Robert Brusca

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070921c.jpg" width="353">
Slip-slidin&#146; away&#133;
The chart on the left tells the story. The table below gives the perspective on the trend with more precision. Anyway you slice it, the release of the Reuters NTC PMI FLASH! readings for the Euro area tell a grim story&#133;the weakest readings in 21 months. That is since its inception for the services measure taking the MFG PMI back to January 2000, so as to include a recession, raises the range ranking of the MFG PMI to the 70th percentile or the top 30%. That is better but it falls short of being called &#145;strong&#146; or robust. If we were grading papers a 70 would be a C-minus.
And this is a September reading that predates the recent push up in the Euro. We have heard Germany&#146;s wise man Bofinger talk of the potential for FX intervention. Intervention was a topic of the speech to today by the ECBs Bini Smaghi. Airbus has warned of adverse strong-euro effects. The currency game is in full swing.
Who&#146;s at risk: Who Da man?While everyone gnashes their teeth for the poor, poor dollar let&#146;s remember that it&#146;s the strong currency country that really get hurt.
Look at Japan&#146;s decade-long torpor after the too-strong yen. Maybe Europe should spend more time worrying about its own polices instead of the US. Since the US has been denied any control of some its most important FX rates as Japan has wallowed in weak growth and borrowing that cheapie has mushroomed into a cottage industry of massive proportions and since China has asserted its right to commandeer its bilateral peg with the dollar, stress has been left fall elsewhere. Euro anyone?
From jubilation to frustration. We have watched with interest as Europe has chortled over the rise of the euro and as that has segued into a view of the literal invincibility of its growth even as the termites have set about their work on those wooden arguments.
Some have talked of switching reserves into euro. Well be careful what you wish for. Now Europe looks in horror at what is happening. This is a continent based on exporting. Exports are typically high; 40% of GDP in Germany and higher in other countries there. A too-high exchange rate is not the sort of collateral problem for Europe that it has been in the US with export more like 10% to 15% of GDP. And, as we have written before, the trouble with being a reserve center currency is that you need a lot of flexibility in your economy to deal with the swing in capital flows that might arise. So despite the fact that those who have shifted into euro may now be happy the real question is this: for how long?
A one-two punch? For Europe the FX rise is taking its toll in concert with the impact from the financial situation everyone said would not spread. The Bank of England was for a while stubborn about its own building crisis (a gathering storm?). But it has had to cave and offer so much assistance that Mr. King is now being crowned (in the pejorative sense) by the Select Committee looking into those matters.
One in repair, one in despair. The ECB is now taking blasts from its favorite critic, Mr Sarcastic, err Sarkozy. While the dollar is floundering, it is in shallow water. As I remind people of this key question: from here how far can the dollar fall and against what? Meanwhile, back at the Euro-ranch, real trouble is brewing and it does not have a good solution. Talk of FX intervention is a pea shooter against a charging elephant. No trained Mahoot would stand in the way of that charging beast, let alone with a pea shooter for a weapon. It is fair to say that the US is in state of repair and Europe is in a state of despair. So much for the fate of the poor dollar&#133; Dollar rules! Euro drools! Why? Because the dollar and US economy can survive this sort of things since IT IS A REAL RESERVE UNIT with all the trappings. The euro, sadly, is not.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th colspan=3 scope="col">FLASH Readings</th>
</tr>
<tr>
<th colspan="3" scope="col">NTC PMIs for the Euro area 13</th>
</tr>
</thead>
<tbody>

<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Sep-07</td>
<td>53.23</td>
<td>54.04</td>
</tr>
<tr class="odd">
<td class="firstcol">Aug-07</td>
<td>54.16</td>
<td>57.91</td>
</tr>
<tr class="grey2">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>54.08</td>
<td>56.68</td>
</tr>
<tr class="odd">
<td class="firstcol">6-Mo</td>
<td>54.67</td>
<td>57.01</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>55.41</td>
<td>57.14</td>
</tr>
<tr class="grey2">
<td colspan="3" class="firstcol">21-Mo Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>57.61</td>
<td>61.21</td>
</tr>
<tr class="odd">
<td class="firstcol">Low</td>
<td>53.23</td>
<td>54.04</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>0</td>
<td>0</td>
</tr>
</tbody>
</table>
</body>
</html>

Slip-slidin away The chart on the left tells the story. The table below gives the perspective on the trend with more precision. Anyway you slice it, the release of the Reuters NTC PMI FLASH! readings for the Euro area tell a grim [...]

NTC Measures Plunge in September-Back to Central Banking School?

Tom Moeller

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070921a.jpg" width="353">
The Philadelphia Federal Reserve Bank&#39;s Index of General Business Conditions in the manufacturing sector improved sharply this month. The rise to 10.9 more than reversed the deterioration down to 0.0 during August.
During the last ten years there has been a 65% correlation between the level of the Philadelphia Fed Business Conditions Index and three-month growth in factory sector industrial production. There has been a 43% correlation with q/q growth in real GDP.
The sub indexes for new orders and inventories accounted for most of the rise in the overall index. Shipments improved only marginally while the indexes for unfilled orders and employment both fell. During the last ten years there has been a 75% correlation between the employment index and the three-month growth in factory payrolls.
The business conditions index reflects a separate survey question, not the sub indexes.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070921b.jpg" width="353">
The prices paid index reversed some of its deterioration in August but remained near its low since February. During the last ten years there has been a 76% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months fell slightly but remained near its best level since late in 2004. Expectations for new orders were quite firm and though expectations for the number of employees fell from its recent high, it remained firm.
Subprime Side Effects in the Federal Funds Market from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20071001/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"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">September</th>
<th scope="col">August &nbsp;</th>
<th scope="col">Sept. &#145;06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>10.9&nbsp;</td>
<td>0.0</td>
<td>2.3&nbsp;</td>
<td>8.1</td>
<td>11.5</td>
<td>28.1</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>23.1&nbsp;</td>
<td>15.4&nbsp;</td>
<td>46.6&nbsp;</td>
<td>36.6</td>
<td>40.1</td>
<td>51.2</td>
</tr>
</tbody>
</table>
</body>
</html>

The Philadelphia Federal Reserve Bank's Index of General Business Conditions in the manufacturing sector improved sharply this month. The rise to 10.9 more than reversed the deterioration down to 0.0 during August. During the last ten [...]

Philadelphia Fed Index Improved

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070921a.jpg" width="353">
The Philadelphia Federal Reserve Bank&#39;s Index of General Business Conditions in the manufacturing sector improved sharply this month. The rise to 10.9 more than reversed the deterioration down to 0.0 during August.
During the last ten years there has been a 65% correlation between the level of the Philadelphia Fed Business Conditions Index and three-month growth in factory sector industrial production. There has been a 43% correlation with q/q growth in real GDP.
The sub indexes for new orders and inventories accounted for most of the rise in the overall index. Shipments improved only marginally while the indexes for unfilled orders and employment both fell. During the last ten years there has been a 75% correlation between the employment index and the three-month growth in factory payrolls.
The business conditions index reflects a separate survey question, not the sub indexes.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070921b.jpg" width="353">
The prices paid index reversed some of its deterioration in August but remained near its low since February. During the last ten years there has been a 76% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months fell slightly but remained near its best level since late in 2004. Expectations for new orders were quite firm and though expectations for the number of employees fell from its recent high, it remained firm.
Subprime Side Effects in the Federal Funds Market from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20071001/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"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">September</th>
<th scope="col">August &nbsp;</th>
<th scope="col">Sept. &#145;06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>10.9&nbsp;</td>
<td>0.0</td>
<td>2.3&nbsp;</td>
<td>8.1</td>
<td>11.5</td>
<td>28.1</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>23.1&nbsp;</td>
<td>15.4&nbsp;</td>
<td>46.6&nbsp;</td>
<td>36.6</td>
<td>40.1</td>
<td>51.2</td>
</tr>
</tbody>
</table>
NTC Measures Plunge in September-Back to Central Banking School? 
by <a href="/comment/Brusca.html">Robert Brusca</a> September 21, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070921c.jpg" width="353">
Slip-slidin&#146; away&#133;
The chart on the left tells the story. The table below gives the perspective on the trend with more precision. Anyway you slice it, the release of the Reuters NTC PMI FLASH! readings for the Euro area tell a grim story&#133;the weakest readings in 21 months. That is since its inception for the services measure taking the MFG PMI back to January 2000, so as to include a recession, raises the range ranking of the MFG PMI to the 70th percentile or the top 30%. That is better but it falls short of being called &#145;strong&#146; or robust. If we were grading papers a 70 would be a C-minus.
And this is a September reading that predates the recent push up in the Euro. We have heard Germany&#146;s wise man Bofinger talk of the potential for FX intervention. Intervention was a topic of the speech to today by the ECBs Bini Smaghi. Airbus has warned of adverse strong-euro effects. The currency game is in full swing.
Who&#146;s at risk: Who Da man?While everyone gnashes their teeth for the poor, poor dollar let&#146;s remember that it&#146;s the strong currency country that really get hurt.
Look at Japan&#146;s decade-long torpor after the too-strong yen. Maybe Europe should spend more time worrying about its own polices instead of the US. Since the US has been denied any control of some its most important FX rates as Japan has wallowed in weak growth and borrowing that cheapie has mushroomed into a cottage industry of massive proportions and since China has asserted its right to commandeer its bilateral peg with the dollar, stress has been left fall elsewhere. Euro anyone?
From jubilation to frustration. We have watched with interest as Europe has chortled over the rise of the euro and as that has segued into a view of the literal invincibility of its growth even as the termites have set about their work on those wooden arguments.
Some have talked of switching reserves into euro. Well be careful what you wish for. Now Europe looks in horror at what is happening. This is a continent based on exporting. Exports are typically high; 40% of GDP in Germany and higher in other countries there. A too-high exchange rate is not the sort of collateral problem for Europe that it has been in the US with export more like 10% to 15% of GDP. And, as we have written before, the trouble with being a reserve center currency is that you need a lot of flexibility in your economy to deal with the swing in capital flows that might arise. So despite the fact that those who have shifted into euro may now be happy the real question is this: for how long?
A one-two punch? For Europe the FX rise is taking its toll in concert with the impact from the financial situation everyone said would not spread. The Bank of England was for a while stubborn about its own building crisis (a gathering storm?). But it has had to cave and offer so much assistance that Mr. King is now being crowned (in the pejorative sense) by the Select Committee looking into those matters.
One in repair, one in despair. The ECB is now taking blasts from its favorite critic, Mr Sarcastic, err Sarkozy. While the dollar is floundering, it is in shallow water. As I remind people of this key question: from here how far can the dollar fall and against what? Meanwhile, back at the Euro-ranch, real trouble is brewing and it does not have a good solution. Talk of FX intervention is a pea shooter against a charging elephant. No trained Mahoot would stand in the way of that charging beast, let alone with a pea shooter for a weapon. It is fair to say that the US is in state of repair and Europe is in a state of despair. So much for the fate of the poor dollar&#133; Dollar rules! Euro drools! Why? Because the dollar and US economy can survive this sort of things since IT IS A REAL RESERVE UNIT with all the trappings. The euro, sadly, is not.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th colspan=3 scope="col">FLASH Readings</th>
</tr>
<tr>
<th colspan="3" scope="col">NTC PMIs for the Euro area 13</th>
</tr>
</thead>
<tbody>

<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Sep-07</td>
<td>53.23</td>
<td>54.04</td>
</tr>
<tr class="odd">
<td class="firstcol">Aug-07</td>
<td>54.16</td>
<td>57.91</td>
</tr>
<tr class="grey2">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>54.08</td>
<td>56.68</td>
</tr>
<tr class="odd">
<td class="firstcol">6-Mo</td>
<td>54.67</td>
<td>57.01</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>55.41</td>
<td>57.14</td>
</tr>
<tr class="grey2">
<td colspan="3" class="firstcol">21-Mo Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>57.61</td>
<td>61.21</td>
</tr>
<tr class="odd">
<td class="firstcol">Low</td>
<td>53.23</td>
<td>54.04</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>0</td>
<td>0</td>
</tr>
</tbody>
</table>
Japan is Losing Momentum Across Sectors 
by <a href="/comment/Brusca.html">Robert Brusca</a> September 21, 2007


<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070921g.jpg" width="353">
Construction sector is on its LIFETIME LOW &#150; since 1993. 
The chart on the left shows the 12-month momentum in Japan&#146;s various key sectors. Among them, only construction is contracting and it has been doing that since mid -2006. Construction is at the its lifetime low point. Other sectors are relatively high in their respective ranges &#150; in their 90th percentiles. But momentum is fading across these sectors. MFG is only gradually losing momentum while the tertiary sector (services) has less momentum to start and is also losing it faster. The all industry measure tracks the tertiary sector closely. </div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th colspan="10" scope="col">Japan Main Industry Surveys</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol"></td>
<td colspan="3">Recent Months</td>
<td colspan="3">Moving Averages</td>
<td colspan="3">Extremes: Range</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Jul 2007</td>
<td>Jun 2007</td>
<td>May 2007</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Max</td>
<td>Min</td>
<td>%-Tile</td>
</tr>
<tr>
<td class="firstcol">All Industry</td>
<td>107.1</td>
<td>107.5</td>
<td>107.3</td>
<td>107.3</td>
<td>107.2</td>
<td>106.9</td>
<td>107.6</td>
<td>93.1</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>78.7</td>
<td>80</td>
<td>81.6</td>
<td>80.1</td>
<td>80.3</td>
<td>80.4</td>
<td>124.6</td>
<td>78.7</td>
<td>0</td>
</tr>
<tr>
<td class="firstcol">Mining and MFG</td>
<td>108.1</td>
<td>108.5</td>
<td>107.1</td>
<td>107.9</td>
<td>107.8</td>
<td>107.9</td>
<td>109.6</td>
<td>87.7</td>
<td>0.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Tertiary</td>
<td>109.7</td>
<td>110.3</td>
<td>110.2</td>
<td>110.1</td>
<td>110.0</td>
<td>109.5</td>
<td>110.7</td>
<td>91</td>
<td>0.9</td>
</tr>
<tr class="grey1">
<td colspan="10" class="firstcol">Ranges, Max, Min since 1993</td>
</tr>
</tbody>
</table>
Canada's Retail Trade Falls 0.8% in July, But Could Be Simple Offset to Earlier Strength 
by <a href="/comment/Stone.html">Carol Stone</a> September 21, 2007


<img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070921d.jpg"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070921e.jpg">
Retail trade in Canada fell 0.8% in July following on a 1.1% drop in June. May had been stronger, with a 2.8% increase. The July result year-on-year was up 3.8%. This was the weakest y/y increase since October 2005, although the monthly swings in these growth rates make it a bit misleading to characterize the one month; the y/y change in a 3-month moving average, by contrast, was 6.6%, roughly in line with recent experience.
Several store groups shared the pattern of a strong May followed by decreases in June and July. The automotive sector, which accounts for about 34% of retail sales in Canada, gained 4.3% in May, but then fell 2.9% in June and 1.3% in July. But others duplicated this: home centers and hardware stores, clothing, and general merchandise, as examples.
The strength in May&#39;s sales was believed by Statistics Canada and private analysts to be largely attributable to a government-worker pay settlement received by women in Quebec, one of a series of &quot;pay equity&quot; settlements achieved by unions and/or reflecting national legislation concerning salaries of women and men. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070921f.jpg" width="353">Sales in Quebec then were up 5.0% in May and they fell 4.1% in June and 0.7% in July. Sales among all the other Provinces, though, still rose 2.2% in May, so not all of the push was due to the payout to Quebec&#39;s workers.
Among other of the big Provinces, Ontario saw 2.1% growth in May and then declines of 0.5% in June and 1.9% in July. Alberta sales rose 2.9% in May and 0.6% in June; they edged down 0.2% in July. 
On a volume basis, sales showed the same monthly pattern. In chained 2000 C$, they rose 2.5% in May and fell back 0.7% in June and 0.8% in July. Prices were thus not the major reason for the swing in nominal sales. In May, the retail trade price index rose just 0.3%; it declined 0.4% in June and was flat in July.
As we noted at the outset, while these sales look to be slowing if July alone is compared to year-ago figures, it really does seem too early to conclude that the trend is shifting. However, the trend in the Canadian economy looks to be quite sensitive to the path of this key measure of consumer demand over the next month or two.
The national data for Canada are contained in Haver&#39;s CANSIM database, with that for the Provinces in CANSIMR.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CANADA (% Chg)</th>
<th scope="col">Jul 2007*</th>
<th scope="col">Jun 2007*</th>
<th scope="col">May 2007*</th>
<th scope="col">Year Ago</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Retail Trade: All Groups</td>
<td>-0.8</td>
<td>-1.1</td>
<td>2.8</td>
<td>3.8</td>
<td>6.4</td>
<td>5.6</td>
<td>4.7</td>
</tr>
<tr>
<td class="firstcol">All Motor Vehicles &amp; Parts Dealers</td>
<td>-2.3</td>
<td>-3.6</td>
<td>5.0</td>
<td>3.7</td>
<td>6.0</td>
<td>5.0</td>
<td>0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Total less MV &amp; P</td>
<td>0.3</td>
<td>1.9</td>
<td>0.1</td>
<td>4.7</td>
<td>6.4</td>
<td>6.5</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">Gasoline Stations</td>
<td>-3.5</td>
<td>4.7</td>
<td>5.3</td>
<td>0.2</td>
<td>9.1</td>
<td>15.4</td>
<td>11.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Total less MV &amp; P and Gasoline</td>
<td>0.9</td>
<td>1.5</td>
<td>-0.6</td>
<td>5.4</td>
<td>5.9</td>
<td>5.2</td>
<td>5.5</td>
</tr>
</tbody>
</table>
</body>
</html>

Carol Stone, CBE

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070920g.jpg" width="353">
Today, the BEA reported personal income by state for Q2. This sizable body of data, carried in Haver&#39;s PIQR database, shows the composition of aggregate personal income for each state by type of income and earnings by industry. In Q2 total personal income for the country grew 1.2%, following 2.5% in Q1. Q1 had included the payment of large bonuses covering year-end 2006, and these enlarged the income growth reported for Q1 and the apparent slowdown in Q2. The year-on-year growth in Q2 personal income, though, was 6.4%, well in line with the performance of the last three years. Similarly, earnings rose 1.0% in Q2 compared with 2.2% in Q1; the year-on-year growth was 5.9%, also running about average with recent years&#39; experience. These data levels are given in seasonally adjusted annual rates, but the % changes are cited as quarterly rates by BEA.
By state, personal income grew as much as 2.0% in Q2 in Utah and it declined outright in New York -- by 0.1%. New York workers had received the biggest part of the Q1 bonus money and income there then expanded by 4.8%. So the decline in Q2 should be seen as weak only relative to the bulge in Q1 growth. In Utah, the big Q2 gains income came in earnings, with outsized gains in professional and technical industries, durable goods manufacturing and construction.
This report highlights a special feature of state income data. Income is measure according to residence; I live and work in New York, for instance, so all of my income occurs in New York. But earnings are compiled from establishment data, so they represent earnings were people work, which is not necessarily the state they they live in. Adjustment is needed to reconcile these differences Our data table below shows two states with a noticeable impact from commuters. Many New Jerseyans work in New York. So earnings (defined here as wages and salaries net of contributions for social insurance) defined by residence are larger in New Jersey than those reported for workers. So we see that the &quot;worker&quot; data are increased by a positive factor, which was $35.9 billion in Q2, or 11.7% of earnings of residents.
In contrast, many people who work in Missouri live in Kansas or Illinois. So Missouri has a negative &quot;residence adjustment&quot;. In Q2 it was $4.3 billion, or 2.8% of earnings reported for workers in the state. That is, 2.8% of earnings earned in Missouri was transferred to other states where the workers actually reside.
Most states have a negligible residence adjustment since nearly everyone lives and works in the same state. But all states have even a small amount. And the country as a whole has a tiny but negative residence adjustment, since some people who work in the US live in another country.[Note that these personal income data are compiled separately from the personal income reported in the National Income Accounts. The differences would be the subject of another commentary, but for now, it is enough to say that the sum of the states need not equal the total of personal income in the more familiar national data. It are quite close, however.] 
<img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070920h.jpg"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070920i.jpg">
<table cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Personal Income by State</th>
<th scope="col">Q2 2007</th>
<th scope="col">Q1 2007</th>
<th scope="col">Q4 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Personal Income, Total US</td>
<td>11,595</td>
<td>11,459</td>
<td>11,181</td>
<td>10,902</td>
<td>10,967</td>
<td>10,284</td>
<td>9,711</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; % Change</td>
<td>1.2</td>
<td>2.5</td>
<td>1.5</td>
<td>6.4</td>
<td>6.6</td>
<td>5.9</td>
<td>6.1</td>
</tr>
<tr>
<td class="firstcol">Net Earnings by Residence</td>
<td>7,893</td>
<td>7,812</td>
<td>7,646</td>
<td>7,453</td>
<td>7,504</td>
<td>7,104</td>
<td>6,739</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; % Change</td>
<td>1.0</td>
<td>2.2</td>
<td>1.9</td>
<td>5.9</td>
<td>5.6</td>
<td>5.4</td>
<td>6.5</td>
</tr>
<tr class="grey2">
<td colspan="8" class="firstcol">Earnings by State</td>
</tr>
<tr>
<td class="firstcol">New Jersey</td>
<td>307</td>
<td>305</td>
<td>296</td>
<td>291</td>
<td>291</td>
<td>276</td>
<td>263</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; % Change</td>
<td>0.5</td>
<td>3.0</td>
<td>2.3</td>
<td>5.2</td>
<td>5.7</td>
<td>4.8</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">Residence Adjustment</td>
<td>35.9</td>
<td>36.7</td>
<td>33.7</td>
<td>31.7</td>
<td>32.5</td>
<td>29.1</td>
<td>26.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Missouri</td>
<td>132</td>
<td>131</td>
<td>129</td>
<td>127</td>
<td>127</td>
<td>121</td>
<td>117</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>1.3</td>
<td>1.5</td>
<td>1.7</td>
<td>4.5</td>
<td>4.4</td>
<td>4.1</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Residence Adjustment</td>
<td>-4.3</td>
<td>-4.3</td>
<td>-4.2</td>
<td>-4.3</td>
<td>-4.2</td>
<td>-4.2</td>
<td>-3.8</td>
</tr>
</tbody>
</table>
</body>
</html>

Today, the BEA reported personal income by state for Q2. This sizable body of data, carried in Haver's PIQR database, shows the composition of aggregate personal income for each state by type of income and earnings by industry. In Q2 [...]

Personal Income Growth Slows in Most States in Q2 after Bonuses Paid in Q1; Commuting Patterns Require Adjustment [...]

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070920f.jpg" width="353">
The CBI survey presents its data in net balance form like the Philadelphia Fed survey and NFIB survey. Values above unity denote increases, below unity they show declines. The ratings are about the breadth of the trend rather that the strength, although strength is usually inferred from breadth. The reading this month shows that orders are still rising but that the breadth of the reading is diminishing. More broadly the chart on the left shows that the trend toward narrowing gains is in place over long and short horizons. Export orders are on the decline; we have previously seen weakening in German orders for July and in other EMU countries. Output for the moment is holding up and is not reflecting any of the weakness in order trends. Prices are still showing upward pressure with a net positive reading of 16 in the current month but that is barely changed since the 12-month average is +17. Still UK inflation data have been good and the prospects for inflation are considered excellent.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
UK Industrial volume data CBI Survey
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reported:</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>12Mo Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>6</td>
<td>9</td>
<td>-6</td>
<td>8</td>
<td>0</td>
<td>94%</td>
<td>9</td>
<td>-40</td>
<td>49</td>
</tr>
<tr>
<td class="firstcol">Export Orders</td>
<td>-2</td>
<td>-3</td>
<td>-8</td>
<td>0</td>
<td>-4</td>
<td>91%</td>
<td>3</td>
<td>-50</td>
<td>53</td>
</tr>
<tr>
<td class="firstcol">Stocks: Final Goods</td>
<td>7</td>
<td>9</td>
<td>6</td>
<td>-2</td>
<td>9</td>
<td>32%</td>
<td>26</td>
<td>-2</td>
<td>28</td>
</tr>
<tr>
<td class="firstcol">Output Volume: Next 3M</td>
<td>17</td>
<td>13</td>
<td>10</td>
<td>25</td>
<td>16</td>
<td>80%</td>
<td>28</td>
<td>-28</td>
<td>56</td>
</tr>
<tr>
<td class="firstcol">Avg Prices 4 Next 3M</td>
<td>16</td>
<td>16</td>
<td>11</td>
<td>16</td>
<td>17</td>
<td>84%</td>
<td>25</td>
<td>-30</td>
<td>55</td>
</tr>
</tbody>
</table>
</body>
</html>

The CBI survey presents its data in net balance form like the Philadelphia Fed survey and NFIB survey. Values above unity denote increases, below unity they show declines. The ratings are about the breadth of the trend rather that the [...]

In the UK, CBI Orders are Fading Over All Major Horizons

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070920e.jpg" width="353">
Manufacturing orders are sharply lower in France in July following a pattern we have seen among previous European reports of industrial orders in July. Like those reported earlier, French new orders, which dropped sharply in July, merely offset a similarly strong rise in June. France&#146;s Yr/Yr trend remains firmly higher with Yr/Yr rates of growth of 15.5% overall and 14.8% for foreign orders. Despite the drop in July, the three-month growth is strong and accelerating compared to the six-month rate. However, in the new quarter (Q3) orders are growing at a pace of only 1.3% annualized. This could be the start of a slowing in orders as the euro has climbed and has just recently broken to a new all-time high above $1.40. This is what will bear watching in the months ahead. As &#145;current&#146; data are for July, and the Euro&#146;s new peak is in mid-September.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th colspan="7" scope="class">French Orders</th>
</tr>
</thead>
<tbody>
<tr class="grey2">
<td class="firstcol">Saar exept m/m</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>-2.9%</td>
<td>3.4%</td>
<td>3.1%</td>
<td>14.6%</td>
<td>4.9%</td>
<td>15.5%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-2.0%</td>
<td>2.2%</td>
<td>3.5%</td>
<td>16.0%</td>
<td>4.8%</td>
<td>14.8%</td>
</tr>
</tbody>
</table>
</body>
</html>

Manufacturing orders are sharply lower in France in July following a pattern we have seen among previous European reports of industrial orders in July. Like those reported earlier, French new orders, which dropped sharply in July, [...]

French Orders Continue to Rise Year-Over-Year

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070920c.jpg" width="353">
The composite index of leading economic indicators fell nearly twice expectations and declined 0.6% last month, fully reversing all of the prior month&#39;s increase, according to the Conference Board.
During the last ten years there has been a 59% correlation between the y/y change in the leading indicators index and the lagged change in real GDP.
The breadth of one month gains amongst the 10 components of the leading index plunged to 15% in August from 70% in July.
All of the components of the leading indicators index made a negative contribution except the money supply. Declining building permits have made a negative contribution for six out of the last eight months.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070920d.jpg" width="353">
The method of calculating the contribution to the leading index from the spread between 10 year Treasury securities and the Fed funds rate has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators increased 0.1% after a 0.2% rise during July. Over the last ten years there has been a 91% correlation between the y/y change in the coincident indicators and real GDP growth.
The lagging index rose 0.3% during August. As a result, the ratio of coincident to lagging indicators (a measure of economic excess) fell slightly and has been roughly unchanged all year.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<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/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.6%</td>
<td>0.7%</td>
<td>0.6%</td>
<td>1.2%</td>
<td>2.5%</td>
<td>7.1%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.1%</td>
<td>0.2%</td>
<td>1.7%</td>
<td>2.5%</td>
<td>2.1%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.3%</td>
<td>0.2%</td>
<td>3.5%</td>
<td>3.0%</td>
<td>3.5%</td>
<td>0.6%</td>
</tr>
</tbody>
</table>
</body>
</html>

The composite index of leading economic indicators fell nearly twice expectations and declined 0.6% last month, fully reversing all of the prior month's increase, according to the Conference Board. During the last ten years there has [...]

U.S. Leading Economic Indicators Fell Sharply

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070920a.jpg" width="353">
Initial claims for jobless insurance fell 9,000 to 311,000 and reversed all of the little revised 5,000 rise during the prior week. An unchanged reading of 322,000 had been expected by a Consensus of economists.
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last six years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four-week moving average of initial claims rose slightly to 320,750 (1.3% y/y).
The latest figure covers the survey week for nonfarm payrolls in September and claims fell 14,000 (4.3%) from the August period. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070920b.jpg" width="353">
Continuing claims for unemployment insurance fell by 53,000 and reversed all of the increases during the prior several weeks. The decline during the prior seek was revised to a slight increase. The continuing claims numbers lag the initial claims figures by one week.
Since yearend 2006, continuing claims have risen 132,000 or by 5.5%. During that period, the monthly survey of household employment from BLS indicates that individuals who were unemployed for 15-26 weeks rose 14.8%. The average weeks of unemployment rose to 16.9 from 15.9.
Reconciling the rise in these figures and the rough stability of the initial claims numbers may be that one represents the &quot;flow&quot; of unemployment while the other captures the &quot;stock&quot; of unemployed individuals. The payroll employment figures from BLS also represent the flow.
The insured rate of unemployment fell to 1.9%.

<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">09/15/07 </th>
<th scope="col">09/08/07 </th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;311</td>
<td>320</td>
<td>-3.4%</td>
<td>313</td>
<td>331</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,544</td>
<td>4.0%</td>
<td>2,545</td>
<td>3.3%</td>
<td>2,459</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for jobless insurance fell 9,000 to 311,000 and reversed all of the little revised 5,000 rise during the prior week. An unchanged reading of 322,000 had been expected by a Consensus of economists. A claims level below [...]

U.S. Initial Claims For Jobless Insurance Fell

Sharply rising share of AI-related jobs

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

London

Singapore

New York

Tokyo

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Andrew Cates

**Front-End Yields Reflect Policy Reassessment**
Against a backdrop of key central bank meetings either having just taken place or imminent, short-dated government bond yields have moved decisively higher across most major economies since the escalation of the Middle East conflict, with the sharpest increase seen in the UK. The rise in 2-year yields reflects a repricing of near-term monetary policy expectations, as markets respond to the inflationary implications of higher energy prices and the growing likelihood that central banks will delay easing cycles. Moves have been most pronounced in economies where inflation is expected to be more persistent—most notably the UK—while increases have been more modest in the US and particularly Japan, where policy normalisation remains gradual. In effect, the front end of the curve is signalling a shift away from the “rate cuts soon” narrative that prevailed earlier in the year toward a more cautious, higher-for-longer policy outlook.

260430Z1.jpg

**US Recession Risks Remain Contained—For Now**
Despite the recent deterioration in the macro backdrop, real-time recession risk indicators for the US remain relatively subdued. This is notable given the combination of softer growth momentum, higher bond yields and heightened geopolitical risk. The nowcast—derived from a blend of high-frequency activity data and financial stress measures—has historically tended to move sharply when conditions turn, rather than drift higher gradually. That asymmetry is important in the current environment. While recession risks are not yet flashing red, past cycles suggest they can reprice abruptly, and arguably at present if energy-driven inflation were to feed much more forcefully into financial conditions or begin to weigh more materially on demand.

260430Z2.jpg

**Consumer Confidence Diverges: Europe and UK Slide, US Stabilises**
Consumer confidence has weakened across the major economies, but the deterioration has been more pronounced in the euro area and the UK than in the US. While sentiment in the US has recently edged up, it remains at relatively subdued levels. By contrast, confidence in Europe and the UK has fallen more sharply, reflecting greater exposure to higher energy costs and a more direct squeeze on real household incomes. This divergence is consistent with broader macro trends, suggesting that demand in Europe may prove more sensitive to the current shock, with weaker sentiment feeding more quickly into consumption.

260430Z3.jpg

**Euro area Credit Conditions Turn More Restrictive**
The latest ECB lending survey points to a clear tightening in credit conditions across the euro area, with banks raising lending standards for both firms and households while loan demand weakens. This combination—more restrictive supply alongside softer demand—is typically associated with a cooling in activity, particularly in interest-sensitive sectors. Recent evidence suggests that higher perceived risks, rising funding costs and geopolitical uncertainty are all weighing on banks’ willingness to lend, while weaker confidence and reduced investment appetite are dampening borrowing needs. The result is a tightening in financial conditions that is likely to amplify the broader slowdown already evident in survey data, reinforcing the more fragile growth dynamics now emerging across the region.

260430Z4.jpg

**An Intensifying AI Boom with Supply-Side Undercurrents**
Against the backdrop of surging AI-related investment, semiconductor prices are not just high—they are rising at an increasingly rapid pace. This chart shows a clear acceleration in both prices and export values, pointing to an intensifying boom in global chip demand. While this is in part a reflection of strong, structural demand, supply-side factors may also be playing a growing role. Although the Middle East is not a direct source of key chip-making minerals, it is central to the energy and petrochemical inputs that underpin semiconductor production. Ongoing geopolitical tensions are therefore likely feeding into higher costs and renewed frictions across supply chains. The combination of accelerating demand and tightening supply conditions suggests that semiconductor inflation could prove more persistent—and more globally consequential—than currently assumed.

260430Z5.jpg

**Labour Markets Reflect the AI Acceleration**
Our final chart this week highlights the extent to which the current AI boom is now feeding through into labour markets. This high-frequency indicator—based on the share of job listings containing AI-related keywords—shows a sharp and sustained increase since the widespread adoption of generative AI tools in late 2022. What began as a more traditional build-out in machine learning roles has evolved into a broader and more intense wave of hiring tied to generative AI capabilities, with demand accelerating markedly across multiple economies. The scale and persistence of this trend point to a structural shift rather than a cyclical upswing, reinforcing the view that AI is becoming an increasingly important driver of investment, productivity expectations and, potentially, broader macroeconomic dynamics.

260430Z6.jpg

Against a backdrop of persistent geopolitical tensions, firmer energy prices and a busy week of central bank meetings—including the Fed, ECB, BoE and BoJ—financial markets have remained notably resilient, even as the macro narrative has softened at the margin. The message from this week’s charts is one of growing tension beneath that surface calm. Front-end bond yields have moved higher, signalling a shift toward a more cautious, “higher-for-longer” policy outlook (chart 1). At the same time, real-time recession indicators for the United States suggest risks remain contained for now (chart 2). Consumer confidence data paint a more uneven picture, with sharper declines in the euro area and UK than in the US, highlighting regional vulnerabilities to the current energy shock (chart 3). The ECB’s latest bank lending survey reinforces this, pointing to tighter credit conditions and weaker demand—factors that are likely to weigh further on European growth (chart 4). By contrast, developments in the semiconductor sector underline a different dynamic: an intensifying global boom, with accelerating price pressures reflecting both strong AI-driven demand and emerging supply-side constraints linked indirectly to energy and logistics disruptions (chart 5). Finally, labour market data confirm that the AI surge is not merely a market narrative but a tangible structural shift, with hiring for AI-related roles accelerating across economies (chart 6). Taken together, these signals point to a more complex macro environment—one in which resilient markets coexist with softening growth, more persistent inflation risks and increasingly delicate policy trade-offs.

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/20j2LcPyLFkPvV7NrquXuj?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Tension Beneath the Surface

Michael J. Moran

260430N.jpg

260430O.jpg

Real GDP grew at an annual rate of 2.0% in the first quarter of 2026, almost identical to the expected advance of 2.1%. The latest change was comfortably within the range of recent observations and close to the economy’s potential rate of growth. The year-over-year change totaled 2.7%, but that shift reflected what might be viewed as a special factor (robust growth in the second and third quarters that offset a trade-tariff-induced drop in 2025-Q1 GDP).

Business fixed investment was the star of the show in the first quarter, registering growth of 10.4%. Outlays for information processing equipment and software were especially strong, while outlays for industrial equipment and Research & Development contributed positively as well. Outlays for structures remained decidedly soft, dropping for the ninth consecutive quarter. Building of data centers have been vigorous, but softness in offices and manufacturing facilities has dwarfed the strength in this new area.

Federal spending surged 9.4% in Q1, but the rise reflected the reopening of most federal agencies after their closure during much of the fourth quarter. Excluding this noise, support from the federal government has been softening. Nondefense outlays peaked in the fourth quarter of 2024, and they were 6.9% shy of that total in the first quarter. Defense spending also peaked in 2024-Q4 and has eased 2.4% since then. Defense spending most likely will grow in coming quarters because of the efforts in the Middle East. Orders for defense goods have already started to rise.

Consumer spending rose 1.5% in the first quarter, a bit shy of the 2.1% pace over the four quarters of last year and less than half the rates in 2023 and 2024. Consumer spending showed signs of softening in late 2025 and January of this year, but activity picked up in February and March. Firm tax refunds might have provided a boost to household spending in the latest months. Some of the tax cuts from the One Big Beautiful Bill were applied retroactively to 2025, but withholding schedules were not adjusted last year. Thus, many households are receiving larger-than-normal tax refunds.

International trade acted as a drag on economic growth in Q1, with net exports subtracting 1.3 percentage points from the GDP increase. Exports did well in the first quarter with growth of 12.9%, but imports were even stronger with a jump of 21.4%. The real trade deficit of $1.1 trillion was noticeably smaller than the shortfall of $1.4 trillion in 2025-Q1 when importers were rushing to get goods into the US before the imposition of tariffs. Still, the trade shortfall was sizeable and its effect on growth noticeable.

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**.

260430P.jpg

260430Q.jpg

- Robust business investment led the advance; moderate support from consumers.
- Government spending jumped with the reopening of most federal agencies.
- The trade sector remained volatile, making a sizeable negative contribution in Q1.

Q1 GDP: Weathering the Challenges; Trend-Like Growth

Sandy Batten

260430A.jpg

260430B.jpg

This monthly report contains a wealth of information concerning the state of the consumer. The anticipation ahead of today’s report centered on how much the surge in energy prices since the escalation of the US-Iran conflict in early March would push up overall PCE inflation. Prices of energy goods and services jumped 11.6% m/m not annualized in March. This was the largest monthly increase since September 2005. As a result, the headline PCE price index increased 0.7% m/m (3.5% y/y versus 2.8% y/y in February), the largest monthly gain since July 2022 but in line with expectations of the Action Economics Forecast Survey.

The core index (that is, excluding food and energy prices) rose by a more modest 0.3% m/m in March, down from a 0.4% monthly increase in February and in line with expectations. However, the yearly rate rose further to 3.2% y/y in March from 3.0% in February, well above and moving away from the Fed’s 2% target. The FOMC left its fed funds rate target unchanged at yesterday’s meeting, but some committee members dissented, opposing the implied easing bias contained in the statement. Chair Powell, in his press conference, noted that a number of members have become more concerned over the inflation outlook and the possible need for a Fed response.

Nominal personal income posted a solid 0.6% m/m (3.7% y/y) increase in March following an upwardly revised unchanged reading in February (previously -0.1% m/m). The March increase was twice the 0.3% monthly gain expected by the Action Economics Forecast Survey. However, after adjusting for inflation, real personal income slipped 0.1% m/m in March on top of a 0.4% m/m decline in February.

Employee compensation continued to be a major driver of personal income in March. It rose 0.4% m/m (4.1% y/y) in March after a 0.2% monthly increase in February. In March, proprietors’ income jumped 2.8%. This outsized increase reflected payments to farmers from the federal government’s Farmer Bridge Assistance Program. Rental income rose a solid 0.7% m/m, the same gain as in February. Income from financial assets increased 0.4% m/m following a 0.9% m/m decline in February. Personal current transfer payments edged up 0.1% m/m versus a 0.3% m/m decline in February.

Nominal consumption expenditures jumped 0.9% m/m (5.7% y/y) in March following an upwardly revised 0.6% monthly gain in February (previously +0.5% m/m). Spending on goods rose 2.0% m/m (4.5% y/y) while spending on services increased 0.4% m/m (6.3% y/y). As for overall inflation, the surge in energy prices also accounted for a large portion of the March gain in nominal spending. After adjusting for overall inflation, real PCE rose a more modest 0.2% m/m following an upwardly revised 0.3% m/m increase in February (previously +0.1% m/m). Still, the solid gains in February and March provide a strong starting point for Q2. The March level is 1.5% at an annual rate above the Q1 average. For all of Q1, real PCE rose 1.6% q/q saar.

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**.

260430C.jpg

260430D.jpg

- The PCE price index jumped 0.7%, reflecting an 11.6% m/m surge in energy prices.
- The core index was up 0.3%, in line with expectations but still well above the Fed’s target.
- Personal income increased 0.6% m/m, led by a 0.4% m/m rise in compensation.
- Personal consumption jumped 0.9% m/m with a slight upward revision to February.
- However, much of the March gain in nominal consumption also reflected the jump in energy prices.
- Real consumption rose by a more modest 0.2% m/m.

Surging Energy Prices Push Up PCE Prices and Consumption in March

Kathleen Stephansen, CBE

260430A2.jpg

260430B2.jpg

Initial claims for unemployment insurance dropped by 26,000 to 189,000 in the week ending April 25, from 215,000 in the week ending April 18, revised from 214,000. The four-week average declined by 3,500 to 207,500 in the week ending April 25, from 211,000 the April 18 week, revised from 210,750. The Action Economics/Haver Analytics Survey looked for 214,000 claims to have been filed.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—dropped by 23,000 to 1.785 million in the week ending April 18, from 1.808 million in the week ending April 11, revised from 1.821 million. The four-week moving average declined to 1.797 million in the latest week from 1.809 million in the April 11 week. The insured unemployment rate remained at 1.2% in the week of April 11. It has remained at that level since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending April 11, the highest unemployment rates were in New Jersey (2.51%), Washington (2.25%), Massachusetts (2.21%), Rhode Island (2.10%), and California (2.06%). The lowest rates were in Florida (0.31%), Louisiana (0.32%), Arkansas, North Carolina and Mississippi (all 0.35%), Alabama (0.36%), South Dakota (0.41%) and Tennessee (0.43%). Rates in other notable states include New York (1.96%), Illinois (1.77%), Pennsylvania (1.40%), and Texas (1.04%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

260430C2.jpg

260430D2.jpg

- New claims dropped by 26,000 to 189,000.
- Continuing claims declined by 23,000 to 1.785 million.
- The insured unemployment rate remained at 1.2%.

U.S. Initial Unemployment Claims dropped in the Week of April 25

260430E.jpg

**Unemployment rates are stable near all-time lows for EMU**
Unemployment rates in the European Monetary Union (EMU) continued to hover at the lowest level. The EMU all-time low unemployment rate is 6.2%, and that’s the number reported for March. There have been five of these 6.2% unemployment rates monthly in the history of the monetary union.

Unemployment rates in March saw declines in five of the 12 early reporting countries: the Netherlands, Italy, Finland, Belgium, and Austria. Over the last three months, there were net declines in the unemployment rates in four countries, while year-over-year once again four countries—though a different four—showed declines in the unemployment rate.

Unemployment rates, evaluated relative to their historic standings, have a median rank standing in their 33.6 percentile. That is the median unemployment rank among these 12 countries; it shows that the unemployment rate is in the lower one-third of its historic rank. Among the 12 early reporting countries, only three failed to have unemployment rate rankings below their 30th percentile; those three are Austria with a 71.3 percentile ranking, Finland with an 80th percentile ranking, and Luxembourg with a 98.8 percentile ranking. So, there are three countries among these 12 that have relatively high unemployment rates compared to their histories, whereas the rest of the reporters have unemployment rates below their respective 30th percentiles.

260430.jpg

**Good, but not great, labor markets**
Clearly, the labor situation is in good hands; however, at the same time, inflation runs over the top of the ECB target, and with war in the Middle East and flurrying oil prices, inflation is going to climb higher. The ECB, like the Federal Reserve, finds itself in the awkward position of not wanting to raise rates because the economy is generating growth; on the other hand, growth seems somewhat fragile. The unemployment rate is low, and inflation has been overshooting, so the central bank is in a difficult position.

**Are central banks awakening from their slumber?**
Despite the good news on the unemployment front, central banks have been wary not to raise interest rates to fend off inflation. Inflation can really be described as having been moved around by financial crises and shocks going back to the great financial crisis. That shock, coupled with the losses that it created, left a legacy of inflation discipline for a very long run, basically, right into the COVID-created recession. COVID weakened economies globally as they were shut down by government policies and then inflation spurted as result of stimulative monetary action and fiscal excess. After that experience, central banks kept stimulative policies on the books and tried to coax growth out of a wounded economy and maintain low unemployment rates, while tolerating inflation that was excessive relative to their targets, but that did not accelerate and did decline slowly—at least for a while. As a result, there's now a legacy of overshooting inflation and more question marks about central banks and their backbone than central bankers want to admit as inflation rises, and as they continue to watch and postpone acting.

**ECB met and declared watchful waiting—not policy action**
At the recent meeting, the ECB policy statement admitted that “Longer-term inflation expectations remain well anchored, although inflation expectations over shorter horizons have moved up significantly.” They are following the model used in the U.S. to contend that long-term inflation expectations are still firmly anchored while they are only slipping away for the short term—a year ahead or so. However, to its credit, the ECB does refer to expectations having moved up significantly in the near term. This is something policy must be wary of, and it also must be wary that long-term expectations may have been damaged as well.

In her press conference, Christine Lagarde noted that the forward guidance from the ECB has several different elements: “There are sort of three anchors of what our reaction function is. So first of all, to remind you: target is 2% medium term, number one. Number two: symmetry. We discussed that today and we reaffirmed it. Number three: our reaction will depend on the type of deviation from target that we observe. Is it large and sustainable?”

"The increase in energy prices will keep inflation well above 2% in the near term. ⁠As the period of high energy prices extends, the likely impact on broader inflation through indirect and second-round effects intensifies. We will therefore closely monitor the size and persistence of the energy price surge, and how it feeds through to price and wage setting, inflation expectations and overall economic dynamics." (Source [here](https://www.reuters.com/business/finance/lagarde-comments-ecb-press-conference-2026-04-30/)).

**The road they kick the can down is getting narrower**
So, we are in store for more watchful waiting. Central bankers can feel that the flexibility is closing in on them. There's been a long period in which post financial crisis and post-COVID events helped to keep inflation under control, but now we're getting into a situation where it may be harder to keep control of inflation, especially since central bank credibility has been eroded by a long period of target misses. Two wars are in progress, and fiscal excess is the order of the day. So why not wait longer?

**No eager-beaver rate hikers**
No central bank seems eager to undertake this new challenge; however, they seem to be circling around the policy change and preparing to do something they haven't done in a long time, which would be to raise interest rates. Last time, in the wake of COVID, the central banks raised interest rates they waited too long to hike them, calling the situation of inflation temporary or transitory. Once again, the central banks see the oil price shock as something that is temporary; however, it's also severe, and while it's temporary, it could turn out to be ‘temporary’ but fairly long-lasting, making it harder to ignore or for a central bank that plans to ‘look through.’

**Some act, some talk, some just look...**
As I noted in the [report on money supplies](https://www.haver.com/articles/globally-money-supplies-accelerate-no-problemo) yesterday, the current practice of trying to look through this supply shock is creating an overshoot of money supply as we have money supply accelerations brewing in the U.S., the U.K., and the European Monetary Union. However, one of the rules from the 1970s was to not accommodate an oil price shock. Unfortunately, the practice of ‘looking through’ a supply shock—which means holding interest rates steady—is at the same time encouraging acceleration in the money supply, which looks accommodative to me. I don't see any evidence that central bankers have recognized the contradiction implied by these policies; it's something we should keep an eye on.

Economy in Brief

Jump to:

NTC Measures Plunge in September-Back to Central Banking School?

Philadelphia Fed Index Improved

Philadelphia Fed Index Improved

Personal Income Growth Slows in Most States in Q2 after Bonuses Paid in Q1; Commuting Patterns Require Adjustment [...]

In the UK, CBI Orders are Fading Over All Major Horizons

French Orders Continue to Rise Year-Over-Year

U.S. Leading Economic Indicators Fell Sharply

U.S. Initial Claims For Jobless Insurance Fell