Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060517f.jpg" width="353">
Last week, the total number of mortgage applications recovered most of the prior week&#39;s decline with a 4.6% gain. The rise lifted the average level in May 0.3% above the April average.
Purchase applications rose 2.4% following a 3.9% w/w decline the prior week. As a result, purchase applications in May are 2.3% 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 recovered about all of the prior week&#39;s decline with an 8.4% rise. Nevertheless, the May level is 2.7% below the April average which fell 4.1% from March.
The effective interest rate on a conventional 30-year mortgage jumped to 6.90% from 6.84% the prior week and the rate on 15-year financing increased to 6.55%. 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">05/12/06</th>
<th scope="col">05/05/06</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>588.0</td>
<td>562.1</td>
<td>-15.9%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>426.7</td>
<td>416.5</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>1,546.8</td>
<td>1,427.4</td>
<td>-24.1%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
</body>
</html>

Last week, the total number of mortgage applications recovered most of the prior week's decline with a 4.6% gain. The rise lifted the average level in May 0.3% above the April average. Purchase applications rose 2.4% following a 3.9% [...]

Mortgage Applications Recovered

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060517d.jpg" width="353">
The April consumer price index (CPI-U) rose 0.6%, the most for any month since a 0.7% rise in January and matched Consensus expectations. For the second month, however, a 0.3% rise in prices less food &amp; energy was firmer than expected.
An 8.8% m/m jump in gasoline prices (21.5% y/y) caused energy prices to spike 3.9% and in May gas prices have moved another 6.7% higher to an average $2.93 per gallon. Fuel oil prices also were strong last month and posted a 4.0% (18.6% y/y) gain while natural gas &amp; electricity prices fell 1.5% (+14.1% y/y) for the fourth decline in the last five months.
A 0.3% increase last month in core services prices provided additional lift to last month&#39;s rise in the &quot;core&quot; CPI. That reflected a 0.3% (2.9% y/y) rise in shelter prices as well as a 0.5% (6.0% y/y) gain in education expenses. Medical care services prices rose 0.3% (4.1% y/y), the smallest rise in three months and public transportation prices increased for the first month in the last three, by 0.2% (4.8% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060517e.jpg" width="353">
Prices for core goods rose just 0.1% (0.4% y/y), further suggesting that the pass-through of higher energy prices has been limited. Apparel prices did jump 0.6% (-0.2% y/y) following a 1.0% March spike but window &amp; floor coverings prices fell 1.6% (-4.5% y/y) and household appliance prices rose a modest 0.1% (1.3% y/y). New &amp; used motor vehicle prices also rose a slim 0.1% (0.3% y/y) and tobacco prices fell 0.2% +4.2% y/y). Medical care commodity prices rose 0.4% (4.3% y/y).
Food prices were unchanged, an increase held back by a 0.7% (-0.5% y/y) decline in dairy products and another 0.1% decline (+2.6% y/y) drop in fruits &amp; vegetables prices. Meat, fish &amp; poultry prices rose 0.2% (0.5% y/y).
The chained CPI, which adjusts for shifts in the mix of consumer purchases, increased 0.6% and less food &amp; energy prices rose 0.3%, half the prior month&#39;s gain.
Gas-Price Inflation from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20060601/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/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</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">Total&nbsp;</td>
<td>0.6%</td>
<td>0.4%</td>
<td>3.6%</td>
<td>3.4%</td>
<td>2.7%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.3%</td>
<td>0.3%</td>
<td>2.3%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.1%</td>
<td>0.3%</td>
<td>0.4%</td>
<td>0.5%</td>
<td>-0.9%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.0%</td>
<td>2.8%</td>
<td>2.8%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>3.9%</td>
<td>1.3%</td>
<td>17.9%</td>
<td>16.9%</td>
<td>10.8%</td>
<td>12.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.0%</td>
<td>0.1%</td>
<td>1.8%</td>
<td>2.4%</td>
<td>3.4%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a> </td>
<td>0.6%</td>
<td>0.5%</td>
<td>3.1%</td>
<td>2.9%</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.3%</td>
<td>0.6%</td>
<td>2.1%</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

The April consumer price index (CPI-U) rose 0.6%, the most for any month since a 0.7% rise in January and matched Consensus expectations. For the second month, however, a 0.3% rise in prices less food & energy was firmer than [...]

CPI Up 0.6% Due To Energy & Services

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060517d.jpg" width="353">
The April consumer price index (CPI-U) rose 0.6%, the most for any month since a 0.7% rise in January and matched Consensus expectations. For the second month, however, a 0.3% rise in prices less food &amp; energy was firmer than expected.
An 8.8% m/m jump in gasoline prices (21.5% y/y) caused energy prices to spike 3.9% and in May gas prices have moved another 6.7% higher to an average $2.93 per gallon. Fuel oil prices also were strong last month and posted a 4.0% (18.6% y/y) gain while natural gas &amp; electricity prices fell 1.5% (+14.1% y/y) for the fourth decline in the last five months.
A 0.3% increase last month in core services prices provided additional lift to last month&#39;s rise in the &quot;core&quot; CPI. That reflected a 0.3% (2.9% y/y) rise in shelter prices as well as a 0.5% (6.0% y/y) gain in education expenses. Medical care services prices rose 0.3% (4.1% y/y), the smallest rise in three months and public transportation prices increased for the first month in the last three, by 0.2% (4.8% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060517e.jpg" width="353">
Prices for core goods rose just 0.1% (0.4% y/y), further suggesting that the pass-through of higher energy prices has been limited. Apparel prices did jump 0.6% (-0.2% y/y) following a 1.0% March spike but window &amp; floor coverings prices fell 1.6% (-4.5% y/y) and household appliance prices rose a modest 0.1% (1.3% y/y). New &amp; used motor vehicle prices also rose a slim 0.1% (0.3% y/y) and tobacco prices fell 0.2% +4.2% y/y). Medical care commodity prices rose 0.4% (4.3% y/y).
Food prices were unchanged, an increase held back by a 0.7% (-0.5% y/y) decline in dairy products and another 0.1% decline (+2.6% y/y) drop in fruits &amp; vegetables prices. Meat, fish &amp; poultry prices rose 0.2% (0.5% y/y).
The chained CPI, which adjusts for shifts in the mix of consumer purchases, increased 0.6% and less food &amp; energy prices rose 0.3%, half the prior month&#39;s gain.
Gas-Price Inflation from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20060601/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/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</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">Total&nbsp;</td>
<td>0.6%</td>
<td>0.4%</td>
<td>3.6%</td>
<td>3.4%</td>
<td>2.7%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.3%</td>
<td>0.3%</td>
<td>2.3%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.1%</td>
<td>0.3%</td>
<td>0.4%</td>
<td>0.5%</td>
<td>-0.9%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.0%</td>
<td>2.8%</td>
<td>2.8%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>3.9%</td>
<td>1.3%</td>
<td>17.9%</td>
<td>16.9%</td>
<td>10.8%</td>
<td>12.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.0%</td>
<td>0.1%</td>
<td>1.8%</td>
<td>2.4%</td>
<td>3.4%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a> </td>
<td>0.6%</td>
<td>0.5%</td>
<td>3.1%</td>
<td>2.9%</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.3%</td>
<td>0.6%</td>
<td>2.1%</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.1%</td>
</tr>
</tbody>
</table>
Mortgage Applications Recovered 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 17, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060517f.jpg" width="353">
Last week, the total number of mortgage applications recovered most of the prior week&#39;s decline with a 4.6% gain. The rise lifted the average level in May 0.3% above the April average.
Purchase applications rose 2.4% following a 3.9% w/w decline the prior week. As a result, purchase applications in May are 2.3% 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 recovered about all of the prior week&#39;s decline with an 8.4% rise. Nevertheless, the May level is 2.7% below the April average which fell 4.1% from March.
The effective interest rate on a conventional 30-year mortgage jumped to 6.90% from 6.84% the prior week and the rate on 15-year financing increased to 6.55%. 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">05/12/06</th>
<th scope="col">05/05/06</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>588.0</td>
<td>562.1</td>
<td>-15.9%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>426.7</td>
<td>416.5</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>1,546.8</td>
<td>1,427.4</td>
<td>-24.1%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
Chain Store Sales Unchanged. Gasoline Prices Jumped 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 17, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060517c.jpg" width="353">
Chain store sales were unchanged last week, according to the International Council of Shopping Centers (ICSC)-UBS survey, after a modest 0.4% decline to open the month. So far, sales in May are 0.3% ahead of the April average which rose 1.6% from March.
During the last ten years there has been a 47% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060517b.jpg" width="353">
Retail gasoline prices rose four cents last week to $2.95 per gallon, however, yesterday spot market gasoline prices dropped again and the NY price is off nearly a dime from last week.
The latest Short-Term Energy Outlook from the US Energy Information Administration is available <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html"> 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/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">05/13/06</th>
<th scope="col">05/06/06</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">Total Weekly Chain Store Sales</td>
<td>475.7</td>
<td>475.9</td>
<td>3.1%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
Firm Q1 Growth in Singapore Prompts Hike in "Official" 2006 Forecast; Net Exports, Business Equipment Investment Lead 
by <a href="/comment/Stone.html">Carol Stone</a> May 17, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060517a.jpg" width="353">
Singapore&#39;s economy turned in a much better than expected performance in Q1, with its GDP up 6.8% annualized from Q4 and 10.6% from a year ago. Forecasts had called for a greater slowdown after the strong close to 2005 in Q4, when GDP was up 12.5% from Q3. The good gain prompted the Singapore government to raise its official forecast for the entire year from 4%-6% projected in February to 5%-7%.
On a year-over-year basis, both goods- and service-producing sectors participated in the good growth. Goods were led by manufacturing, which expanded by 20%. Press reports cited strength in electronic products, a sizable portion of manufacturing in Singapore. Also, among the industry &quot;cluster&quot; data compiled by the Singapore Economic Development Board, biomedical production and transport engineering were also very strong.
Value added in service industries gained 8.1% year-on-year, its best showing since Q2 2004. Wholesale and retail trade was a leader here, reflecting, according to the Department of Statistics, the movement of re-exports, which expanded 39.5% from a year ago in current prices.
Net exports were a leading source of demand, accounting for nearly 80% of the yearly GDP growth. Among domestic sectors, demand for machinery and equipment increased 19% from a year ago.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060517g.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060517h.jpg" width="353">

<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/EMERGEPR/@P4/@P42/@P42.HTM">Singapore</a></th>
<th scope="col">Q1 2006</th>
<th scope="col">Q4 2005</th>
<th scope="col">Q3 2005</th>
<th scope="col">Q2 2005</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP Qtr/Qtr</td>
<td>6.8</td>
<td>12.5</td>
<td>9.6</td>
<td>14.6</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Year/Year</td>
<td>10.6</td>
<td>8.6</td>
<td>7.6</td>
<td>5.7</td>
<td>6.4</td>
<td>9.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods Producing (Yr/Yr)</td>
<td>16.3</td>
<td>12.0</td>
<td>10.7</td>
<td>4.9</td>
<td>7.7</td>
<td>8.6</td>
</tr>
<tr>
<td class="firstcol">Service Producing (Yr/Yr)</td>
<td>8.1</td>
<td>7.2</td>
<td>6.8</td>
<td>5.8</td>
<td>6.0</td>
<td>7.1</td>
</tr>
</tbody>
</table>


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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516g.jpg" width="353">
German investors and analysts, who report to the ZEW Center for European Economic Research, have become less optimistic regarding the economic outlook over the next six months. The excess of those expecting better conditions over those expecting worsening conditions dropped sharply from 62.7% in April to 50.0% in May. It is, however, still above the historical average of 35.3%. The consensus had expected a more modest drop. There has been a steady erosion of confidence since January when the percent balance reached 71.1%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516h.jpg" width="353">
At the same time, the excess of those German investors and analysts who rate current conditions as &quot;good&quot; over those who rate them &quot;bad&quot; rose from 2.9% in April to 8.7% in May. These two ratings were the first positive ratings since April 2001. They may have reflected the improvement in the economy as measured by the 0.04% increase in GDP in the first quarter of this year, up from 0.01% in the fourth quarter of 2005. From the beginning of the this year until April, the price of a barrel of oil had remained below $66 and the euro had ranged in a fairly narrow band between $1.19 and $1.23. Investor expectations and appraisals of current conditions are shown in the first chart.
Since then, however, the price of oil has spiked up to more than $74 a barrel and the euro has climbed to $1.29. (See the second chart.) The threat to German exports from a higher euro and the impact of higher oil prices on consumer demand have, no doubt, made investors and analysts more cautious.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/@D8/@D8.HTM">Germany: ZEW</a></th>
<th scope="col">May 06</th>
<th scope="col">Apr 06</th>
<th scope="col">May 05</th>
<th scope="col">M/M dif </th>
<th scope="col">Y/Y dif</th>
<th scope="col">2005</th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Expectations &nbsp;&nbsp;</td>
<td>50.0</td>
<td>62.7</td>
<td>13.9</td>
<td>-12.7</td>
<td>36.1</td>
<td>34.8</td>
<td>44.6</td>
<td>38.4</td>
</tr>
<tr>
<td class="firstcol">Current conditions</td>
<td>8.7</td>
<td>2.9</td>
<td>-69.3</td>
<td>5.8</td>
<td>78.0</td>
<td>-61.8</td>
<td>-67.7</td>
<td>-92.6</td>
</tr>
</tbody>
</table>
</body>
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German investors and analysts, who report to the ZEW Center for European Economic Research, have become less optimistic regarding the economic outlook over the next six months. The excess of those expecting better conditions over [...]

A Stronger Euro and Rising Oil Prices Shake German Investors' Confidence

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060517a.jpg" width="353">
Chain store sales remained unchanged last week after a 0.4% slip to open the month, according to the International Council of Shopping Centers (ICSC)-UBS survey. So far in May sales are 0.3% above the April average which rose 1.6% from March.
During the last ten years there has been a 47% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The leading indicator of chain store sales fell 0.6% (-2.2% y/y) to begin May and has been declining steadily since late March.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
Retail gasoline prices rose four cents last week to $2.95 per gallon after averaging $2.74 during April.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">05/13/06</th>
<th scope="col">05/06/06</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">Total Weekly Chain Store Sales</td>
<td>475.7</td>
<td>475.9</td>
<td>4.2%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


</html>

Chain store sales remained unchanged last week after a 0.4% slip to open the month, according to the International Council of Shopping Centers (ICSC)-UBS survey. So far in May sales are 0.3% above the April average which rose 1.6% [...]

Chain Store Sales Tread Water; Gasoline Prices Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516e.jpg" width="353">
Total industrial output jumped 0.8% last month following two months of 0.5% gain. Consensus expectations had been for another 0.5% increase.
Factory sector output surged 0.8% (5.5% y/y) after an unrevised 0.5% March increase. That increase matched a 0.8% January spike and lifted the y/y gain in factory output to its highest since in over a year.
A 1.7% (12.4% y/y) rise in business equipment output provided umph to last month&#39;s gain in output as output of computers, communication equipment and semiconductors jumped 2.4% (21.7% y/y). Factory output excluding high tech, however, also was strong and rose 0.7% (4.6% y/y).
Output of nondurable consumer goods rose 0.4% (2.1% y/y) as appliance &amp; furniture output rose 0.2% (4.0% y/y). Automotive products&#39; production fell 1.1% (+4.2% y/y). Excluding motor vehicles and high tech factory output increased 0.9% (4.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516f.jpg" width="353">
Output of primary metals jumped 1.2% (6.7% y/y) following two months of decline and fabricated metals output rose 0.5% (6.1% y/y).
Total capacity utilization surged to 81.9%, the highest level since July of 2000. Factory sector utilization rose to 80.5%, also its highest level since 2000. During the last twenty years there has been a 36% correlation between the level of factory sector utilization and the y/y change in &quot;core&quot; producer prices. There also has been a 37% correlation with the change in core consumer prices.
Industrial capacity grew 0.1% (1.9% y/y) and the annual rate of growth is up from 1.3% last year and 0.3% during 2004. Factor sector capacity grew 0.2% (2.3% y/y) compared to 1.6% growth last year and 0.2% growth during 2004. Much of that growth has been in the high tech sector. Excluding high tech, factory sector capacity is up 1.0% y/y.
The 1990s Acceleration in Labor Productivity: Causes and Measurement from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/06/05/Anderson.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</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">Total Industrial Production</td>
<td>0.8%</td>
<td>0.6%</td>
<td>4.8%</td>
<td>3.2%</td>
<td>4.1%</td>
<td>0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.8%</td>
<td>0.5%</td>
<td>5.5%</td>
<td>3.9%</td>
<td>4.8%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Consumer Goods</td>
<td>0.2%</td>
<td>0.8%</td>
<td>2.7%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Business Equipment</td>
<td>1.7%</td>
<td>0.7%</td>
<td>12.4%</td>
<td>9.1%</td>
<td>9.3%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>81.9%</td>
<td>81.4%</td>
<td>79.7% (4/05)</td>
<td>80.1%</td>
<td>78.6%</td>
<td>75.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

Total industrial output jumped 0.8% last month following two months of 0.5% gain. Consensus expectations had been for another 0.5% increase. Factory sector output surged 0.8% (5.5% y/y) after an unrevised 0.5% March increase. That [...]

Industrial Production Jumped

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516c.jpg" width="353">
The April finished goods producer price index jumped 0.9%. That was the largest gain since a 1.4% spike last September but it about matched Consensus expectations had been for a 0.8% rise.
Less food &amp; energy the (core) PPI increased 0.1% last month and fell short of expectations for a 0.2% rise. Durable consumer goods prices were unchanged (0.3% y/y) following two months of 0.1% increase and core consumer nondurable prices rose 0.1% (2.6% y/y) following three months of stronger gain. Apparel prices continued lower. Prices of all finished consumer goods less food &amp; energy rose 0.1% (1.6% y/y).
Capital equipment prices rose 0.2% (1.4% y/y) after two months of 0.1% gains.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516d.jpg" width="353">
Finished energy prices jumped 4.0% (17.8% y/y) as gasoline prices increased 12.3% (33.9% y/y) and home heating oil rose 13.7% (27.6% y/y). A 3.0% decline in natural gas prices (+12.4% y/y) was the third consecutive monthly drop.
Intermediate goods prices jumped 0.9% on higher energy prices which rose 2.8% (18.4% y/y). Core intermediate prices increased 0.4%.
Crude goods prices regained about half of the prior month&#39;s decline with a 1.2% increase. Energy prices rose 1.3% higher crude oil prices were offset by lower prices for natural gas. Core crude prices, however, were notably strong and posted a 4.7% gain and are up 8.4% year to date. Copper base scrap (59.1% y/y), aluminum scrap (28.7% y/y) and iron &amp; steel scrap (8.7% y/y) all continued strong. During the last thirty years &quot;core&quot; crude prices have been a fair indicator of industrial sector activity with a 48% correlation between the six month change in core crude prices and the change in factory sector industrial production.

<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/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</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">Finished Goods</td>
<td>0.9%</td>
<td>0.5%</td>
<td>4.0%</td>
<td>4.9%</td>
<td>3.6%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>2.4%</td>
<td>1.5%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.9%</td>
<td>-0.1%</td>
<td>7.3%</td>
<td>8.0%</td>
<td>6.6%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.4%</td>
<td>0.1%</td>
<td>4.9%</td>
<td>5.5%</td>
<td>5.7%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>1.2%</td>
<td>-2.7%</td>
<td>3.3%</td>
<td>14.6%</td>
<td>17.5%</td>
<td>25.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>4.7%</td>
<td>0.8%</td>
<td>16.0%</td>
<td>4.8%</td>
<td>26.5%</td>
<td>12.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

The April finished goods producer price index jumped 0.9%. That was the largest gain since a 1.4% spike last September but it about matched Consensus expectations had been for a 0.8% rise. Less food & energy the (core) PPI increased [...]

PPI Up Expected 0.9%, Core Tame

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516b.jpg" width="353">
During April, housing starts fell 7.4% m/m to 1.849M units following the 6.4% March decline that was revised slightly shallower. Again, the decline by far exceeded Consensus expectations for a modest drop to 1.95M starts and reduced the number of starts to the lowest level since November 2004.
Since the peak this past January, total starts have fallen 18.4%.
Single-family starts dropped 5.6% to 1.535M units and added to the 10.3% March decline. The latest level is down 15.4% from the January peak and is the lowest since November 2004.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516a.jpg" width="353">
By region, single family housing starts were quite mixed last month. Starts in the South fell 15.9% m/m to a level that was off 19.9% from the January peak. In the West starts fell a moderate 3.6% but that added to the 19.1% slide in March and pulled the latest level down 22.0% from the February peak. In the Midwest single family starts moved in the opposite direction and reversed the prior month&#39;s decline with a 21.4% (+3.2% y/y) gain. In the Northeast starts also recovered the prior month&#39;s down draft and rose 6.7% though starts were still 17.7% off the January peak.
Multi family starts reversed the sharp March increase with a 15.1% decline to the lowest level since March of last years.
Building permits dropped by 5.4% for the third consecutive monthly decline and are off 10.7% from the peak last September.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</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">Total</td>
<td>1,849</td>
<td>1,996</td>
<td>-11.1%</td>
<td>2,073</td>
<td>1,950</td>
<td>1,854</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,535</td>
<td>1,626</td>
<td>-8.6%</td>
<td>1,719</td>
<td>1,604</td>
<td>1,505</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>314</td>
<td>370</td>
<td>-21.3%</td>
<td>354</td>
<td>345</td>
<td>349</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,984</td>
<td>2,097</td>
<td>-8.0%</td>
<td>2,144</td>
<td>2,057</td>
<td>1,8 88</td>
</tr>
</tbody>
</table>
</body>
</html>

During April, housing starts fell 7.4% m/m to 1.849M units following the 6.4% March decline that was revised slightly shallower. Again, the decline by far exceeded Consensus expectations for a modest drop to 1.95M starts and reduced [...]

Housing Starts Lowest Since 2004

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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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.

250501Z1.jpg

**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.

250501Z2.jpg

**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.

250501Z3.jpg

**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.

U.S. Light Vehicle Sales Fall in April

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The ISM Purchasing Managers Index of activity in the manufacturing sector slipped to 48.7 in April from 49.0 during March and 50.3 in February. It remained up from a low of 46.9 in October of last year. A level of 50 is the break-even point between a rising and falling level of activity. The Action Economics Forecast Survey expected a reading of 47.8 for April. The series reached a monthly high of 63.8 in March 2021.

Two of the five component indexes weakened last month. The April production index fell to 44.0 after declining to 48.3 in March. It was the lowest level since May 2020. A lessened 19.8% (NSA) of respondents reported higher production while an increased 24.2% reported lower output. The inventories index declined to 50.8 last month from 53.4 in March. The index remained up from a low of 43.2 in October of last year.

Moving higher, the new orders index rose to 47.2 last month from 45.2 in March. The index remained below a January high of 55.1. Twenty-eight percent (NSA) of respondents reported higher new orders while 26.7% reported a decline. The employment index rose to 46.5 from 44.7 in March. It was below a high of 50.3 in January. A greater 13.1% (NSA) of respondents reported more hiring while a fewer 16.2% indicated less. The supplier delivery index rose to 55.2 from 53.5 in March. A higher 16.6% (NSA) of respondents reported slower delivery speeds while a fairly steady 6.2% reported a quickening.

The prices index, which is not part of the composite series, edged up to 69.8 (NSA) in April after increasing to 69.4 in March. It was the highest level since June 2022, up from a December 2022 low of 39.4. An increased 49.2% of respondents reported higher prices last month, up from 12.2% in November, while a higher 9.7% reported lower prices.

In other series, the export orders index plummeted to 43.1 in April from 49.6 during March. It was down from the high of 52.4 in January. The imports index fell sharply to 47.1 from 50.1 in March. It was the lowest reading since December 2023. The order backlog index dropped to 43.7 (NSA) last month from 44.5 in March. It was the lowest level in five months.

The ISM figures are based on responses from over 400 purchasing executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These indexes are diffusion indexes where a reading above 50 indicates expansion and a reading below 50 points to contraction. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- Declines in last three months follow earlier improvement.
- Production & inventories account for m/m shortfall.
- Prices index edges up to another three-year high.

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

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The value of construction put in place unexpectedly fell 0.5% m/m in March after rises of 0.6% in February (+0.7% initially) and 0.1% in January (-0.5% previously), data from the U.S. Census Bureau showed. The March reading was the first m/m fall following five straight m/m gains. A 0.3% m/m March rise had been expected in the Action Economics Forecast Survey. The year-on-year rate of increase decelerated to 2.8% in March, the lowest since May 2019, after registering at 3.4% in February and January. The latest y/y figure was lower than 8.7% in March 2024; thus, having remained below its recent high of 9.8% in January 2024 and a peak of 18.6% in April 2022.

Private construction slid 0.6% (+2.3% y/y) in March, down for the first time since September, following increases of 0.7% in February (+0.9% initially) and 0.1% in January (-0.7% previously). Residential private construction fell 0.4% (+2.8% y/y) in March, the first m/m fall in six months, after an unrevised 1.3% gain in February. Home improvement building dropped 1.2% (+13.4% y/y), the first m/m decline since December, following a 2.3% February gain; it was 41.1% of the residential private construction. Single-family building edged up 0.1% (-0.8% y/y), the smallest of seven consecutive m/m increases, after a 0.8% February rise; it was 46.6% of the residential private construction. Meanwhile, multi-family building was essentially unchanged m/m (-12.1% y/y) in March following 15 straight m/m decreases; it was 12.3% of the residential private construction.

Nonresidential private construction fell 0.8% (+1.6% y/y) in March after a 0.1% increase in February (+0.4% initially) and a 0.1% easing in January (-0.2% previously). The March fall reflected m/m drops in the following nonresidential private constructions. These included religious (-2.9%; +16.4% y/y), health care (-2.2%; -5.2% y/y), office (-1.8%; +2.7% y/y), educational (-1.7%; -4.2% y/y), lodging (-1.6%; -1.0% y/y), commercial (-1.0%; -5.8% y/y), manufacturing (-0.4%; +3.6% y/y), communication (-0.3%; +2.2% y/y), and utilities (-0.1%; +7.0% y/y). In contrast, private constructions for amusement & recreation (1.5%; 7.0% y/y) and transportation (0.7%; 10.2% y/y) rose m/m in March.

The value of public construction declined 0.2% (+4.7% y/y) in March after holding steady in February (+0.2% initially), reflecting a 0.2% increase (-1.9% y/y) in residential public construction and a 0.2% easing (+4.8% y/y) in nonresidential public construction. The March decline reflected m/m drops in the following nonresidential public constructions. These included utilities (-4.8%; -12.8% y/y), commercial (-1.6%; +40.3% y/y), amusement & recreation (-1.0%; +19.1% y/y), educational (-0.6%; +7.6% y/y), sewage & waste disposal (-0.6%; +10.6% y/y), and health care (-0.4%; +13.0% y/y). Notably, spending on highways & streets, which made up 28.7% of public construction spending, fell 0.5% (-2.4% y/y) in March, the first m/m fall since October, following a 0.9% increase in February. To the upside, the following public constructions rose m/m in March: office (1.6%; 6.0% y/y), transportation (1.4%; 7.3% y/y), public safety (0.7%; 4.1% y/y), conservation & development (0.6%; 4.7% y/y), and water supply (0.6%; 12.2% y/y).

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

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- March construction spending -0.5% m/m; +2.8% y/y, the lowest y/y rate since May ’19.
- Residential private construction -0.4% m/m, led by a 1.2% drop in home improvement building.
- Nonresidential private construction -0.8% m/m, down for the second month in three.
- Public sector construction -0.2% m/m, reflecting a 0.2% decline in nonresidential public building.

U.S. Construction Spending Unexpectedly Drops in March, the First M/M Fall Since September

Carol Stone, CBE

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Initial claims for unemployment insurance rose 18,000 in the week ended April 26 to 241,000, seasonally adjusted.  This is higher by 16,000 than the Action Economics Forecast Survey amount of 225,000 and is the largest amount since the week of February 22. The previous week’s actual count was revised up by 1,000 to 223,000, from 222,000 reported initially.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” – in the week ended April 19 was 1.916 million, up 83,000 from the prior week’s 1.833 million; that earlier amount was revised down by 8,000.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, was 1.3% in the April 19 week, following 1.2% continuously since the week of January 6, 2024.

Economic conditions vary widely across states and territories.  In the week ended April 12, the highest unemployment rates were in New Jersey (2.39%), California (2.24%), Washington (2.19%), Rhode Island (2.17%) and Massachusetts (1.93%).  The lowest rates were in Florida (0.35%), South Dakota (0.40%), Alabama (0.41%), Virginia (0.45%) and Tennessee (0.48%).  Rates in other notable states include the Illinois (1.85%), New York (1.71%), Pennsylvania (1.54%) and Texas (1.09%). 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 U**SECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Actual initial claims amount is 16,000 more than forecast.
- Total beneficiaries rose by 83,000.
- Insured unemployment rate ticked up to 1.3% after 15 months at 1.2%.

Economy in Brief

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