Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060526a.jpg" width="353">
Personal income rose 0.5% last month following a downwardly revised 0.5% gain during March. The latest compared to Consensus expectations for a 0.7% increase.
Wage &amp; salary disbursements soared 0.9% (5.3% y/y) following an upwardly revised 0.5% March increase. Private sector wages jumped 1.0% (5.7% y/y) as strong gains were logged in manufacturing (0.7%, 2.8% y/y) and in service producing industries (1.1%, 6.1% y/y).
Government transfer payments for health insurance &amp; disability rose 0.6% (11.4% y/y) and a March surge was revised down.
Disposable personal income increased 0.4% (4.7% y/y) but a revised 0.4% gain in March was half that initially reported. Personal taxes jumped 1.6% (10.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060526b.jpg" width="353">
Adjusted for price inflation, disposable personal income fell 0.1% (+1.7% y/y) following a revised no change during March that was initially reported up 0.5%. Real disposable income per capita fell 0.2% (+0.8% y/y), the third m/m decline this year.
Personal consumption matched Consensus expectations for a 0.6% rise. Adjusted for price inflation, spending rose 0.1% (3.1% y/y) for the second consecutive month. Real spending on gasoline &amp; oil jumped 1.7% (0.8% y/y) following two months of decline.
The PCE chain price index rose 0.5% boosted by an 8.7% (19.1% y/y) surge in gasoline &amp; oil prices. Less food &amp; energy the chain price index increased 0.2% (2.1% y/y), down from the 0.3% gain in March. Prices for clothing &amp; shoes rose 0.4% (-0.7% y/y) but furniture &amp; household equipment prices fell another 0.4% (-4.8% y/y).
The personal savings rate was a negative 1.6% in April and recent figures were revised more negative.
The Trend Growth Rate of Employment: Past, Present and Future from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/1q06clar.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.5%</td>
<td>0.5%</td>
<td>5.4%</td>
<td>5.4%</td>
<td>5.9%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.6%</td>
<td>0.5%</td>
<td>6.2%</td>
<td>6.5%</td>
<td>6.5%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>-1.6%</td>
<td>-1.4%</td>
<td>-0.2% (April &#39;05)</td>
<td>-0.5%</td>
<td>1.7%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.5%</td>
<td>0.4%</td>
<td>2.9%</td>
<td>2.8%</td>
<td>2.6%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.1%</td>
<td>2.0%</td>
<td>2.0%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>
U.S. Consumers' Funk Didn't Deepen in Late May 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 26, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060526c.jpg" width="353">
The University of Michigan reported that for all of May, consumer sentiment held steady at the preliminary level indicated two weeks ago. Nevertheless, sentiment fell 9.5% m/m to 79.1, the lowest level since last October. Consensus expectations had been for some improvement to 79.4.
During the last ten years there has been a 77% correlation between the level of consumer sentiment and the y/y change in real consumer spending.
Expectations for the economy dropped 7.1% m/m as higher gasoline prices boosted the twelve month mean expected inflation rate to 4.7% versus 3.6% expected in February. That dragged expectations for personal finances down 10.4% m/m and expected business conditions down 5.8%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060526d.jpg" width="353">
The current conditions index fell 12.0% m/m, the same as the mid-month read. The current index of personal finances dropped 14.3% (-6.4% y/y) and the reading of buying conditions for large household goods dropped 10.9% (-9.8% y/y).
Consumers&#39; assessment of gov&#39;t economic policy fell 8.3% m/m (-10.5% y/y) and is at nearly half the level of early 2000.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">May (final)</th>
<th scope="col">May (prelim.</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>79.1</td>
<td>79.0</td>
<td>87.4</td>
<td>-9.0%</td>
<td>88.6</td>
<td>95.2</td>
<td>87.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>96.1</td>
<td>96.2</td>
<td>109.2</td>
<td>-8.4%</td>
<td>105.9</td>
<td>105.6</td>
<td>97.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>68.2</td>
<td>68.0</td>
<td>73.4</td>
<td>-9.4%</td>
<td>77.4</td>
<td>88.5</td>
<td>81.4</td>
</tr>
</tbody>
</table>
Japan's Net Investment Position Eased in 2005 as the Value of Foreign Investment Surged 
by <a href="/comment/Stone.html">Carol Stone</a> May 26, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060526e.jpg" width="353">
The Bank of Japan today reported on Japan&#39;s international investment position for year-end 2005. Total assets abroad stood at &yen;506.2 trillion, up 16.7% from the end of 2004. All of the major asset categories climbed by significant amounts, such as direct investment abroad, which was up 18.2%, and holdings of equity securities, which rose 26.9%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060526f.jpg" width="353">
We find it interesting that both of the equity components, direct investment and equity securities holdings, constitute only moderate amounts of total assets abroad. Equities were 5.6% of total international assets at the end of 1995; while they have increased, they still constitute just 9.5% of Japanese investors&#39; holdings abroad. Direct investment has ranged between 8.4% and 10.4% of total assets over the 11-year history of these data; at the end of 2005, this item was 9% of the total. It was also right at 9% of Japanese GDP for the year. In contrast, US direct ownership interests abroad constituted 26.2% of total US assets abroad and 20.2% of US GDP in 2004 (latest available).
Foreign investors have interests in Japan, of course, and at the end of 2005, these totaled &yen;325.9 trillion, up a sizable 31.2% from year-end 2004. The gain was concentrated in equity securities, which increased 71.6%, helped by the 40.2% surge in Japanese stock prices (measured by the Nikkei 225). Foreign direct investment in Japan rose 17.9%, but it is a much smaller amount, only &yen;11.9 billion.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060526g.jpg" width="353">
With the big gain in the value of liabilities to foreigners, Japan&#39;s net investment position actually decreased in 2005, falling 2.7% to &yen;180.7 billion. Sometimes such a movement is seen as unhealthy for a country. But on this occasion, it seems more to reflect the emerging improvement in Japan that makes it more attractive for investment.
In releasing these data today, the Bank of Japan added industry and country detail. Haver Analytics will be adding these data to the JAPAN database soon. They will greatly enhance the understanding Japan&#39;s capital flows and values in world markets.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Japan: End of Year, Bil.&yen;</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2000</th>
<th scope="col">1995</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Assets Abroad</td>
<td>506,191</td>
<td>433,864</td>
<td>385,538</td>
<td>341,206</td>
<td>270,738</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Direct Investment</td>
<td>45,605</td>
<td>38,581</td>
<td>35,932</td>
<td>31,993</td>
<td>24,520</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Portfolio Investment</td>
<td>249,493</td>
<td>209,247</td>
<td>184,353</td>
<td>150,115</td>
<td>88,257</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Equity</td>
<td>48,200</td>
<td>37,972</td>
<td>29,394</td>
<td>30,133</td>
<td>15,040</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Debt Securities</td>
<td>201,294</td>
<td>171,275</td>
<td>154,959</td>
<td>119,982</td>
<td>73,217</td>
</tr>
<tr>
<td class="firstcol">Domestic Liabilities</td>
<td>325,942</td>
<td>248,067</td>
<td>212,720</td>
<td>208,159</td>
<td>186,666</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Direct Investment</td>
<td>11,903</td>
<td>10,098</td>
<td>9,610</td>
<td>5,782</td>
<td>3,448</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Portfolio Investment</td>
<td>181,959</td>
<td>120,091</td>
<td>92,873</td>
<td>101,609</td>
<td>56,379</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Loans</td>
<td>98,105</td>
<td>90,776</td>
<td>83,665</td>
<td>76,212</td>
<td>97,759</td>
</tr>
<tr>
<td class="firstcol">Net Assets</td>
<td>180,699</td>
<td>185,797</td>
<td>172,818</td>
<td>133,047</td>
<td>84,072</td>
</tr>
</tbody>
</table>


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Personal income rose 0.5% last month following a downwardly revised 0.5% gain during March. The latest compared to Consensus expectations for a 0.7% increase. Wage & salary disbursements soared 0.9% (5.3% y/y) following an upwardly [...]

U.S. Personal Income Gain Light, Wages Soared, Prices Up

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/060525e.jpg" width="353">
 New Zealand&#39;s trade balance improved in April, according to data reported this morning in Wellington by Statistics New Zealand. Markets and analysts focus on rolling 12-month totals for New Zealand, and the trade deficit on that basis narrowed to NZ$6.90 billion for the year ended April from NZ$7.05 billion in March. The April figure was the smallest deficit this year although much wider than the NZ$4.30 billion of April 2005.
 As evident in both the graph and the table below, cumulative exports are little changed over the last year, but imports are up some 7.7%. Petroleum accounts for a big part of this: the value of those imports has increased by nearly 26%. The largest single import item is vehicles, and these purchases have actually decreased from a year ago, to NZ$5.15 billion from NZ$5.52 billion.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060525f.jpg" width="353">
 New Zealand is largely a service and agricultural economy. The trade balance improvement, which started in March, owes mainly to gains in dairy product exports: milk powder, butter and cheese. These had an aggregate total of NZ$5.48 billion in April compared with NZ$5.04 billion a year ago. Machinery, aluminum and beverage exports also rose.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060525g.jpg" width="353">
 These data, all from Statistics New Zealand, are contained in Haver&#39;s ANZ database, along with our Australia data offerings. This database includes only series that come from the countries&#39; own data sources. For some major countries that do not seasonally adjust certain data, Haver performs that procedure; these supplemental data are contained in the database G10. This latter collection includes key data summaries for 22 countries, the Euro-Zone and several regional groupings. For New Zealand, Haver&#39;s calculations show the trade deficit for the month of April alone was NZ$217 million, the smallest since NZ$173 million in January 2005. The reduction from March in the seasonally adjusted deficit from NZ$380 million consisted of a slim NZ$32 million decrease in exports and a more significant NZ$197 million drop in imports.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/ANZ/@A2/@A209/@A209.HTM">New Zealand, NZ$</a></th>
<th scope="col">Apr 2006</th>
<th scope="col">Mar 2006</th>
<th scope="col">Feb 2006</th>
<th scope="col">Apr 2005</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">12-Month Totals (Bil): Trade Balance</td>
<td>-6.90</td>
<td>-7.05</td>
<td>-7.32</td>
<td>-4.30</td>
<td>-6.46</td>
<td>-4.20</td>
<td>-3.38</td>
</tr>
<tr>
<td class="firstcol">Exports</td>
<td>31.33</td>
<td>31.10</td>
<td>30.71</td>
<td>31.20</td>
<td>30.82</td>
<td>30.71</td>
<td>28.40</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports</td>
<td>38.22</td>
<td>38.16</td>
<td>38.03</td>
<td>35.50</td>
<td>37.27</td>
<td>34.91</td>
<td>31.78</td>
</tr>
<tr>
<td class="firstcol">Individual Months, SA* (Mil): Trade Balance</td>
<td>-217</td>
<td>-380</td>
<td>-772</td>
<td>-368</td>
<td colspan="3">Monthly Averages</td>
</tr>
<tr class="odd">
<td class="firstcol">-539</td>
<td>-350</td>
<td>-282</td>
</tr>
<tr>
<td class="firstcol">Exports</td>
<td>2852</td>
<td>2886</td>
<td>2600</td>
<td>2643</td>
<td>2568</td>
<td>2560</td>
<td>2366</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports</td>
<td>3069</td>
<td>3266</td>
<td>3372</td>
<td>3011</td>
<td>3107</td>
<td>2910</td>
<td>2648</td>
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New Zealand's trade balance improved in April, according to data reported this morning in Wellington by Statistics New Zealand. Markets and analysts focus on rolling 12-month totals for New Zealand, and the trade deficit on that basis [...]

New Zealand Trade Deficit Diminishes as Gains in Dairy Exports Help Offset Petroleum Imports

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060525d.jpg" width="353">
Last week, initial unemployment insurance claims fell 40,000 to 329,000 due to the resolution of a partial government shutdown in Puerto Rico. The drop reversed nearly all of the prior week&#39;s little revised rise. Consensus expectations had been for 315,000 claims.
The four week moving average of initial claims rose to 337,000 (0.9% y/y).
Continuing claims for unemployment insurance increased 38,000 following a revised 1,000 rise during the prior week.
The insured rate of unemployment ticked up to 1.9% following two weeks at 1.8%.
Financial literacy, testimony of Federal Reserve Board Chairman Ben S. Bernanke, can be found <a href="http://www.federalreserve.gov/boarddocs/testimony/2006/20060523/default.htm"> here</a>. 

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<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">05/20/06</th>
<th scope="col">05/13/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
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<td class="firstcol">Initial Claims</td>
<td>329</td>
<td>369</td>
<td>0.6%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,420</td>
<td>-6.7%</td>
<td>2,663</td>
<td>2,923</td>
<td>3,530</td>
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Last week, initial unemployment insurance claims fell 40,000 to 329,000 due to the resolution of a partial government shutdown in Puerto Rico. The drop reversed nearly all of the prior week's little revised rise. Consensus [...]

Initial Jobless Insurance Claims Back Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060525c.jpg" width="353">
 The National Association of Realtors reported that April total existing home sales declined 2.0% m/m to 6.760M following little change in March that was little revised. The gain was in line with Consensus expectations for 6.78M sales.
Sales of single-family homes fell 2.0% after a slight March dip. The data cover sales closed in the latest and previous months, and contrast to the new home sales data which count sales at the signing of a contract. 
Sales declines were widespread throughout the country. In the Northeast, sales reversed all of the prior month&#39;s gain with a 4.5% drop (-3.4% y/y). Sales in the Midwest more than reversed the prior month&#39;s gain and fell 3.4% (-4.1% y/y). In the South sales fell 0.8% (-2.4% y/y) for the third consecutive monthly drop and sales in the West were unchanged (-12.8% y/y).
The median price of an existing single-family home rose 2.5% (4.3% y/y). Prices are not seasonally adjusted.
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/research.nsf/pages/EHSPage?OpenDocument">here</a>.

<table border="0" cellspacing="0" width="100%">
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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">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Home Sales</td>
<td>&nbsp;6,760</td>
<td>6,900</td>
<td>-5.7%</td>
<td>7,064</td>
<td>6,722</td>
<td>6,176</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family Home Sales</td>
<td>5,920</td>
<td>6,040</td>
<td>-5.6%</td>
<td>6,170</td>
<td>5,912</td>
<td>5,443</td>
</tr>
<tr class="odd">
<td class="firstcol">Single Family Median Home Price (000) </td>
<td>$222.7 </td>
<td>$217.2 </td>
<td>4.3% </td>
<td>$206.3</td>
<td>$182.8 </td>
<td>$169.1 </td>
</tr>
</tbody>
</table>


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The National Association of Realtors reported that April total existing home sales declined 2.0% m/m to 6.760M following little change in March that was little revised. The gain was in line with Consensus expectations for 6.78M sales. [...]

U.S. Existing Home Sales Decline As Expected

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060525a.jpg" width="353">
During 1Q06 the U.S. economy grew 5.3% (AR), faster than the initially estimated 4.8% which was an acceleration from 1.7% during 4Q05. The increase fell short of Consensus expectations for a revision to 5.8% and growth of 3.0-3.5% is widely forecast for 2Q.
Corporate profits jumped 7.9% (23.8% y/y) during 1Q. Strength was pronounced for US financial corporations whose profits soared 17.5% (19.4% y/y). Nonfinancial corporate profitability also posted a robust 4.6% (29.3% y/y) gain as profit margins rose to another record high. Overseas profits recovered 4.3% (12.4% y/y) following a 6.5% decline during 4Q. 
Inventories subtracted a lesser 0.1% from GDP growth during 1Q versus the initial estimate of a 0.5% subtraction.
The 0.6 percentage point subtraction from a wider foreign trade deficit also was less than the initially estimated 0.8 percentage points. Growth in exports was revised up to 14.7% (8.1% y/y) and import growth of 12.8% (6.6% y/y) was little changed.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060525b.jpg" width="353">
Domestic demand growth was lessened to 5.7% from 5.9% estimated initially due to lowered estimates of growth in personal consumption and business investment.
Growth in personal consumption expenditures was revised down to 5.2% (3.4% y/y) from 5.5%. The estimate of growth in spending on services was reduced to 2.2% (2.6% y/y) from 2.8% while estimates of strong spending in most goods categories were little changed.
Growth in business fixed investment also was reduced to a still strong 13.8% (10.0% y/y) from 17.9% estimated last month. Growth in spending on structures was halved to 11.4% (4.8% y/y). Residential investment grew 3.0% (5.9% y/y).
The estimate of the GDP chain price index was unchanged at 3.3%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">1Q &#39;06 (Prelim.)</th>
<th scope="col">1Q &#39;06 (Advance)</th>
<th scope="col">4Q &#39;05</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>5.3%</td>
<td>4.8%</td>
<td>1.7%</td>
<td>3.6%</td>
<td>3.5%</td>
<td>4.2%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>1.9%</td>
<td>-0.2%</td>
<td>-0.3%</td>
<td>0.3%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>5.5%</td>
<td>5.4%</td>
<td>-0.2%</td>
<td>3.8%</td>
<td>3.8%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign Trade Effect</td>
<td>-0.6%</td>
<td>-0.8%</td>
<td>-1.4%</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>5.7%</td>
<td>5.9%</td>
<td>1.1%</td>
<td>3.8%</td>
<td>3.9%</td>
<td>4.4%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>3.3%</td>
<td>3.3%</td>
<td>3.5%</td>
<td>3.2%</td>
<td>2.8%</td>
<td>2.6%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>


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During 1Q06 the U.S. economy grew 5.3% (AR), faster than the initially estimated 4.8% which was an acceleration from 1.7% during 4Q05. The increase fell short of Consensus expectations for a revision to 5.8% and growth of 3.0-3.5% is [...]

1Q US GDP Growth Revised Up, Profits Soared

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060525a.jpg" width="353">
During 1Q06 the U.S. economy grew 5.3% (AR), faster than the initially estimated 4.8% which was an acceleration from 1.7% during 4Q05. The increase fell short of Consensus expectations for a revision to 5.8% and growth of 3.0-3.5% is widely forecast for 2Q.
Corporate profits jumped 7.9% (23.8% y/y) during 1Q. Strength was pronounced for US financial corporations whose profits soared 17.5% (19.4% y/y). Nonfinancial corporate profitability also posted a robust 4.6% (29.3% y/y) gain as profit margins rose to another record high. Overseas profits recovered 4.3% (12.4% y/y) following a 6.5% decline during 4Q. 
Inventories subtracted a lesser 0.1% from GDP growth during 1Q versus the initial estimate of a 0.5% subtraction.
The 0.6 percentage point subtraction from a wider foreign trade deficit also was less than the initially estimated 0.8 percentage points. Growth in exports was revised up to 14.7% (8.1% y/y) and import growth of 12.8% (6.6% y/y) was little changed.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060525b.jpg" width="353">
Domestic demand growth was lessened to 5.7% from 5.9% estimated initially due to lowered estimates of growth in personal consumption and business investment.
Growth in personal consumption expenditures was revised down to 5.2% (3.4% y/y) from 5.5%. The estimate of growth in spending on services was reduced to 2.2% (2.6% y/y) from 2.8% while estimates of strong spending in most goods categories were little changed.
Growth in business fixed investment also was reduced to a still strong 13.8% (10.0% y/y) from 17.9% estimated last month. Growth in spending on structures was halved to 11.4% (4.8% y/y). Residential investment grew 3.0% (5.9% y/y).
The estimate of the GDP chain price index was unchanged at 3.3%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">1Q &#39;06 (Prelim.)</th>
<th scope="col">1Q &#39;06 (Advance)</th>
<th scope="col">4Q &#39;05</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>5.3%</td>
<td>4.8%</td>
<td>1.7%</td>
<td>3.6%</td>
<td>3.5%</td>
<td>4.2%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>1.9%</td>
<td>-0.2%</td>
<td>-0.3%</td>
<td>0.3%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>5.5%</td>
<td>5.4%</td>
<td>-0.2%</td>
<td>3.8%</td>
<td>3.8%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign Trade Effect</td>
<td>-0.6%</td>
<td>-0.8%</td>
<td>-1.4%</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>5.7%</td>
<td>5.9%</td>
<td>1.1%</td>
<td>3.8%</td>
<td>3.9%</td>
<td>4.4%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>3.3%</td>
<td>3.3%</td>
<td>3.5%</td>
<td>3.2%</td>
<td>2.8%</td>
<td>2.6%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
U.S. Existing Home Sales Decline As Expected 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 25, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060525c.jpg" width="353">
 The National Association of Realtors reported that April total existing home sales declined 2.0% m/m to 6.760M following little change in March that was little revised. The gain was in line with Consensus expectations for 6.78M sales.
Sales of single-family homes fell 2.0% after a slight March dip. The data cover sales closed in the latest and previous months, and contrast to the new home sales data which count sales at the signing of a contract. 
Sales declines were widespread throughout the country. In the Northeast, sales reversed all of the prior month&#39;s gain with a 4.5% drop (-3.4% y/y). Sales in the Midwest more than reversed the prior month&#39;s gain and fell 3.4% (-4.1% y/y). In the South sales fell 0.8% (-2.4% y/y) for the third consecutive monthly drop and sales in the West were unchanged (-12.8% y/y).
The median price of an existing single-family home rose 2.5% (4.3% y/y). Prices are not seasonally adjusted.
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/research.nsf/pages/EHSPage?OpenDocument">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Home Sales</td>
<td>&nbsp;6,760</td>
<td>6,900</td>
<td>-5.7%</td>
<td>7,064</td>
<td>6,722</td>
<td>6,176</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family Home Sales</td>
<td>5,920</td>
<td>6,040</td>
<td>-5.6%</td>
<td>6,170</td>
<td>5,912</td>
<td>5,443</td>
</tr>
<tr class="odd">
<td class="firstcol">Single Family Median Home Price (000) </td>
<td>$222.7 </td>
<td>$217.2 </td>
<td>4.3% </td>
<td>$206.3</td>
<td>$182.8 </td>
<td>$169.1 </td>
</tr>
</tbody>
</table>
Initial Jobless Insurance Claims Back Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 25, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060525d.jpg" width="353">
Last week, initial unemployment insurance claims fell 40,000 to 329,000 due to the resolution of a partial government shutdown in Puerto Rico. The drop reversed nearly all of the prior week&#39;s little revised rise. Consensus expectations had been for 315,000 claims.
The four week moving average of initial claims rose to 337,000 (0.9% y/y).
Continuing claims for unemployment insurance increased 38,000 following a revised 1,000 rise during the prior week.
The insured rate of unemployment ticked up to 1.9% following two weeks at 1.8%.
Financial literacy, testimony of Federal Reserve Board Chairman Ben S. Bernanke, can be found <a href="http://www.federalreserve.gov/boarddocs/testimony/2006/20060523/default.htm"> 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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">05/20/06</th>
<th scope="col">05/13/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>329</td>
<td>369</td>
<td>0.6%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,420</td>
<td>-6.7%</td>
<td>2,663</td>
<td>2,923</td>
<td>3,530</td>
</tr>
</tbody>
</table>
New Zealand Trade Deficit Diminishes as Gains in Dairy Exports Help Offset Petroleum Imports 
by <a href="/comment/Stone.html">Carol Stone</a> May 25, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060525e.jpg" width="353">
 New Zealand&#39;s trade balance improved in April, according to data reported this morning in Wellington by Statistics New Zealand. Markets and analysts focus on rolling 12-month totals for New Zealand, and the trade deficit on that basis narrowed to NZ$6.90 billion for the year ended April from NZ$7.05 billion in March. The April figure was the smallest deficit this year although much wider than the NZ$4.30 billion of April 2005.
 As evident in both the graph and the table below, cumulative exports are little changed over the last year, but imports are up some 7.7%. Petroleum accounts for a big part of this: the value of those imports has increased by nearly 26%. The largest single import item is vehicles, and these purchases have actually decreased from a year ago, to NZ$5.15 billion from NZ$5.52 billion.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060525f.jpg" width="353">
 New Zealand is largely a service and agricultural economy. The trade balance improvement, which started in March, owes mainly to gains in dairy product exports: milk powder, butter and cheese. These had an aggregate total of NZ$5.48 billion in April compared with NZ$5.04 billion a year ago. Machinery, aluminum and beverage exports also rose.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060525g.jpg" width="353">
 These data, all from Statistics New Zealand, are contained in Haver&#39;s ANZ database, along with our Australia data offerings. This database includes only series that come from the countries&#39; own data sources. For some major countries that do not seasonally adjust certain data, Haver performs that procedure; these supplemental data are contained in the database G10. This latter collection includes key data summaries for 22 countries, the Euro-Zone and several regional groupings. For New Zealand, Haver&#39;s calculations show the trade deficit for the month of April alone was NZ$217 million, the smallest since NZ$173 million in January 2005. The reduction from March in the seasonally adjusted deficit from NZ$380 million consisted of a slim NZ$32 million decrease in exports and a more significant NZ$197 million drop in imports.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/ANZ/@A2/@A209/@A209.HTM">New Zealand, NZ$</a></th>
<th scope="col">Apr 2006</th>
<th scope="col">Mar 2006</th>
<th scope="col">Feb 2006</th>
<th scope="col">Apr 2005</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">12-Month Totals (Bil): Trade Balance</td>
<td>-6.90</td>
<td>-7.05</td>
<td>-7.32</td>
<td>-4.30</td>
<td>-6.46</td>
<td>-4.20</td>
<td>-3.38</td>
</tr>
<tr>
<td class="firstcol">Exports</td>
<td>31.33</td>
<td>31.10</td>
<td>30.71</td>
<td>31.20</td>
<td>30.82</td>
<td>30.71</td>
<td>28.40</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports</td>
<td>38.22</td>
<td>38.16</td>
<td>38.03</td>
<td>35.50</td>
<td>37.27</td>
<td>34.91</td>
<td>31.78</td>
</tr>
<tr>
<td class="firstcol">Individual Months, SA* (Mil): Trade Balance</td>
<td>-217</td>
<td>-380</td>
<td>-772</td>
<td>-368</td>
<td colspan="3">Monthly Averages</td>
</tr>
<tr class="odd">
<td class="firstcol">-539</td>
<td>-350</td>
<td>-282</td>
</tr>
<tr>
<td class="firstcol">Exports</td>
<td>2852</td>
<td>2886</td>
<td>2600</td>
<td>2643</td>
<td>2568</td>
<td>2560</td>
<td>2366</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports</td>
<td>3069</td>
<td>3266</td>
<td>3372</td>
<td>3011</td>
<td>3107</td>
<td>2910</td>
<td>2648</td>
</tr>
</tbody>
</table>


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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060524f.jpg" width="353">
Two widely followed industrial surveys in Europe showed a slight pause in their May results, following marked improvements in the prior couple of months. They also both indicated continuing firmness in export sectors, but some hesitation in domestic activity.
The UK&#39;s Confederation of British Industry (CBI) reports that the balance on total industry orders is -12 for May, down from April&#39;s -11, but obviously much better than anytime in the previous year. Within total orders, those for exports gained dramatically, reaching a neutral value for the first time since February 1996. Thus, the UK is seeing significant and persistent improvement in export demand, but this month&#39;s gain there, combined with the decline in the overall orders balance, shows that the domestic sector faltered. In total then, the progress in manufacturing remains tenuous.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060524g.jpg" width="353">
The German organization Ifo, which specializes in applied economic research, reports that in its latest survey, the overall Business Climate Index edged down to 105.6 this month from 105.9 in April (2000=100), corresponding to diffusion balance figures of +10.4% and +11.0%, respectively. As Louise Curley noted here a month ago, these are the best readings since the spring of 1991; manufacturing, despite a slight downtick this month, is experiencing the best readings in the total history of the survey.
Details are not yet available for the factors in the Ifo survey, but as shown in the table below, wholesale trade continues to gain, while retail trade has moderated. This suggests that as in the UK, domestic demand -- at least consumption -- remains fragile, while broader industry is still advancing. Businesses also report to Ifo that they are less confident about activity in the next six months; the business expectations index decreased 3 points from 13.4% in April to 10.4% in May, which also is the lowest since January. The business situation index, in contrast, continues to increase, showing that current activity is expanding at more and more firms.
We&#39;d guess that skepticism over the outlook is related to energy prices and to the recent surge in the euro. While the latter wouldn&#39;t correspond to assessments of better export performance, it also might foster more imports, to the detriment of local industry. So, despite the recent gains in both Germany and the UK, it&#39;s not hard to understand that business leaders remain cautious.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">% Balance, SA</th>
<th scope="col">May 2006</th>
<th scope="col">Apr 2006</th>
<th scope="col">Mar 2006</th>
<th scope="col">May 2005</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">UK CBI Total Orders</td>
<td>-12</td>
<td>-11</td>
<td>-16</td>
<td>-22</td>
<td>-21</td>
<td>-9</td>
<td>-29</td>
</tr>
<tr>
<td class="firstcol">Export Orders</td>
<td>0</td>
<td>-13</td>
<td>-12</td>
<td>-17</td>
<td>-21</td>
<td>-13</td>
<td>-33</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">German Ifo Business Climate </td>
<td>10.4</td>
<td>11.0</td>
<td>10.0</td>
<td>-15.7</td>
<td>-9.7</td>
<td>-9.9</td>
<td>-17.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>19.4</td>
<td>20.7</td>
<td>19.2</td>
<td>-5.6</td>
<td>1.2</td>
<td>4.4</td>
<td>-7.9</td>
</tr>
<tr>
<td class="firstcol">Wholesale Trade</td>
<td>12.4</td>
<td>10.8</td>
<td>9.7</td>
<td>-16.6</td>
<td>-9.9</td>
<td>-16.6</td>
<td>-25.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Trade</td>
<td>-5.7</td>
<td>-5.2</td>
<td>-1.8</td>
<td>-35.1</td>
<td>-28.0</td>
<td>-30.7</td>
<td>-22.5</td>
</tr>
<tr>
<td class="firstcol">Services*</td>
<td>22.5</td>
<td>23.5</td>
<td>21.0</td>
<td>4.0</td>
<td>8.1</td>
<td>6.5</td>
<td>-0.4</td>
</tr>
</tbody>
</table>
</body>
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Two widely followed industrial surveys in Europe showed a slight pause in their May results, following marked improvements in the prior couple of months. They also both indicated continuing firmness in export sectors, but some [...]

UK and German Business Confidence Gains Pause in May; Export Demand Favorable

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060524e.jpg" width="353">
The total number of mortgage applications fell a hard 6.0% last week and pulled the average level in May 1.0% below April.
Purchase applications cratered 7.1% w/w but in May remained 0.3% ahead of April which rose 1.1% versus March.
During the last ten years there has been a negative 80% correlation between the interest rate level on 30-year financing and purchase applications while during those years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance reversed about half of the prior week&#39;s rise with a 4.3% decline. The May level is 2.8% below the April average which fell 4.1% from March.
The effective interest rate on a conventional 30-year mortgage retraced all of the prior week&#39;s increase and fell back to 6.84% while the rate on 15-year financing fell to 6.52%. Rates have risen roughly 50 basis points since year end 2005. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective rate on a 30-Year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">05/19/06</th>
<th scope="col">05/12/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>552.6</td>
<td>588.0</td>
<td>-24.3%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>396.4</td>
<td>426.7</td>
<td>-9.1%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,480.5</td>
<td>1,546.8</td>
<td>-31.7%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
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The total number of mortgage applications fell a hard 6.0% last week and pulled the average level in May 1.0% below April. Purchase applications cratered 7.1% w/w but in May remained 0.3% ahead of April which rose 1.1% versus March. [...]

Mortgage Applications Recovered

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Nonfarm payrolls increased 177,000 (1.2% y/y) during April after rising 185,000 in March, revised from 228,000, and 102,000 in February, revised from 117,000. Expectations had been for a 130,000 rise in the Action Economics Forecast Survey. The latest figure left the three-month average change at 155,000 in April, down from 232,000 in January.

Average hourly earnings rose 0.2% during April after unrevised increases of 0.3% in March and 0.2% in February. Earnings growth of 3.8% y/y was below the 5.9% high in March 2022.

The unemployment rate, measured in the household survey, held m/m at an expected 4.2% in April, and compared to 4.1% in February and 4.0% in January. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, eased to 7.8% in April from 7.9% in March.

In the **establishment survey**, private-sector employment rose 167,000 (1.2% y/y) after a 170,000 March increase. Factory sector jobs edged 1,000 lower (-0.7% y/y) following a 3,000 gain. Construction sector employment increased 11,000 (1.7% y/y), after rising 7,000 in March.

Private service-producing sector employment increased 156,000 (1.4% y/y) in April after improving 161,000 in March. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 70,000 (3.4% y/y) last month following a 74,000 March increase. Leisure & hospitality employment rose 24,000 (1.3% y/y) after a 38,000 gain. Trade, transportation & utilities rose 32,000 (0.9% y/y) in April following a 25,000 March increase. Professional & business services employment rose 17,000 (-0.1% y/y) following a 3,000 rise while temporary help employment rose 3,600 (-3.9% y/y) following a 2,700 decline. Financial activities employment improved 14,000 (1.2% y/y) after a 6,000 gain. The number of information sector jobs held steady (-0.4% y/y) last month after falling 2,000 in March.

Government sector payrolls rose 10,000 (1.3% y/y) last month after increasing 15,000 in March. The number of local government jobs increased 13,000 (1.4% y/y) following a 17,000 gain. State government employment rose 6,000 (1.8% y/y) following a 2,000 March increase but federal government payrolls fell 9,000 (-0.3% y/y), the third consecutive monthly decline.

Private-sector average hourly earnings rose 0.2% (3.8% y/y) in April after increasing 0.3% in March. Earnings in the goods-producing sector eased 0.1% (+4.0% y/y) following a 0.6% gain. Earnings in construction rose 0.3% (3.6% y/y), after a 0.2% rise but factory sector earnings declined 0.3% (+4.3% y/y) after surging 0.8% in March. In the private services-sector, earnings rose 0.2% (3.7% y/y) in April for the third straight month. Information sector pay increased 1.0% (5.2% y/y) last month after easing 0.1%, and financial activities earnings rose 0.5% (4.3% y/y) for the second straight month. Trade, transportation & utilities sector pay increased 0.4% (3.4% y/y) after 0.6%. Professional & business sector earnings increased 0.1% (4.4% y/y) after 0.2% in March. Leisure & hospitality earnings held steady (+3.8% y/y) following a 0.6% March increase.

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The length of the average workweek held steady at 34.3 hours in April. The workweek in the goods-producing sector eased to 39.8 hours from 40.0 hours. The construction sector average workweek eased to 39.0 hours from 39.3 hours while the factory sector workweek moved lower to 40.0 hours from 40.2. The average workweek in the private service sector held at 33.2 hours. Professional & business service hours fell to 36.3 hours from 36.4 while trade, transportation & utilities hours improved to 34.3 from 34.0 hours. Private education hours rose slightly to 32.8, but leisure & hospitality held steady at 25.5 hours.

In the **household survey**, the unemployment rate held at 4.2% in April as employment rose 436,000 and the size of the labor force increased 518,000. The labor force participation rate edged up to 62.6% last month from 62.5% in March. It remained below the high of 63.3% early in 2020. The rate for teenagers declined to 36.9%. For workers aged 20-24, the rate held steady at 72.1%, up from 71.8% six months earlier. For workers aged 25-54 the rate rose to 83.6%, a five-month high. For individuals 55 and over, the rate improved to 38.4% in April.

The employment/population ratio for all workers in April rose to 60.0%. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- Job growth spreads across most sectors.
- Earnings growth trend decelerates.
- Jobless rate holds steady.

U.S. Job Growth Is Firm in April but March Gain Is Lessened

Winnie Tapasanun

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Total factory orders rose a slightly less-than-expected 4.3% m/m in March after rises of 0.5% in February and 1.8% in January, data from the U.S. Census Bureau showed. A 4.5% m/m March increase had been expected in the Action Economics Forecast Survey. The March reading was the third successive monthly rise and the largest since July 2024. The year-on-year rate accelerated to 6.0% in March, the highest since November 2022, from 2.3% in February. Notably, orders for nondefense aircraft & parts soared 139.0% in March following a 7.4% drop in February and a 92.9% surge in January. Factory orders excluding defense rose 4.8% (5.9% y/y), the largest of three straight m/m/ rises, after a 0.4% February increase. Factory orders excluding the transportation sector fell 0.2% (+1.1% y/y), the first m/m fall since August, after rising 0.3% in February, January and December.

Durable goods orders jumped 9.2% (11.9% y/y) in March, the third consecutive m/m gain and the biggest since July 2024, on top of a 0.8% increase in February (matching +9.2% m/m in the advance report on April 24). The March jump reflected m/m orders increases of 27.1% (the largest m/m surge since July 2024; 31.2% y/y) in transportation equipment, 1.1% (4.9% y/y) in primary metals, 0.5% (-0.4% y/y) in furniture & related products, 0.1% (2.5% y/y) in fabricated metal products, and 0.1% (0.9% y/y) in machinery. To the downside, durable goods orders for computers & electronic products (-1.3%; +2.7% y/y) and electrical equipment, appliances & components (-1.0%; +4.2% y/y) declined m/m in March.

Nondurable goods orders, which equal nondurable goods shipments, fell 0.3% (+0.4% y/y) in March, the first m/m fall since September, after a 0.1% uptick in February. The March fall reflected m/m drops of 2.4% (-9.3% y/y) in petroleum & coal products and 0.9% (-1.2% y/y) in apparel. To the upside, the following nondurable goods shipments rose m/m in March: leather & allied products (1.5%; 8.6% y/y), beverage & tobacco products (0.7%; 5.8% y/y), paper products (0.6%; 2.3% y/y), printing (0.3%; 3.8% y/y), textile mills (0.3%; 0.8% y/y), chemical products (0.2%; 5.4% y/y), plastics & rubber products (0.2%; 0.4% y/y), food products (0.1%; 1.8% y/y), and textile products (0.1%; 2.1% y/y).

Total shipments slipped 0.1% (+2.0% y/y) in March, the first m/m easing since October, after a 0.7% increase in February. Excluding transportation, shipments were virtually unchanged m/m (+1.1% y/y) in March following six straight m/m gains. Shipments of durable goods industries inched up 0.1% (3.8% y/y) in March, the smallest of four consecutive m/m increases, after a 1.3% advance in February. This reflected m/m durable goods shipments rises of 1.2% (5.6% y/y) in primary metals, 0.9% (0.1% y/y) in furniture & related products, 0.8% (-0.2% y/y) in nonmetallic mineral products, 0.4% (0.0% y/y) in machinery, 0.3% (1.8% y/y) in fabricated metal products, 0.2% (4.5% y/y) in computers & electronic products, 0.2% (-2.1% y/y) in wood products, and 0.1% (3.0% y/y) in electrical equipment, appliances & components. In contrast, durable goods shipments for transportation equipment (-0.5%; +7.3% y/y) and miscellaneous durable goods (-0.1%; +2.9% y/y) fell m/m in March following three successive m/m increases.

Unfilled orders rose 2.0% (2.3% y/y) in March, up for the eighth month in nine, after a 0.1% uptick in February. Excluding transportation, unfilled orders dipped 0.1% (+0.7% y/y) in March, the first m/m easing since May 2024, after holding steady in February. Backlogs of durable goods rose 2.0% (2.3% y/y) in March, reflecting m/m rises of 3.1% (3.1% y/y) in transportation equipment and 0.2% (2.4% y/y) in electrical equipment, appliances & components.

Inventories edged up 0.1% (0.9% y/y) in March, the fifth straight m/m increase, after rising at the same pace in the prior two months. Excluding transportation, inventories were up 0.1% (0.5% y/y) in March, the fifth consecutive m/m rise. Durable goods inventories ticked up 0.1% (1.0% y/y) in March after holding steady in February and January; nondurable goods inventories edged up 0.1% (0.8% y/y), the fifth successive m/m increase.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- March manufacturers’ new orders +4.3% m/m; +6.0% y/y, highest since Nov. ’22.
- Durable goods orders (+9.2%) jump m/m, while nondurable goods orders (-0.3%) and shipments (-0.1%) decline m/m.
- Transportation equipt. orders +27.1% m/m, w/ a 139.0% m/m surge in nondefense aircraft & parts orders.
- Unfilled orders +2.0%, the eighth m/m rise in nine months.
- Inventories +0.1%, the fifth consecutive m/m increase.

U.S. Factory Orders Increase for the Third Straight Month in March

Robert Brusca

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The global manufacturing data showed broad weakening in April as conditions weakened across more than half of the contributing early reporters in the S&P survey of manufacturing. Of the 18 early reporting countries, more than half of them showed deceleration over six months and 12 months. Over three months, only 8 of 18 showed deterioration and that's about as good as it got in this report. In the current month, month-to-month changes showed more than half of the survey contributors showing weaker results than the month before. In the S&P framework, manufacturing improved month-to-month for the U.S.; however, looking at sequential averages for the U.S., U.K., European monetary union, Canada, and Japan, we see a steady weakening and results over 12 months, over six months versus 12 months, and for three months versus 6 months. The highly developed countries are not doing particularly well.

Asian economies are also showing slight deterioration but doing a little better than the developed countries in general.

Only five of the 18 reporting countries have queue percentile standings in their data back to January 2021 that are above their medians. Readings at or above the 50% mark are at or above the median standing. Canada is showing the weakest manufacturing result on record over this span, in terms of its queue percentile standing which is at 0 in the current month.

I showed the graphic for the Baltic dry goods index in this report rather than statistics on the manufacturing PMI data because the Baltic data, which reflect shipping volume for dry goods - that is excluding things like oil - is weak but it's only in the neighborhood where it's been for some time. There has been a great deal of talk about how tariffs may have impacted trade flows, expected trade flows, shipping, shipping rates, and the like. However, according to the Baltic dry goods index, there isn't much evidence that this is occurring right now and affecting the current data. That may still lie ahead but for now it's not baked in the cake.

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Globally Manufacturing Weakens

Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

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**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

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**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

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**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

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**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

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**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

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Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

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Charts of the Week: Tariff Truce, Tenuous Trust

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U.S. light vehicle sales dropped 2.9% (+6.5% y/y) to 17.31 million units (SAAR) in April after surging 10.8% to 17.82 million units in March. The retreat in April vehicle sales accompanied a 1.7% y/y rise in real disposable income through March, which compared to 2.0% growth last year.

Sales declines were broad-based last month. Light truck sales fell 1.3% (+9.9% y/y) during April to 14.34 million units (SAAR), after rising 12.4% in March. Purchases of domestically-made light trucks declined 1.2% (+11.9% y/y) to 11.02 million units, after jumping 12.5% in March. Sales of imported light trucks fell 1.8% (+4.4% y/y) to 3.32 million units, following an 11.6% March surge.

Trucks’ record 82.8% share of the light vehicle market last month compared to 81.5% in March and 80.3% in April of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales also declined last month, down 9.5% (-7.5%) to 2.97 million units (SAAR) following a 3.5% March rise. The decline reversed all of the increase over the prior two months. Purchases of domestically-produced cars fell 9.8% (-4.3% y/y) last month to 2.22 million units, after rising 3.8% in March. Sales of imported autos declined 9.6% (-15.7% y/y) to 0.75 million units, following a 2.5% March increase.

Imports' 23.5% share of the U.S. light vehicle market was little changed from 23.6% in March and compared to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market held steady at 25.3% last month and compared to 27.7% in April of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market eased to 23.2% last month after falling to 23.3% in March.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the I**NDUSTRY** database.

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- Light truck sales pull back, while auto sales tumble.
- Both domestic and imported sales decline.
- Imports' market share slips further.

Economy in Brief

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Mortgage Applications Recovered