jumped 22.0% following three months of decline.
Strength in capital goods orders powered overall orders and rose 2.8%. Excluding aircraft and parts, nondefense capital goods orders added another 1.7% (12.7% y/y) to the 5.8% September gain, revised up from 3.9%.
Orders for computers &amp; electronic products jumped another 4.0% (28.7% y/y) following the 7.0% September rise, revised from 2.6%. Orders for computers &amp; related products fell moderately for the second month but orders for communication equipment jumped 25.0% (66.1% y/y). Electrical equipment orders fell slightly (-0.5% y/y).
Shipments of durable goods surged 1.9% (1.9% y/y). Excluding transportation shipments rose 1.4% (3.7% y/y), strong for the fourth month in five.
Durable inventories, up 0.2% (-3.1% y/y), rose for the first month since December of last year. The gain reflected accumulation in the transportation, computers and machinery sectors.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Durable Goods Orders</td>
<td>3.3%</td>
<td>2.1%</td>
<td>8.2%</td>
<td>-1.7%</td>
<td>-10.5%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nondefense Capital Goods</td>
<td>2.8%</td>
<td>5.1%</td>
<td>12.8%</td>
<td>-7.2%</td>
<td>-15.5%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
Chicago Purchasing Agents' Index Strong 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 26, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031126d.jpg" width="353">
The Chicago Purchasing Managers Business Barometer for November rose much more than expected to 64.1 from 55.0 in October. The rise was to the highest level since February 1995.
Strength amongst the component indexes was broad based. New orders (73.3) and production (69.0) were at the highest levels since the mid-1990s and order backlogs were also up. Employment (48.5) dropped back below the dividing line between rising and falling jobs.
During the last twenty years there has been a 56% correlation between the level of the Chicago PMI and quarterly growth in real GDP.
The index of prices paid jumped to 61.5, the highest level since March.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF05/@EF05.HTM">Chicago Purchasing Managers Index, SA</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Barometer</td>
<td>64.1</td>
<td>55.0</td>
<td>55.0</td>
<td>52.7</td>
<td>41.4</td>
<td>51.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>73.3</td>
<td>59.2</td>
<td>62.5</td>
<td>56.3</td>
<td>42.3</td>
<td>53.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>67.3</td>
<td>61.5</td>
<td>60.1</td>
<td>56.9</td>
<td>50.4</td>
<td>65.6</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 26, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031126e.jpg" width="353">
The University of Michigan&#146;s consumer sentiment index rose a bit less than expected for the full month of November. At 93.7, the index was up only slightly from the mid-month read of 93.5 and was versus Consensus expectations for 94.0.
It was the highest level of Consumer Sentiment since May 2002.
During the last ten years there has been a 71% correlation between the level of consumer sentiment and the y/y change in real PCE. That correlation has risen to 82% during the last five years.
The current conditions index rose to 102.5, the highest level since May 2002.
The expectations index rose to 88.1, the highest level since May of this year.
The University of Michigan survey is not seasonally adjusted.It is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>93.7</td>
<td>89.6</td>
<td>11.3%</td>
<td>89.6</td>
<td>89.2</td>
<td>107.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>102.5</td>
<td>99.9</td>
<td>10.1%</td>
<td>97.5</td>
<td>100.1</td>
<td>115.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>88.1</td>
<td>83.0</td>
<td>12.2%</td>
<td>84.6</td>
<td>82.3</td>
<td>102.7</td>
</tr>
</tbody>
</table>
Help-Wanted Advertising Unchanged At Three Month Low 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 26, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031126f.jpg" width="353">
The Conference Board&#146;s National Index of Help-Wanted Advertising remained at 37 last month, the depressed level in place since August.
During the last ten years there has been a 93% correlation between the level of help-wanted advertising and the year-to-year change in non-farm payrolls.
The proportion of labor markets with rising want-ad volume fell to 37% from a downwardly revised September level of 39%.
Indexes of help wanted remained depressed across the country, although Richmond, San Antonio and Sacramento showed some improvement.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month. 

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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Oct &#39;02</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>37</td>
<td>37</td>
<td>40</td>
</tr>
</tbody>
</table>
New Home Sales Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 26, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030925c.jpg" width="353">
Sales of new single family homes fell 3.5% in October to 1.105M (AR). It was the third decline in the last four months from the record high in June. Consensus estimates were for a lesser decline to 1.140M.
Sales declines were spread across the country.
The median price of a new home rose to $190,900 (0.9% y/y).
These new home sales data from the US Census Department reflect current sales versus the existing home sale figures which reflect closings on past sales.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E904/@E90401/@E90401.HTM">Homes Sales (000s, AR)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">New Single-Family</td>
<td>1,105</td>
<td>1,145</td>
<td>10.0%</td>
<td>977</td>
<td>907</td>
<td>880</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for jobless insurance fell 11,000 last week to 351,000, the lowest level since January 2001. Consensus expectations had been for claims of 360,000 and the prior week's level was revised up. The four-week moving average [...]

Initial Jobless Insurance Claims Lowest Since January 2001

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031125e.jpg" width="353">
Recent releases of several indicators of confidence among businessmen and consumers in the Euro-zone suggest that, on balance, confidence is improving. The IFO indexes of business confidence for West and East Germany have risen steadily since April and May, respectively, and are now well above year ago levels. While still below year ago levels, business confidence in Belgium has improved steadily since March of this year. Business confidence in the Netherlands declined slightly in November but is still well above the low of -10.1 reached in June of this year.
Consumers in the Netherlands and Belgium have seen some improvement in their current economic situation and, as a result, have become more confident. Consumers in Italy, on the contrary, continue to view negatively both their current situation and the outlook for the next twelve months. As a result, they have become even more pessimistic.

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</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Nov 03&nbsp;</th>
<th scope="col">Oct 03</th>
<th scope="col">Nov 02&nbsp;</th>
<th scope="col">M/M&nbsp; %</th>
<th scope="col">Y/Y&nbsp; %</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">BUSINESS CONFIDENCE</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West Germany IFO (1991=100)</td>
<td>95.7</td>
<td>94.3</td>
<td>87.3</td>
<td>1.48</td>
<td>9.62</td>
<td>89.0</td>
<td>89.9</td>
<td>99.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; East Germany IFO (1991=100)</td>
<td>105.2</td>
<td>104.7</td>
<td>95.0</td>
<td>0.48</td>
<td>10.74</td>
<td>98.6</td>
<td>101.4</td>
<td>106.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Netherlands (% balance)</td>
<td>-3.8</td>
<td>-3.0</td>
<td>0.7</td>
<td>-0.8</td>
<td>-3.1</td>
<td>-1.6</td>
<td>-1.1</td>
<td>6.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Belgium (% balance</td>
<td>-7.9</td>
<td>-9.4</td>
<td>-6.3</td>
<td>1.5</td>
<td>-1.6</td>
<td>-7.9</td>
<td>-9.4</td>
<td>4.2</td>
</tr>
<tr>
<td class="firstcol">CONSUMER CONFIDENCE</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Netherlands (% balance)</td>
<td>-30</td>
<td>-36</td>
<td>-30</td>
<td>6</td>
<td>0</td>
<td>-20</td>
<td>-1</td>
<td>24</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Belgium (% balance)</td>
<td>-6</td>
<td>-15</td>
<td>-4</td>
<td>9</td>
<td>-2</td>
<td>-2</td>
<td>-0</td>
<td>13</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Italy ISAE (1980=100)</td>
<td>104.0</td>
<td>106.8</td>
<td>109.7</td>
<td>-2.62</td>
<td>-5.20</td>
<td>115.8</td>
<td>122.7</td>
<td>119.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Situation in the last 12 months</td>
<td>-75</td>
<td>-70</td>
<td>-69</td>
<td>-5</td>
<td>-6</td>
<td>-46</td>
<td>-28</td>
<td>-37</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Situation&nbsp; expected&nbsp; in the next 12 months</td>
<td>-29</td>
<td>-28</td>
<td>-18</td>
<td>-1</td>
<td>-11</td>
<td>-6</td>
<td>-5</td>
<td>-1</td>
</tr>
</tbody>
</table>
</body>
</html>

Recent releases of several indicators of confidence among businessmen and consumers in the Euro-zone suggest that, on balance, confidence is improving. The IFO indexes of business confidence for West and East Germany have risen [...]

Euro-zone Confidence Indicators Mostly Positive

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031125a.jpg" width="353">
US economic growth last quarter was revised upward to 8.2% (AR). Consensus expectations had been for a revision to 7.8%.
Corporate profits w/IVA &amp; CCA exploded, rising at a 56.0% annual rate (30.0% y/y. That followed a 45.7% gain in 2Q. The burst came as profits after tax jumped 49.8% (13.6% y/y), the biggest quarterly jump since 4Q 1992. Profits in the nonfinancial corporate sector (calculated from the income side of the NIPA) jumped at a 75.2% rate (43.2% y/y).
The GDP revision stemmed primarily from inventories. Slight accumulation, the first since 4Q02, is now shown adding 0.2 percentage points to output growth instead of subtracting 0.7 points.
Domestic final demand growth also was revised upward to 6.8% from 6.6% as business investment in equipment &amp; software was revised to 18.4%, the fastest since 4Q 1998. Growth in residential investment also was revised up to 22.7% but PCE growth was lowered slightly to 6.4%.
Improvement in the foreign trade deficit was unrevised and it added 0.8 percentage points to GDP growth. Export growth was revised up to 11.0% and imports were revised up less to 1.5%.
Inflation was revised down slightly to 1.7%. The PCE price deflator was up 2.3% but excluding food and energy rose just 1.0% (1.2% y/y).

<table border="0" cellspacing="0" width="100%">

</table>
<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/@E701/@E701.HTM">Chained &#39;96 $, % AR</a></th>
<th scope="col">3Q&#39;03 (Prelim.)</th>
<th scope="col">3Q&#39;03 (Advance)</th>
<th scope="col">2Q&#39;03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>8.2%</td>
<td>7.2%</td>
<td>3.3%</td>
<td>&nbsp;3.5%</td>
<td>2.4%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.2%</td>
<td>-0.7%</td>
<td>-0.7%</td>
<td>-0.3%</td>
<td>0.6%</td>
<td>-1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>8.0%</td>
<td>7.8%</td>
<td>4.0%</td>
<td>3.8%</td>
<td>1.8%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>0.8%</td>
<td>0.8%</td>
<td>-1.3%</td>
<td>-0.2%</td>
<td>-0.7%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>6.8%</td>
<td>6.6%</td>
<td>5.1%</td>
<td>4.0%</td>
<td>2.4%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Deflator</td>
<td>1.7%</td>
<td>1.8%</td>
<td>1.0%</td>
<td>1.7%</td>
<td>1.1%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>
Weekly Chain Store Sales Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 25, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031125b.jpg" width="353">
Chain store sales rose 0.4% and gained back half of the 0.8% drop the week prior according to the BTM-UBSW survey.
So far in November sales are 0.5% ahead of last month&#39;s average. That followed a 0.6% m/m decline during all of October.
During the last five years there has been a 61% correlation between the year-to-year percent change in the BTM-UBSW measure of chain store sales and the change in non-auto retail sales less gasoline.
The BTM-UBSW retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">11/22/03</th>
<th scope="col">11/15/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>423.3</td>
<td>421.7</td>
<td>5.6%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
Consumer Confidence Up More Than Expected 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 25, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031125c.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence rose to 91.7 in November, the highest level in over a year. Consensus estimates were for a gain to 84.0 and October&#39;s level was revised up slightly.
The expectations index jumped to 99.4 from 91.5 in October, the highest level since June 2002. The reading of the present situation jumped for the second month to 80.1.
The 12.2% m/m rise in Confidence outpaced the 4.4% November increase in Consumer Sentiment reported by the University of Michigan.
Jobs were viewed as hard to get by 29.5% of respondents, the lowest since April. The appraisal of the present situation improved to its best since the summer of 2002.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>91.7</td>
<td>81.7</td>
<td>8.0%</td>
<td>96.6</td>
<td>106.6</td>
<td>139.0</td>
</tr>
</tbody>
</table>
Existing Home Sales Down in October 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 25, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031125d.jpg" width="353">
Sales of existing single family homes reported by the National Association of Realtors fell 4.9% in October to 6.35M. The decline was greater than Consensus expectations.
Record sales in September were revised down slightly. The figures reflect closings of home sales in earlier months.
Sales fell across the nation. In the Northeast sales fell 2.7% (10.6% y/y). In the West sales fell 9.2% to 1.68M (12.8% y/y). Sales in the Midwest were down 4.9% (9.7% y/y) and in the South sales fell 2.7% to 2.57M (14.7% y/y).
The median price of an existing home rose m/m to $172,400 (+8.2% y/y) but the prior month was revised down.
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/PublicAffairsWeb.nsf/Pages/EHSOct03?OpenDocument">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Existing Single-Family</td>
<td>&nbsp;6,350</td>
<td>&nbsp;6,6680</td>
<td>12.8%</td>
<td>5,595</td>
<td>5,292</td>
<td>5,158</td>
</tr>
</tbody>
</table>
</body>
</html>

US economic growth last quarter was revised upward to 8.2% (AR). Consensus expectations had been for a revision to 7.8%. Corporate profits w/IVA & CCA exploded, rising at a 56.0% annual rate (30.0% y/y. That followed a 45.7% gain in [...]

3Q U.S. GDP Revised to 8.2%, Profits Exploded

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031124b.jpg" width="353">
South Korea is the fourth country in the Pacific Rim to report an increase in Gross Domestic Product in the third quarter. Earlier this month, Indonesia reported a 1.40% gain, Malaysia, a 2.15% gain and Singapore a 4.07% gain.
Although South Korea&#39;s gain was the smallest at 1.14%, it reversed the declining trend of the first two quarters of this year. The South Korean economy has been plagued by political uncertainty, bad weather and consumer credit problems, particularly among the lower income levels.
A substantial increase in exports accompanied by a lesser increase in imports and a modest increase in private consumption spending more than offset declines in gross capital formation and government consumption spending. The rise in private spending was particularly encouraging in view of the troubled credit situation.

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;South Korea Gross Domestic Product&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</th>
<th scope="col">Q3 &nbsp;2003</th>
<th scope="col">Q2 &nbsp;2003</th>
<th scope="col">Q1 &nbsp;2003&nbsp;</th>
<th scope="col">2002&nbsp; %</th>
<th scope="col">2001&nbsp; %</th>
<th scope="col">2000&nbsp; %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Gross Domestic Product</td>
<td>1.14</td>
<td>-0.68</td>
<td>-0.40</td>
<td>6.27</td>
<td>3.23</td>
<td>9.26</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Private Consumption</td>
<td>1.23</td>
<td>-1.30</td>
<td>-2.24</td>
<td>6.78</td>
<td>4.74</td>
<td>7.85</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Government Consumption</td>
<td>-1.65</td>
<td>-2.90</td>
<td>4.20</td>
<td>3.00</td>
<td>1.23</td>
<td>0.14</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Gross Capital Formation</td>
<td>-11.02</td>
<td>-2.99</td>
<td>8.00</td>
<td>4.46</td>
<td>-2.85</td>
<td>10.94</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Exports of Goods and Services</td>
<td>10.82</td>
<td>-1.02</td>
<td>0.22</td>
<td>14.78</td>
<td>0.63</td>
<td>20.56</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Imports of Goods and Services</td>
<td>7.30</td>
<td>-4.59</td>
<td>3.21</td>
<td>16.42</td>
<td>-3.10</td>
<td>20.03</td>
</tr>
</tbody>
</table>
</body>
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South Korea is the fourth country in the Pacific Rim to report an increase in Gross Domestic Product in the third quarter. Earlier this month, Indonesia reported a 1.40% gain, Malaysia, a 2.15% gain and Singapore a 4.07% gain. [...]

South Korea is the Fourth Pacific RIM Country to Report Increased Growth in the Third Quarter

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031124a.jpg" width="353">
The Weekly Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) rose to a record high level in the latest week.
The latest increase pulled the six-month growth rate of the weekly leading index to 11.1%.
During the last ten years there has been a 62% correlation between the six-month growth in the leading index and the two quarter growth in real GDP.
Construction of the ECRI Leading Index differs from the Index of Leading Economic Indicators published by the Conference Board. Nevertheless there has been a 75% correlation between the y/y percent change in the two series over the last 20 years.
The components of the ECRI weekly leading index are money supply plus stock &amp; bond mutual funds, the JOC-ECRI industrial materials price index, mortgage applications, bond quality spreads, stock prices, bond yields, and initial jobless insurance claims.
The median lead of the ECRI index at business cycle peaks has been 10.5 months and at cycle troughs 3.0 months. The sideways movement of the leading index in 2002 may or may not signal something about the economy&#39;s growth rate.

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<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/weekly/@W8/@W801/@W801.HTM"> ECRI Leading Index</a></th>
<th scope="col"> 11/14/03</th>
<th scope="col"> 11/07/03</th>
<th scope="col"> Growth Rate</th>
<th scope="col"> 2002</th>
<th scope="col"> 2001</th>
<th scope="col"> 2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Weekly</td>
<td>130.9</td>
<td>129.2</td>
<td>11.1%</td>
<td>1.2%</td>
<td>-5.3%</td>
<td>-0.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td> Oct</td>
<td> Sept</td>
<td> Growth Rate</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Monthly</td>
<td>128.8</td>
<td>128.5</td>
<td>11.0%</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body>
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The Weekly Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) rose to a record high level in the latest week. The latest increase pulled the six-month growth rate of the weekly leading index to [...]

ECRI Weekly Leading Indicators at Record High

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031121b.jpg" width="353">
The entire Venezuelan economy suffered from last winter&#39;s oil industry strike, which lasted from December through February. Its impact on GDP in Q4 2002 and Q1 2003 is readily evident in the chart nearby.
The latest data, issued today by the Central Bank of Venezuela for Q3 shows a quick rebound in overall activity, but a level of GDP still more than 7% less than the pre-strike amount in Q3 2002.
Petroleum activity weakened anew in Q3, but non-petroleum sectors are continuing a recovering phase. A good portion of that amelioration has taken place in social services, however, and while activity in the core of private industry, especially construction, manufacturing, and trade, appears to be picking up, it remains well below pre-strike volumes.
At the same time, better performances in Venezuela&#39;s foreign trade accounts appears to be giving an assist to the overall economy. The balances of trade in both petroleum and non-petroleum products have improved markedly since strike- ridden Q1, and international reserves have increased to $18.4 billion at the end of September, the second highest month on record (the highest was $18.9 billion in November 1997).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Percent Changes</th>
Year/Year
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">3rd Qtr 2003</td>
<td>2nd Qtr 2003</td>
<td>1st Qtr 2003 &nbsp;</td>
<td>2002</td>
<td>2001</td>
<td>2000</td>
</tr>
<tr>
<td class="firstcol">GDP (not seasonally adj.)</td>
<td>-7.1</td>
<td>-9.4</td>
<td>-27.7</td>
<td>-16.7</td>
<td>+0.9</td>
<td>+5.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Petroleum Activity</td>
<td>-9.1</td>
<td>-2.9</td>
<td>-47.2</td>
<td>-25.5</td>
<td>-5.0</td>
<td>+7.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non-petroleum Activity</td>
<td>-6.0</td>
<td>-10.1</td>
<td>-18.9</td>
<td>-12.4</td>
<td>+3.1</td>
<td>+4.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Billions of US $</td>
<td>3rd Qtr 2003</td>
<td>2nd Qtr 2003</td>
<td>1st Qtr 2003 &nbsp;</td>
<td>2002</td>
<td>2001</td>
<td>2000</td>
</tr>
<tr>
<td class="firstcol">Current Account Balance</td>
<td>+$2.8</td>
<td>+$3.3</td>
<td>+$0.8</td>
<td>+$7.4</td>
<td>+$2.1</td>
<td>+$12.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Reserves, End of Period</td>
<td>$18.4</td>
<td>$16.9</td>
<td>$13.7</td>
<td>$12.0</td>
<td>$12.3</td>
<td>$15.9</td>
</tr>
</tbody>
</table>
</body>
</html>

The entire Venezuelan economy suffered from last winter's oil industry strike, which lasted from December through February. Its impact on GDP in Q4 2002 and Q1 2003 is readily evident in the chart nearby. The latest data, issued today [...]

Venezuela Struggles to Recover from Early 2003 Oil Strike

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031121a.jpg" width="353">
The foreign exchange value of the US dollar versus major currencies fell yesterday to the lowest level since late 1996 (-15.1% y/y). Roughly 50% of US foreign trade is with the countries in the major currency index.
Against a broader basket of currencies, the US dollar has fallen a lesser 8.3% y/y. Over 40% of US foreign trade is with Mexico, China and other Asian countries. Against these countries the US$ has been relatively stable, or up versus the peso.
The dollar&#39;s value has been notably weak versus the Euro which is up 19.1% y/y. The dollar also has weakened notably versus the yen as signs of Japanese economic improvement have emerged.
Versus the UK pound, the dollar&#39;s decline recently has picked up steam losing 6.7% in just the last three months. UK economic growth has improved and inflation has been stable.
Against the Canadian dollar the US currency has fallen out of bed, down 17.3% y/y.
Exchange rate forecasting is discussed in this Federal Reserve Board International Finance Discussion Paper that could be found <a href="http://www.federalreserve.gov/pubs/ifdp/2003/779/default.htm">here</a>. <table border="1" cellpadding="0" cellspacing="0" width="100%"><tr><td align="left" height="16" valign="top" width="264"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM"> Exchange Rates</a></td><td align="center" height="16" valign="top" width="81">11/20/03</td><td align="center" height="16" valign="top" width="79">12/31/02</td><td align="center" height="16" valign="top" width="50">Y/Y</td><td align="center" height="16" valign="top" width="56">2002</td><td align="center" height="16" valign="top" width="65">2001</td><td align="center" height="16" valign="top" width="66">2000</td></tr><tr><td align="left" height="13" valign="top" width="264">US$ Major Currency Index (3/73=100)</td><td align="center" height="13" valign="center" width="81">85.15</td><td align="center" height="13" valign="center" width="79">97.65</td><td align="center" height="13" valign="center" width="50">-15.1%</td><td align="center" height="13" valign="center" width="56">103.08</td><td align="center" height="13" valign="center" width="65">104.26</td><td align="center" height="13" valign="center" width="66">98.42</td></tr><tr><td align="left" height="16" valign="top" width="264">Japan (Yen/US$)</td><td align="center" height="16" valign="center" width="81">108.99</td><td align="center" height="16" valign="center" width="79">118.75</td><td align="center" height="16" valign="center" width="50">-11.3%</td><td align="center" height="16" valign="center" width="56">125.22</td><td align="center" height="16" valign="center" width="65">121.57</td><td align="center" height="16" valign="center" width="66">107.80</td></tr><tr><td align="left" height="16" valign="top" width="264">European Monetary Union (US$/Euro)</td><td align="center" height="16" valign="center" width="81">1.1895</td><td align="center" height="16" valign="center" width="79">1.0485</td><td align="center" height="16" valign="center" width="50">19.1%</td><td align="center" height="16" valign="center" width="56">0.9454</td><td align="center" height="16" valign="center" width="65">0.8952</td><td align="center" height="16" valign="center" width="66">0.9232</td></tr><tr><td align="left" height="16" valign="top" width="264">United Kingdom (US$/Pound)</td><td align="center" height="16" valign="center" width="81">1.7024</td><td align="center" height="16" valign="center" width="79">1.6095</td><td align="center" height="16" valign="center" width="50">8.1%</td><td align="center" height="16" valign="center" width="56">1.5025</td><td align="center" height="16" valign="center" width="65">1.4396</td><td align="center" height="16" valign="center" width="66">1.5156</td></tr></table>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM"> Exchange Rates</a></th>
<th scope="col">11/20/03</th>
<th scope="col">12/31/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">US$ Major Currency Index (3/73=100)</td>
<td>85.15</td>
<td>97.65</td>
<td>-15.1%</td>
<td>103.08</td>
<td>104.26</td>
<td>98.42</td>
</tr>
<tr>
<td class="firstcol">Japan (Yen/US$)</td>
<td>108.99</td>
<td>118.75</td>
<td>-11.3%</td>
<td>125.22</td>
<td>121.57</td>
<td>107.80</td>
</tr>
<tr class="odd">
<td class="firstcol">European Monetary Union (US$/Euro)</td>
<td>1.1895</td>
<td>1.0485</td>
<td>19.1%</td>
<td>0.9454</td>
<td>0.8952</td>
<td>0.9232</td>
</tr>
<tr>
<td class="firstcol">United Kingdom (US$/Pound)</td>
<td>1.7024</td>
<td>1.6095</td>
<td>8.1%</td>
<td>1.5025</td>
<td>1.4396</td>
<td>1.5156</td>
</tr>
</tbody>
</table>
</body>
</html>

The foreign exchange value of the US dollar versus major currencies fell yesterday to the lowest level since late 1996 (-15.1% y/y). Roughly 50% of US foreign trade is with the countries in the major currency index. Against a broader [...]

US Dollar At Seven Year Low

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

Resilient US economy is pushing up longer-term inflation expectations and interest rates

Positive US economic data surprises leading to upward adjustment of interest rate expectations

Recent aggressive policy easing in China has given a massive boost to equity prices

FOMC expects much more easing now than in June

US is clear world leader in business capital spending on artificial intelligence

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Total housing starts increased 11.2% (-2.9% y/y) during February to 1.501 million units (SAAR) after falling 11.5% (revised from -9.8%) in January to 1.350 million, according to the U.S. Census Bureau. The Action Economics Forecast Survey expected 1.378 million starts. Single-family starts rose 11.4% (-2.3% y/y) in February after declining 8.6% in January. Multi-family starts rebounded 10.7% (-4.6% y/y) to 393,000, following an 18.8% January drop. Total starts in February remained 17.9% below their peak of 1.828 million units reached in April 2022.

Starts increased in three of the four major regions in February. They rose 47.4% (20.2% y/y) to 143,000 in the Northeast, following a 34.0% January decline. In the South, starts rose 18.3% (-5.6% y/y) to 815,000 after falling 23.0% in January. In the West, starts increased 5.9% (26.2% y/y) to 410,000 after rising 38.2% in January. In the Midwest, starts fell 24.9% (-44.4% y/y) TO 133,000 following a 13.2% January decline.

Building permits fell 1.2% (-6.8% y/y) to 1.456 million in February, the third straight month of modest decline. Single-family permits eased 0.2% (-3.4% y/y) in February to 992,000, the same decline as in January. Multi-family permits weakened 3.1% (-13.4% y/y). Permits fell 15.3% (-45.8% y/y) in the Northeast and were off 7.6% (-8.8% y/y) in the West. Building permits in the Midwest rose 8.9% (3.0% y/y) and in the South they increased 1.0% (1.5% y/y).

The housing starts and building permits figures can be found in Haver’s **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- Both single-family and multi-family starts recover.
- Starts’ performance is regionally uneven.
- Building permits decline to four-month low.

U.S. Housing Starts Rebound Sharply in February After January’s Pullback

Winnie Tapasanun

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Industrial production (IP) rose a larger-than-expected 0.7% m/m (1.4% y/y) in February after a downwardly revised 0.3% increase in January (+0.5% initially) and an upwardly revised 1.1% gain in December (+1.0% previously), data from the Federal Reserve Board showed. The February m/m rise was the third consecutive m/m gain following three successive m/m declines. A 0.2% m/m February increase had been expected in the Action Economics Forecast Survey. The February IP index at 104.2 was the highest on record; it was 5.3% above a low of 99.0 in September 2021 and 9.1% above a low of 95.5 in February 2021.

By **industry groups**, manufacturing production rose 0.9% (0.7% y/y) in February, the fourth straight m/m rise, following an upwardly revised 0.1% increase in January (-0.1% initially) and a 0.5% rise in December (unrevised). Durable goods production grew 1.6% (0.1% y/y) in February, the third m/m gain in four months, after holding steady in January. This reflected m/m output rises of 8.5% (-4.8% y/y) in motor vehicles & parts, 2.7% (4.3% y/y) in wood products, 2.1% (3.5% y/y) in aerospace & miscellaneous transportation equipment, 2.0% (6.4% y/y) in electrical equipment, appliances & components, 0.4% (-2.1% y/y) in fabricated metal products, 0.3% (-5.5% y/y) in miscellaneous durables goods, 0.3% (1.5% y/y) in nonmetallic mineral products, 0.2% (7.0% y/y) in computer & electronic products, and 0.1% (-0.8% y/y) in machinery. In contrast, the following durable goods categories fell m/m in February, including output drops of 1.0% (-3.7% y/y) in furniture & related products and 0.3% (-0.3% y/y) in primary metals. Notably, aircraft & parts production rose 2.3% (4.4% y/y) in February, the fourth consecutive m/m rise, on top of a 10.3% gain in January.

Nondurable goods production was up 0.2% (1.6% y/y) in February, the fifth m/m increase in six months, after a 0.1% uptick in January. The February increase reflected m/m output rises of 1.3% (-3.4% y/y) in apparel & leather goods, 1.0% (5.8% y/y) in chemicals, 0.9% (2.7% y/y) in printing & related support activities, 0.9% (0.7% y/y) in textiles & product mills, 0.4% (-4.7% y/y) in plastics & rubber products, and 0.1% (0.0% y/y) in paper. To the downside, the following nondurable goods categories fell m/m in February, including output drops of 0.7% (-0.7% y/y) in food, beverages & tobacco and 0.4% (+2.7% y/y) in petroleum & coal products.

Mining activity rose 2.8% (0.0% y/y) in February, up from the second month in three, following a downwardly revised 3.2% decline in January (-1.2% initially). Utilities output, however, slid 2.5% (+8.7% y/y), the first m/m slide since November, after a downwardly revised 6.1% January gain (+7.2% initially).

By **market groups**, business equipment output rose 1.6% (-0.6% y/y) in February, the fourth successive m/m rise, after a 1.5% increase in January. Construction supplies production recovered 1.0% (0.7% y/y) after a 0.6% January drop and materials production rose 1.0% (2.3% y/y) following a 0.3% January decline; both registered the second m/m gain in three months. Consumer goods output increased 0.2% (0.7% y/y) in February after rising 0.8% in January and December, reflecting a 4.3% rebound (-5.2% y/y) in durable consumer goods and a 0.8% drop (+2.4% y/y) in nondurable consumer goods.

In **special classifications**, factory output of selected high-tech industries rose 1.4% (12.6% y/y) in February, the seventh m/m rise in eight months, after an upwardly revised 3.5% advance in January (+0.2% initially). Manufacturing production excluding selected high-tech industries was up 0.9% (0.4% y/y) in February, the third m/m gain in four months, after virtually unchanged in January; manufacturing production excluding selected high-tech and motor vehicles & parts grew 0.3% (0.8% y/y), the third straight m/m increase, after a 0.4% January rise.

Capacity utilization rose to 78.2% in February, the highest since June, from a downwardly revised 77.7% in January (77.8% initially). The Action Economics Forecast Survey forecasted 77.8%. The February reading was 1.4 percentage points below its long-run (1972–2024) average. Manufacturing capacity utilization rose to 77.0% in February, the highest since August, from an upwardly revised 76.4% in January (76.3% initially); the February rate was 1.2 percentage points below its long-run average.

Industrial production and capacity data are in Haver’s **USECON** database. Additional detail on production and capacity utilization can be found in the **IP** database. The expectations figures come from the **AS1REPNA** database.

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- Feb. IP +0.7% (+1.4% y/y) after +0.3% (+2.0% y/y) in Jan.; IP Index highest on record.
- Mfg. IP +0.9% m/m, led by an 8.5% jump in auto production (w/ durable goods up 1.6% and nondurable goods up 0.2%).
- Mining activity rebounds 2.8%, the second m/m rise in three months, while utilities output drops 2.5%, the first m/m fall since Nov.
- Key categories in market groups all increase.
- Capacity utilization rises to an eight-month-high 78.2%.

U.S. Industrial Production Rises for the Third Straight Month in February

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Import prices rose 0.4% (2.0% y/y) during February after increasing by the same amount in January, revised from 0.3%. A 0.1% easing had been expected in the Action Economics Forecast Survey. Export prices rose 0.1% (2.1% y/y) after increasing an unrevised 1.3% in January. A 0.2% decline had been expected.

Foods, feeds & beverage import prices held steady (+8.2% y/y) last month after rising 0.2% in January. Fuels & lubricants prices rose 1.7% (2.8% y/y), the fourth consecutive monthly gain. Capital goods import prices eased 0.2% (-0.4% y/y) after rising 0.1% in January. Motor vehicle & parts import costs held steady (+1.4% y/y), while nonauto consumer goods prices rose 0.4% (-0.1% y/y). Import prices excluding fuels rose 0.3% (2.0% y/y).

In February, export prices of foods feeds & beverages increased 0.9% (2.3% y/y) after holding steady in January. Industrial supplies & materials prices were unchanged last month (+2.9% y/y) following a 3.2% strengthening. Capital goods export prices improved 0.1% (1.5% y/y) after surging 1.8% in January. Motor vehicle & parts prices rose 0.2% (2.3% y/y) after dipping 0.1% in January. Consumer goods export prices less autos gained 0.6% (1.3% y/y) after a 0.3% increase. Agricultural commodity prices rose 0.8% (0.6% y/y) while nonagricultural product costs edged 0.1% higher (2.2% y/y) after strengthening 1.5% in January.

Each of these monthly trade price numbers are not seasonally adjusted. The import and export price series can be found in Haver’s **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Import price rise led by fuels & lubricants.
- Export price increase reflects stronger food prices.

U.S. Import and Export Prices Increase During February

Robert Brusca

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**WOW! What a chart!!**
**Enter the Post-War age of the rediscovery of geopolitics**
Press reports this morning are all over the new ZEW release that shows that macroeconomic expectations for Germany have jumped sharply to a level of 51.6 in March from 26.0 in February. This, of course, is being heralded as a result of the great German turnaround and Germany discovering that it really needs to provide for its own security rather than to spend its money paying down its debt and letting the U.S. provide its protective defense umbrella. A real epiphany… After years of turning down U.S. entreaties to be more careful with its security that started with Barack Obama and went on to Donald Trump, Germany refused to spend more money in NATO and brushed off Trump's concerns about being linked to Russia through a pipeline. It basically did just about whatever it could to cause Russia to think that the Germans no longer had any interest in NATO which played a part and fueling Russian boldness and its attack of Ukraine. Russia thought Germany would leave NATO to preserve its economic ties to Russia! Wrong. But a war’s start often is based on poor assumptions or hidden factors. Had Germany wanted to spend the least it could on the military, it should have listened to Barack and to Trump. However, it didn't, and so now we have this huge military buildup that is really pushing macroeconomic expectations ahead in Germany. While we can argue about military spending and whether it's good or bad, right now, it's providing the stimulus that Germany and Europe need to jumpstart their economy out of this long period of weakness that stemmed from COVID, its aftermath, and from of the Ukraine invasion by Russia.

**Dramatic shifts**
However, the part of this new survey that is not getting as much attention is that U.S. macroeconomic expectations that were +1.3 in February have dropped to -48.7 in March, a massive drop in one month; the ranking or queue standing of the U.S. macro-expectations in March is at a 4.4 percentile mark which means that since the early 1990s that has been weaker than this only 4% of the time. In contrast, the jump in German expectations have boosted German expectations up to the 75th percentile of their ranking over the same period. The economic situation in March, which is less malleable because it's tethered to what's happening ‘on the ground’ says the euro area is roughly unchanged at a ratio of -45.2. Germany’s situation is also roughly unchanged, slightly improved, at a level of -87.6; but the U.S. current index drops sharply to +6.7 in March from +42.6 in February, down to a 37-percentile standing. I frankly wonder if it's possible for current conditions - actual current conditions - apart from expectations, to deteriorate that sharply in one month but that's the result we have here to report.

**Stunning developments**
On dating back to early 1992, U.S. current conditions have fallen (experienced a deterioration) month-to-month more than they have in March 2025 on only four other occasions and those were generally in the middle of either COVID or a sharp stock market sell off or some clear precipitating event. In this case, I suppose we would say it's the fear of Donald Trump, his geopolitical stance, his government overhaul, and tariffs are driving these changes. Macroeconomic expectations in the United States have deteriorated month-to-month more than this only once, and in Germany macroeconomic expectations have improved more sharply than they have in March only five other occasions in the past. This report from ZEW is a watershed report; it's fair to say we've never seen anything like it in the past because not only are these statistically highly unusual moves, but it is unprecedented to see the U.S. and the German macroeconomic expectations move so sharply in one month in completely different directions. This result is simply stunning.

**The nail in coffin of deflation**
In the wake of these findings, it's not surprising to see that inflation expectations have jumped in the euro area from -18.6 in February to +6 in March. In Germany, they've jumped from -17.9 in February to +7.9 in March while in the U.S. they have jumped from 35.3 to 52.3. The queue standings now for inflation expectations are in the 38.3 percentile for the euro area (since the early 1990s), in the 39.5 percentile for Germany, and in the 71.5 percentile for the U.S. Quite apparently the period where we will worry about deflation and the zero bound, and all of those things is over, and we are back to worrying about inflation..._hello darkness my old friend_...

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"Reports of my death have been exaggerated" – Inflation

**No more low rates, well… except for central banks?**
Short-term interest rate expectations continue to bear negative signs for some strange reason in the wake of all of these concerns that have inflation flaring but concerns about growth rising. And the euro area’s February's -83.2 reading becomes -56.1 in March; the U.S. February reading of -27.2 becomes -22.6 in March. Short-term rates are still seen as dropping but not with as much certainty as previously. The euro area figure has a 10.4 percentile queue standing; the U.S. figure has a 17.5 percentile standing. These are still low enough results that tell us that rate expectations are tilted toward rate cuts not toward rate increases. This tells us that there is still a lot more concern about macroeconomic growth than about the rise of inflation. We’ll see. Central banks have been locked into that view for a long time as they are still cutting rates with inflation above their targets.

**Long-rate expectation are higher-** Long-term rate expectations in Germany have moved from -2 in February to +35.7 in March; the U.S. February reading of +18.7 has moved up to +34.7 in March. The German figure has a ranking at its 44th percentile; in the U.S. the ranking is essentially at its 39th percentile. Those are relatively similar standings and even though they show a significant change compared to a month ago, long-term rate expectations are still below a ranking of ‘50’ which leaves them below their historic median.

**Taking stock...**
The euro area stock market reading moved up to 9.7 in March from -0.8 in February. For Germany, the March reading moved up to 6.2 from -4.7 in February. The U.S. is the lone voice of deterioration where the February reading of 12.1 has turned into a March reading of -13.8. However, all of the stock market rankings remain relatively weak. The euro area ranking is at its 7.6 percentile, the German ranking at its 4.9 percentile, the same as in the U.S. While the ZEW experts are not willing to look for substantial decrements in stock market values from current levels, they're still keeping their assessments near the low end of what they have been historically.

**The Dollar**
As for the dollar, the expectation for the dollar -which had been at 27.5 in February- has fallen to -17.2 in March. We'll see if that kind of decrement in dollar value is played out in the future.

**Summing up**
It appears that we are living in interesting times. If Time magazine is true to its moniker in naming the person of the year the person who affects events the most, based on how this year is developing Donald Trump will be the man of the year in 2025…because I can't imagine anybody affecting economic or global events any more than Trump has in the early months of 2025. It’s only mid-March! Long ago the Time magazine dropped the requirement that ‘the person of the year’ had to do something good. They just had to do something that influenced events the most. That appears to be where Donald Trump is right now; global events have been turned upside down. Will things calm, will the world make peace with Trump (and vice-versa), or will this continue to be a year of tumult?

ZEW Experts See German Outlook JUMP and U.S. Outlook TANK!

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Total retail sales increased 0.2% (3.1% y/y) during February after falling 1.2% in January, revised from down 0.9%, and rising an unrevised 0.7% in December, according to the U.S Census Bureau. Expectations had been for a 0.6% February gain in the Action Economics Forecast Survey. Excluding motor vehicles & parts, retail sales rose 0.3% last month (3.1% y/y) following a 0.6% decline, revised from down 0.4%. A 0.4% gain had been expected for February.

Sales in the retail control group, which excludes autos, building materials, gasoline & food services, rose 1.0% last month (4.4% y/y) and reversed a 1.0% January decline, revised from down 0.8%. These sales are used in the construction of personal consumption expenditures in NIPA accounts.

Sales of motor vehicles & parts eased 0.4% (+3.1% y/y) last month and followed a 3.7% January decline. The decline compared to a 2.5% rise (2.0% y/y) in unit light vehicle sales which followed a 7.7% January decline. Spending at gasoline stations weakened 1.0% (-0.3% y/y) after increasing 1.3% in January. The rise came as gasoline prices increased 1.0% (NSA) on average during February.

By category, nonstore retail sales rebounded 2.4% (6.5% y/y) in February following a 2.4% January drop. Furniture & home furnishings store sales held steady (+5.5% y/y) after falling 1.2%. Electronics & appliance store sales weakened 0.3% (-5.3% y/y) a 1.1% January improvement. Building materials & garden equipment store sales rose 0.2% (-0.7% y/y), after four straight monthly declines. Clothing & accessory store sales were off 0.6% (+1.0% y/y) after falling 0.7% in January. Sporting goods, hobby & book shop sales fell 0.4% (-3.0% y/y) after weakening 3.1%. General merchandise store sales improved 0.2% (3.4% y/y) after two months of 0.5% increase. Within that category, department store sales declined 1.7% (-3.9% y/y) last month following a 0.8% rise.

In the nondiscretionary sales categories, health & personal care store sales rose 1.7% (6.7% y/y) in February after falling 1.1% in January. Food & beverage store sales rose 0.4% (3.9% y/y) after easing 0.1% during January.

Restaurant & drinking place sales fell 1.5% (+1.5% y/y) last month after holding steady in January.

Retail sales data can be found in Haver’s **USECON** database. The expectations figures are from the Action Economic Forecast Survey in **AS1REPNA**.

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- Core retail spending firms.
- Lower gasoline prices hold back last month’s increase.
- Online spending recovers; spending change elsewhere is modest.

Economy in Brief: November 2003

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