Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501e.jpg" width="353">
The March value of construction put in place increased another 0.9% on top of the 1.0% rise during February and for the second month, the gain was double the Consensus expectation for a 0.4% increase.
Residential building jumped 1.6% after an unrevised 1.3% February surge. Strength was most pronounced in the value of improvements which jumped 4.5% (-7.0% y/y) while new single family building rose 0.5% (13.5% y/y).
Nonresidential building fell 0.1%, the first decline since last October, and it was led by a 1.7% (+11.2% y/y) drop in office construction. Commercial building rose 0.6% (8.7% y/y) after a huge 3.3% February drop.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501f.jpg" width="353">
Public construction spending rose 0.2% for the second month though construction activity on highways &amp; streets, nearly one third of the value of public construction spending, slipped 0.4% (4.9% y/y).
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<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/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</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>0.9%</td>
<td>1.0%</td>
<td>8.4%</td>
<td>9.2%</td>
<td>10.9%</td>
<td>5.4%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>1.1%</td>
<td>1.2%</td>
<td>8.9%</td>
<td>9.7%</td>
<td>13.6%</td>
<td>6.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>1.6%</td>
<td>1.3%</td>
<td>8.6%</td>
<td>11.5%</td>
<td>18.2%</td>
<td>12.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.1%</td>
<td>1.1%</td>
<td>9.6%</td>
<td>5.4%</td>
<td>3.9%</td>
<td>-5.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>0.2%</td>
<td>0.2%</td>
<td>6.6%</td>
<td>7.6%</td>
<td>2.5%</td>
<td>2.7%</td>
</tr>
</tbody>
</table>
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The March value of construction put in place increased another 0.9% on top of the 1.0% rise during February and for the second month, the gain was double the Consensus expectation for a 0.4% increase. Residential building jumped 1.6% [...]

U.S. Construction Again Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501d.jpg" width="353">
The April Composite Index of activity in the factory sector reported by the Institute of Supply Management (ISM) surged to 57.3, well ahead of Consensus expectations for an unchanged reading at 55.0. The figure was the highest since last November and represented improvement from the 1Q average of 55.6.
During the last twenty years there has been a 68% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
A higher production index at 60.4 versus 57.2 averaged during 1Q led last month&#39;s rise. Moreover, the employment index rebounded to 55.8 versus 52.9 during 1Q. During the last twenty years there has been a 67% correlation between the level of the ISM employment Index and the three month growth in factory sector employment. The inventory index also rose to its highest level (51.3) in a year while the supplier deliveries index increased to its highest (57.7) since October.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501c.jpg" width="353">
To the downside was the new orders index which fell to the lowest level (57.6) since August. New export orders were notably weak as the index dropped to the lowest level (53.4) since last June.
The price index showed further strength with a five point increase to its highest level since November. During the last twenty years there has been a 91% correlation between the price index and the three month change in the PPI for intermediate goods less food &amp; energy.
Are We Engineering Ourselves Out of Manufacturing Jobs? from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/Research/Com2006/0101.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">April &#39;05</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">Composite Index</td>
<td>57.3</td>
<td>55.2</td>
<td>53.8</td>
<td>55.5</td>
<td>60.5</td>
<td>53.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>57.6</td>
<td>58.4</td>
<td>54.7</td>
<td>57.4</td>
<td>63.5</td>
<td>57.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>71.5</td>
<td>66.5</td>
<td>71.0</td>
<td>66.4</td>
<td>79.8</td>
<td>59.6</td>
</tr>
</tbody>
</table>
</body>
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The April Composite Index of activity in the factory sector reported by the Institute of Supply Management (ISM) surged to 57.3, well ahead of Consensus expectations for an unchanged reading at 55.0. The figure was the highest since [...]

ISM Activity & Pricing Indexes Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501a.jpg" width="353">
Personal income increased 0.8% during March, double the Consensus expectation for a 0.4% rise and followed an unrevised 0.3% increase in February. The increase was the largest for any month since last September.
A 5.3% (16.4% y/y) spike in health insurance benefits due to prescription drug benefits under the Medicare health-care program boosted transfer payments by 3.3% (9.3% y/y).
Wage &amp; salary disbursements rose another 0.4% (5.0% y/y) lifted by a 0.5% (5.6% y/y) rise in private service sector wages. Factory wages rose 0.3% (2.4% y/y), the firmest gain since last October, while government sector wages grew 0.3% (3.3% y/y).
Disposable personal income jumped 0.8% (5.5% y/y) while personal taxes rose 0.8% (9.3% y/y). Adjusted for price inflation disposable income rose 0.5% (2.6% y/y) and real disposable income per capita jumped 0.4% (1.6% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501b.jpg" width="353">
Personal consumption also was firm and increased 0.6% versus a Consensus expectation for a 0.4% rise. Adjusted for price inflation, spending rose 0.2% (3.4% y/y). Real spending on furniture &amp; household equipment increased 0.9% (13.0% y/y) and &quot;other&quot; durable goods spending rose 1.8% (8.5% y/y). Spending on clothing &amp; shoes fell for the second consecutive month and drooped 0.9% (+7.8% y/y) following several strong monthly gains between October and January. Spending on gasoline &amp; oil fell 2.9% (-0.2% y/y and real services spending rose 0.4% (3.0% y/y).
The PCE chain price index rose 0.4% lifted by a 3.5% (16.5% y/y) jump in gasoline &amp; oil prices. Prices for clothing &amp; shoes surged 1.2% (-1.8% y/y), furniture &amp; household equipment prices fell another 0.3% (-4.5% y/y) but motor vehicle &amp; parts prices rose 0.2% (0.8% y/y).
Incentives and Prices for Motor Vehicles: What has been happening in recent years? is a Working Paper from the Federal Reserve Board and is available <a href="http://www.federalreserve.gov/pubs/feds/2006/200609/200609pap.pdf">here</a>.
The personal savings rate was a negative 0.3%.
Last week&#39;s testimony, Outlook for the U.S. Economy, by Federal Reserve Bank Chairman Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/BoardDocs/Testimony/2006/20060427/default.htm">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/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</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>0.8%</td>
<td>0.3%</td>
<td>6.0%</td>
<td>5.5%</td>
<td>5.9%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.6%</td>
<td>0.2%</td>
<td>6.4%</td>
<td>6.5%</td>
<td>6.5%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>-0.3%</td>
<td>-0.6%</td>
<td>0.4% (Mar &#39;05)</td>
<td>-0.4%</td>
<td>1.7%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.4%</td>
<td>0.1%</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>0.3%</td>
<td>0.1%</td>
<td>2.0%</td>
<td>2.0%</td>
<td>2.0%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>


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Personal income increased 0.8% during March, double the Consensus expectation for a 0.4% rise and followed an unrevised 0.3% increase in February. The increase was the largest for any month since last September. A 5.3% (16.4% y/y) [...]

U.S. Income, Spending & Prices Firm in March

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501a.jpg" width="353">
Personal income increased 0.8% during March, double the Consensus expectation for a 0.4% rise and followed an unrevised 0.3% increase in February. The increase was the largest for any month since last September.
A 5.3% (16.4% y/y) spike in health insurance benefits due to prescription drug benefits under the Medicare health-care program boosted transfer payments by 3.3% (9.3% y/y).
Wage &amp; salary disbursements rose another 0.4% (5.0% y/y) lifted by a 0.5% (5.6% y/y) rise in private service sector wages. Factory wages rose 0.3% (2.4% y/y), the firmest gain since last October, while government sector wages grew 0.3% (3.3% y/y).
Disposable personal income jumped 0.8% (5.5% y/y) while personal taxes rose 0.8% (9.3% y/y). Adjusted for price inflation disposable income rose 0.5% (2.6% y/y) and real disposable income per capita jumped 0.4% (1.6% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501b.jpg" width="353">
Personal consumption also was firm and increased 0.6% versus a Consensus expectation for a 0.4% rise. Adjusted for price inflation, spending rose 0.2% (3.4% y/y). Real spending on furniture &amp; household equipment increased 0.9% (13.0% y/y) and &quot;other&quot; durable goods spending rose 1.8% (8.5% y/y). Spending on clothing &amp; shoes fell for the second consecutive month and drooped 0.9% (+7.8% y/y) following several strong monthly gains between October and January. Spending on gasoline &amp; oil fell 2.9% (-0.2% y/y and real services spending rose 0.4% (3.0% y/y).
The PCE chain price index rose 0.4% lifted by a 3.5% (16.5% y/y) jump in gasoline &amp; oil prices. Prices for clothing &amp; shoes surged 1.2% (-1.8% y/y), furniture &amp; household equipment prices fell another 0.3% (-4.5% y/y) but motor vehicle &amp; parts prices rose 0.2% (0.8% y/y).
Incentives and Prices for Motor Vehicles: What has been happening in recent years? is a Working Paper from the Federal Reserve Board and is available <a href="http://www.federalreserve.gov/pubs/feds/2006/200609/200609pap.pdf">here</a>.
The personal savings rate was a negative 0.3%.
Last week&#39;s testimony, Outlook for the U.S. Economy, by Federal Reserve Bank Chairman Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/BoardDocs/Testimony/2006/20060427/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/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</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>0.8%</td>
<td>0.3%</td>
<td>6.0%</td>
<td>5.5%</td>
<td>5.9%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.6%</td>
<td>0.2%</td>
<td>6.4%</td>
<td>6.5%</td>
<td>6.5%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>-0.3%</td>
<td>-0.6%</td>
<td>0.4% (Mar &#39;05)</td>
<td>-0.4%</td>
<td>1.7%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.4%</td>
<td>0.1%</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>0.3%</td>
<td>0.1%</td>
<td>2.0%</td>
<td>2.0%</td>
<td>2.0%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>
ISM Activity & Pricing Indexes Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 1, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501d.jpg" width="353">
The April Composite Index of activity in the factory sector reported by the Institute of Supply Management (ISM) surged to 57.3, well ahead of Consensus expectations for an unchanged reading at 55.0. The figure was the highest since last November and represented improvement from the 1Q average of 55.6.
During the last twenty years there has been a 68% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
A higher production index at 60.4 versus 57.2 averaged during 1Q led last month&#39;s rise. Moreover, the employment index rebounded to 55.8 versus 52.9 during 1Q. During the last twenty years there has been a 67% correlation between the level of the ISM employment Index and the three month growth in factory sector employment. The inventory index also rose to its highest level (51.3) in a year while the supplier deliveries index increased to its highest (57.7) since October.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501c.jpg" width="353">
To the downside was the new orders index which fell to the lowest level (57.6) since August. New export orders were notably weak as the index dropped to the lowest level (53.4) since last June.
The price index showed further strength with a five point increase to its highest level since November. During the last twenty years there has been a 91% correlation between the price index and the three month change in the PPI for intermediate goods less food &amp; energy.
Are We Engineering Ourselves Out of Manufacturing Jobs? from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/Research/Com2006/0101.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/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">April &#39;05</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">Composite Index</td>
<td>57.3</td>
<td>55.2</td>
<td>53.8</td>
<td>55.5</td>
<td>60.5</td>
<td>53.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>57.6</td>
<td>58.4</td>
<td>54.7</td>
<td>57.4</td>
<td>63.5</td>
<td>57.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>71.5</td>
<td>66.5</td>
<td>71.0</td>
<td>66.4</td>
<td>79.8</td>
<td>59.6</td>
</tr>
</tbody>
</table>
U.S. Construction Again Firm 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 1, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501e.jpg" width="353">
The March value of construction put in place increased another 0.9% on top of the 1.0% rise during February and for the second month, the gain was double the Consensus expectation for a 0.4% increase.
Residential building jumped 1.6% after an unrevised 1.3% February surge. Strength was most pronounced in the value of improvements which jumped 4.5% (-7.0% y/y) while new single family building rose 0.5% (13.5% y/y).
Nonresidential building fell 0.1%, the first decline since last October, and it was led by a 1.7% (+11.2% y/y) drop in office construction. Commercial building rose 0.6% (8.7% y/y) after a huge 3.3% February drop.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501f.jpg" width="353">
Public construction spending rose 0.2% for the second month though construction activity on highways &amp; streets, nearly one third of the value of public construction spending, slipped 0.4% (4.9% y/y).
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<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/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</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>0.9%</td>
<td>1.0%</td>
<td>8.4%</td>
<td>9.2%</td>
<td>10.9%</td>
<td>5.4%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>1.1%</td>
<td>1.2%</td>
<td>8.9%</td>
<td>9.7%</td>
<td>13.6%</td>
<td>6.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>1.6%</td>
<td>1.3%</td>
<td>8.6%</td>
<td>11.5%</td>
<td>18.2%</td>
<td>12.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.1%</td>
<td>1.1%</td>
<td>9.6%</td>
<td>5.4%</td>
<td>3.9%</td>
<td>-5.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>0.2%</td>
<td>0.2%</td>
<td>6.6%</td>
<td>7.6%</td>
<td>2.5%</td>
<td>2.7%</td>
</tr>
</tbody>
</table>
 No Surprises in China's Balance of Payments and Trade Data  
by <a href="/comment/Curley.html">Louise Curley</a> May 1, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501g.jpg" width="353">
China&#39;s balance of payment data for 2005 were released today and, to no one&#39;s surprise, the current account surplus was a record--$160.8 billion, $67.2 billion in the first half of the year and $93.5 in the second half. For the year as a whole, the surplus was $92.2 billion above last year&#39;s surplus of $68.7 billion. (Data for China&#39;s balance of payments are reported only on a semi annual basis.)<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501i.jpg" width="353">
With its large current account surplus and a net inflow of capital, China has been piling up international reserves as can be seen in the first chart that compares the current account surplus with the increase in reserves. China is now the world&#39;s largest holder of international reserves having surpassed Japan in November 2004 as seen in the second chart.As of December, 2005, China&#39;s holdings of foreign reserves less gold amounted to $822 billion and the latest data for February, 2006, show a further rise to $856 billion.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501h.jpg" width="353">
Data for China&#39;s trade through March 2006 was also released today. The widening gap between exports to and imports from the United States shows no sign of diminishing as can be seen in the third chart.
Data on China&#39;s trade and balance of payments may be found in the Haver CHINA and EMERGEPR data bases. The data on the balance of payments are identical in both data bases, but the data on trade are more detailed in the CHINA data base. 

<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/JAPAN/@J5/@J5.HTM">China</a>&nbsp; (Bil. US $)</th>
<th scope="col">Mar 06</th>
<th scope="col">Feb 06</th>
<th scope="col">Mar 05</th>
<th scope="col">M/M % </th>
<th scope="col">Y/Y %</th>
<th scope="col">2005</th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade in Goods</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports</td>
<td>77.9</td>
<td>70.1</td>
<td>61.0</td>
<td>11.1</td>
<td>29.7</td>
<td>762.0</td>
<td>593.3</td>
<td>438.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;Imports</td>
<td>63.2</td>
<td>66.4</td>
<td>52.3</td>
<td>-4.8</td>
<td>20.8</td>
<td>660.0</td>
<td>561.2</td>
<td>412.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Balance</td>
<td>14.7</td>
<td>3.7</td>
<td>8.6</td>
<td>11.0 dif</td>
<td>6.1 dif</td>
<td>102.0</td>
<td>32.1</td>
<td>25.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance with U. S.</td>
<td>12.6</td>
<td>10.5</td>
<td>9.2</td>
<td>2.1 dif </td>
<td>3.4 dif</td>
<td>114.2</td>
<td>80.3</td>
<td>58.6</td>
</tr>
<tr>
<td class="firstcol">Balance of Payments&nbsp;</td>
<td>H2 06</td>
<td>H1 05</td>
<td>H2 05</td>
<td>H/H dif </td>
<td>Y/Y dif</td>
<td>2005</td>
<td>2004&nbsp;</td>
<td>2003&nbsp;&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Account</td>
<td>160.8</td>
<td>67.3</td>
<td>68.6</td>
<td>93.5</td>
<td>92.2</td>
<td>160.8</td>
<td>68.6</td>
<td>45.9</td>
</tr>
<tr>
<td class="firstcol">Capital Account</td>
<td>&nbsp;4.1</td>
<td>2.2&nbsp;</td>
<td>-0.1&nbsp;</td>
<td>&nbsp;1.9</td>
<td>4.2&nbsp;</td>
<td>4.1&nbsp;</td>
<td>-0.1&nbsp;</td>
<td>-0.0&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Financial Account</td>
<td>58.9</td>
<td>36.1</td>
<td>110.7</td>
<td>22.7</td>
<td>51.9</td>
<td>58.9</td>
<td>110.7</td>
<td>52.8</td>
</tr>
<tr>
<td class="firstcol">Change in Reserves*</td>
<td>-207.0</td>
<td>-100.5</td>
<td>-206.4</td>
<td>-106.6</td>
<td>-0.6</td>
<td>-207.0</td>
<td>-206.4</td>
<td>117.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Errors &amp; Omissions</td>
<td>-16.77</td>
<td>-5.1</td>
<td>27.05</td>
<td>-11.9</td>
<td>-43.8</td>
<td>-16.77</td>
<td>27.05</td>
<td>18.42</td>
</tr>
</tbody>
</table>


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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/060428g.jpg" width="353">
Besides its monthly labor force survey to measure the number of people employed, Statistics Canada also conducts a survey of establishments, similar to that in the United States. These industry establishment data are part of the compilation of Canada&#39;s monthly GDP series. As with the labor force series, the industry data show good jobs growth in the first two months of 2006, including gains of 15,087 and 34,641 in January and February, respectively.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060428h.jpg" width="353">
At the same time, the establishment data indicate some firming in the manufacturing sector that is not evident in the labor force series. After a long decline, the former began to turn upward in November; the cumulative increase over the four months is only 12,600, but it includes a more marked upturn in the durable goods sector totaling 18,300 since last July. Employment at nondurable goods manufacturers continues in a downward drift. By contrast, the labor force measure shows that the number of people working in manufacturing is still falling, a decrease of 1.2% since October, compared to the 0.7% increase in manufacturing company jobs. These series are not well correlated month-to-month, and can be erratic, so these comparisons could easily be erased by one or two months of reversals in either dataset. Even so, the gain in manufacturing establishment jobs is intriguing, and the labor force series bears monitoring for a sign of new growth there.
Service sector jobs are picking up steam in the establishment data. These had slowed to just a 1.4% increase in 2004, but grew 1.9% last year and through February were already 2.4% ahead of a year ago. The gain in the service industries and the better performance of manufacturing are contributing to growth in Canada&#39;s monthly GDP of 3.3% year-on-year in February, somewhat firmer than last year&#39;s overall increase of 3.0%.

<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/CANSIM/@C6/@C6.HTM">SA, Thousands</a></th>
<th scope="col">Feb 2006</th>
<th scope="col">Jan 2006</th>
<th scope="col">Year Ago</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 NAICS Industries</td>
<td>13,922</td>
<td>13,887</td>
<td>13,647</td>
<td>13,743</td>
<td>13,515</td>
<td>13,337</td>
</tr>
<tr>
<td class="firstcol">Mo/Mo (000) &amp; Yr/Yr % Changes</td>
<td>34.6</td>
<td>15.1</td>
<td>2.0%</td>
<td>1.7%</td>
<td>1.3%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>1,950</td>
<td>1,944</td>
<td>1,967</td>
<td>1,952</td>
<td>1,991</td>
<td>2,045</td>
</tr>
<tr>
<td class="firstcol">Mo/Mo (000) &amp; Yr/Yr % Changes</td>
<td>6.1</td>
<td>-4.9</td>
<td>-0.8%</td>
<td>-2.0%</td>
<td>-2.6%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Service Producing</td>
<td>10,709</td>
<td>10,682</td>
<td>10,463</td>
<td>10,550</td>
<td>10,351</td>
<td>10,213</td>
</tr>
<tr>
<td class="firstcol">Mo/Mo (000) &amp; Yr/Yr % Changes</td>
<td>26.9</td>
<td>18.9</td>
<td>2.4%</td>
<td>1.9%</td>
<td>1.4%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP: Mo/Mo &amp; Yr/Yr % Changes</td>
<td>0.2%</td>
<td>0.2%</td>
<td>3.3%</td>
<td>3.0%</td>
<td>3.2%</td>
<td>2.3%</td>
</tr>
</tbody>
</table>
</body>
</html>

Besides its monthly labor force survey to measure the number of people employed, Statistics Canada also conducts a survey of establishments, similar to that in the United States. These industry establishment data are part of the [...]

Jobs in Canada Show Pick-Up, Even in Manufacturing

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060428e.jpg" width="353">
The employment cost index for private industry workers rose a moderate 0.6% last quarter after a downwardly revised 0.7% increase to close out 2005. Downward revisions to earlier quarters (mostly in benefit costs) resulted in a picture of sharp deceleration in compensation costs during the last two years. Consensus expectations had been for a 0.9% 1Q increase.
The 2.6% increase in the ECI during the last twelve months was the slowest in ten years.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060428f.jpg" width="353">
The 0.4% 1Q increase in benefit costs halved the prior quarter&#39;s growth rate and continued a downtrend that since early 2004 has pulled the y/y growth rate to 2.9% from 7.2%. (Annual growth during 2004 was revised to 6.6% from 10.1% reported earlier.)
Wage and salary growth was up slightly to 0.7% from 0.6% averaged during 2005. Service producing industries saw a 0.8% (2.4% y/y) gain while factory sector wages grew 0.5% (NSA, 2.5% y/y).
The latest release encompassed several revisions. To review the latest changes visit BLS <a href="http://www.bls.gov/news.release/eci.nr0.htm">site</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/@EB/@EB08/@EB08.HTM">ECI- Private Industry Workers</a></th>
<th scope="col">1Q &#39;06</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">Compensation</td>
<td>0.6%</td>
<td>0.7%</td>
<td>2.6%</td>
<td>3.0%</td>
<td>3.7%</td>
<td>4.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp; Salaries</td>
<td>0.7%</td>
<td>0.6%</td>
<td>2.5%</td>
<td>2.5%</td>
<td>2.7%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>0.4%</td>
<td>0.7%</td>
<td>2.9%</td>
<td>4.0%</td>
<td>6.6%</td>
<td>6.5%</td>
</tr>
</tbody>
</table>
</body>
</html>

The employment cost index for private industry workers rose a moderate 0.6% last quarter after a downwardly revised 0.7% increase to close out 2005. Downward revisions to earlier quarters (mostly in benefit costs) resulted in a [...]

Employment Cost Index Eased

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060428d.jpg" width="353">
Consumer sentiment slipped late this month. The final reading from the University of Michigan&#39;s stood a 87.4 versus a preliminary indication of 89.2 posted two weeks ago. Consensus expectations had been for a reading of 89.0.
Expectations for the economy worsened and for price inflation, moved up. During the last ten years there has been a 76% correlation between the level of consumer sentiment and the y/y change in real consumer spending.
The current conditions ended up about unchanged index for the month versus a preliminary indication of moderate m/m 1.8% improvement. The index of personal finances rose slightly (5.3% y/y) after a sharp gain during March but the reading of buying conditions for large household goods was unchanged (4.4% y/y). Consumers&#39; assessment of gov&#39;t economic policy fell hard late in the month and was unchanged for the whole period versus March (-4.5% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060428c.jpg" width="353">
The index of consumer expectations fell 3.4% m/m and that was much worse than the preliminary indication of a 1.2% slip. The near term economic outlook took a powder late in the month and fell 10.4% y/y and the long term outlook reversed much of the prior month&#39;s improvement (-8.8% y/y).
The mean expected inflation rate for the next twelve months jumped to 4.4% from an expected 3.8% last month due the rise in gasoline prices.
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.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">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">Consumer Sentiment</td>
<td>87.4</td>
<td>88.9</td>
<td>-0.3%</td>
<td>88.6</td>
<td>95.2</td>
<td>87.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>109.2</td>
<td>109.1</td>
<td>4.6%</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>73.4</td>
<td>76.0</td>
<td>-4.7%</td>
<td>77.4</td>
<td>88.5</td>
<td>81.4</td>
</tr>
</tbody>
</table>
</body>
</html>

Consumer sentiment slipped late this month. The final reading from the University of Michigan's stood a 87.4 versus a preliminary indication of 89.2 posted two weeks ago. Consensus expectations had been for a reading of 89.0. [...]

U.S. Consumer Sentiment Slipped in Late April

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060428a.jpg" width="353">
US real growth during 1Q06 rebounded smartly to 4.8% (AR) from a lull the prior quarter at 1.7%, but the two quarter average of growth at 3.2% was somewhat depressed from the 3.9% quarterly average of 2004 &amp; 2005. The 1Q increase about matched Consensus expectations for a 5.0% increase while the widespread forecast is for 3.5% growth this quarter.
Personal consumption expenditures bounced back to a 5.5% (3.4% y/y) rate of growth from the 0.9% 4Q pause. Motor vehicles &amp; parts consumption grew 19.8% (-4.5% y/y) but that only recovered half of the prior period&#39;s slump. Furniture &amp; household equipment spending continued strong with a 23.3% (13.3% y/y) rate of growthand apparel spending also advanced a firm 7.8% (7.1% y/y).
Defense spending recovered all of its 4Q slump with a 10.3% (3.5% y/y) advance and that contributed 0.5% percentage points to 1Q GDP growth.
Growth in business fixed investment nearly doubled the already strong 4Q rate of growth with a 17.9% (12.1% y/y) advance. Much of the acceleration owed to a 10.8% (8.1% y/y) rise in information processing equipment &amp; software which more than doubled the prior quarter&#39;s rate of advance. Industrial equipment, however, again was strong with a 12.2% (6.9% y/y) increase and investment in transportation equipment jumped 45.0% (15.0% y/y). That more than recouped a 4Q decline. Structures spending again was quite firm and registered 22.3% (19.5% y/y) growth.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060428b.jpg" width="353">
Business Capital Spending, a speech by Federal Reserve Board Governor Donald L. Kohn yesterday to the Forecasters Club of New York, can be found <a href="http://www.federalreserve.gov/BoardDocs/Speeches/2006/20060427/default.htm"> here</a>.
A wider foreign trade deficit subtracted another 0.8 percentage points from GDP growth last quarter as a 12.1% (7.5% y/y) advance in exports was outpaced by 13.0% (6.6% y/y) growth in imports.
Inventories reversed a piece of the prior quarter&#39;s positive contribution to GDP growth with a 0.5% subtraction.
The GDP chain price index remained firm and grew 3.3%. Strength again owed much to the price index for the government sector which advanced 5.0% (5.2% y/y). The PCE chain price index rose a moderate 2.0% (3.0% y/y) and the price index for business equipment &amp; software was unchanged (-0.9% y/y) following several quarters of decline.
The latest Beige Book from The Federal Reserve Board covering economic activity in the twelve Federal Reserve Districts can be found <a href="http://www.federalreserve.gov/FOMC/BeigeBook/2006/20060426/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/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">1Q &#39;06</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>4.8%</td>
<td>1.7%</td>
<td>3.5%</td>
<td>3.5%</td>
<td>4.2%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-0.5%</td>
<td>1.9%</td>
<td>-0.3%</td>
<td>-0.3%</td>
<td>0.3%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>5.4%</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>-0.8%</td>
<td>-1.4%</td>
<td>0.1%</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>5.9%</td>
<td>1.1%</td>
<td>3.9%</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>3.5%</td>
<td>3.2%</td>
<td>2.8%</td>
<td>2.6%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>


</html>

US real growth during 1Q06 rebounded smartly to 4.8% (AR) from a lull the prior quarter at 1.7%, but the two quarter average of growth at 3.2% was somewhat depressed from the 3.9% quarterly average of 2004 & 2005. The 1Q increase [...]

US GDP Growth Back on Track in 1Q

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Widespread downgrading of 2025 GDP outlook

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

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

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Real GDP eased 0.3% SAAR (+2.1% y/y) during the first quarter of 2025 after increasing 2.4% in Q4’24 and 3.1% in Q3’24. A 0.4% increase had been expected in the Action Economics Forecast Survey. It was the first decline since Q1 2022.

Foreign trade subtracted 4.83 percentage points from growth last quarter as imports surged 41.3% (13.4% y/y) ahead of tariffs, which began to come into effect in the first quarter. The rise followed a 1.9% decline in Q4’24. Exports rose 1.8% (3.0% y/y) after easing 0.2% in Q4. Inventories added 2.25 percentage points to growth after subtracting 0.84 percentage point from Q4 growth.

Real final sales to domestic purchasers grew 2.3% (2.9% y/y) in Q1 after rising 3.0% in Q4. Personal consumption expenditures rose 1.8% (3.1% y/y) following a 4.0% gain. Durable goods spending fell 3.4% (+5.3% y/y) after surging 12.4% in Q4. Motor vehicle purchases declined 11.1% (+5.5% y/y) after strengthening 19.7% in Q4. Spending on home furnishings & appliances gained 1.5% (6.1% y/y) following a 5.4% rise. Recreational goods & vehicle outlays rose 2.5% (7.0% y/y) last quarter after a 13.9% Q4 increase.

Nondurable goods outlays rose 2.7% (3.0% y/y) following 3.1% growth in Q4. Apparel spending increased 6.7% (2.5% y/y) following a 5.0% rise. Food & beverage buying gained 2.5% (2.3% y/y) after a 1.8% increase. Gasoline & fuel oil purchases increased 4.6% (3.4% y/y) after falling 2.0% in Q4.

Spending on services increased 2.4% last quarter (2.7% y/y) after a 3.0% gain. Outlays on housing & utilities increased 3.4% (1.8% y/y) after rising 1.1% in Q4. Health care expenditures rose 4.0% (4.8% y/y) following a 4.7% strengthening. Transportation outlays increased 5.3% (4.6% y/y) after a 3.7% rise while recreation spending rose 4.7% (2.8% y/y) following a 4.5% rise. Restaurant & hotel expenditures declined 2.1% (+0.5% y/y) following a 2.8% rise. Financial services expenditures rose 1.9% (2.0% y/y) after a 3.1% Q4 increase.

Business fixed investment increased 9.8% (3.6% y/y) following a 3.0% decline in Q4. Expenditures on structures rose 0.4% (-0.4% y/y) after a 2.9% increase. Expenditures on producers’ durable equipment jumped 22.5% (8.0% y/y) after falling 8.7%.  Outlays on information processing equipment soared 69.3% (18.9% y/y) following a 7.3% decline. Industrial equipment investment fell 1.4% (-0.3% y/y) after easing 0.9%. Intellectual property product spending rose 4.1% (1.8% y/y) following a 0.5% decline. 

Residential structures investment increased 1.3% (-0.1% y/y) in Q1 after a 5.5% Q4 rise.

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Government spending fell 1.5% (+2.4% y/y) after a 3.1% Q4 rise. Federal government expenditures declined 5.1% (+2.9% y/y) after rising 4.0% in Q4. National defense expenditures declined 8.0% (+4.0% y/y) after increasing 4.8% in Q4. State & local government spending rose 0.8% (2.1% y/y) following a 2.5% rise.

The GDP price index rose 3.7% (2.6% y/y) after increasing 2.3% in Q4. It was the largest increase since Q4’22. A 2.4% increase had been expected. The PCE chain price index increased 3.6% (2.5% y/y) following a 2.4% rise. The PCE price index excluding food and energy rose 3.5% (2.8% y/y) after increasing 2.6% in Q4. The business fixed investment price index rose 0.4% (1.8% y/y) after 1.5% rise. The residential price index strengthened 3.9% (3.2% y/y) after a 1.9% rise while the government price index increased 4.7% (2.8% y/y) following a 2.1% rise.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Decline in GDP is first in three years.
- Foreign trade subtracts substantially ahead of tariffs.
- Domestic final demand growth weakens.
- Price index strengthens with higher core PCE prices.

U.S. GDP Unexpectedly Declines in Q1’25; Prices Strengthen

Michael J. Moran

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High-side readings on the price indexes for personal consumption expenditures in January and February caused some concern about emerging price pressure, especially with some policies of the Trump administration possibly adding to the upward force. However, March brought notable relief, with the headline price index falling slightly (-0.04%). A marked decline in energy prices was helpful (-2.7%), but core prices also were subdued, increasing less than 0.1%.  Year-over-year changes were still above the Fed’s target of 2%, but only barely so for the headline measure (2.3%). The core index backed away from the reading of 3.0% in February, but the latest reading of 2.7% was in line with observations in the past year, and still uncomfortably above target.

Consumers roused from a winter slumber in March, with nominal outlays increasing 0.7%. With inflation restrained, real outlays also posted a gain of 0.7%. Spending on durable gods stood out, with real outlays advancing 3.2%. Real outlays for both nondurable goods and services rose 0.4%, a solid pace. Signs of life were certainly welcome after an average decline of 0.1% in January and February. The March rebound left growth of 1.8% (annual rate) in the first quarter.

The brisk increase in spending in March was supported by a solid gain in personal income (0.5% in both nominal and real terms). Growth in wage income was firm at 0.5%, while proprietors’ income was robust with a gain of 1.8% (not annualized!). The farm sector led the advance in proprietors’ income, but the nonfarm sector also was strong (0.6%).

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- Price pressure eases.
- Spending rebounds after two soft months.

Personal Income, Consumption, and Prices in March

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The Pending Home Sales Index, a forward-looking home sales measure based on contract signings, from the National Association of Realtors rose 6.1% to 76.5 (-0.6% y/y) during March after rising a little-revised 2.1% in February. These changes followed a 4.6% January decline.

The rise in March sales occurred as the rate on a 30-year mortgage eased to an average 6.65% from 6.84% in February. This rate was well above a low of 2.68% averaged in December 2020.

Pending home sales were up in most regions of the country. Sales in the Midwest rose 4.9% (1.4% y/y) last month after rising 1.8% in February. Sales in the South increased 9.8% (-0.4% y/y) following a 5.8% February rise. Sales in the West improved 4.8% (-2.0% y/y) after falling 3.0% in February. Sales in the Northeast were off 0.5% (-3.0% y/y) in March after falling 0.9% in February.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- Sales rise to highest level in four months.
- Strength is evident throughout most of country.

U.S. Pending Home Sales Surge in March

Sandy Batten

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The employment cost index (ECI) for civilian workers, arguably the most accurate measure of labor compensation in the United States, rose 0.9% q/q (3.6% y/y) in Q1, the same quarterly increase as in last year’s Q4, according to the Bureau of Labor Statistics. The quarterly gains have fluctuated between 0.8% and 1.0% for the past six quarters. The Action Economics Forecast Survey had expected a 0.9% q/q increase and a 3.5% y/y gain.

Wages and salaries for civilian workers rose 0.8% q/q (3.5% y/y) in Q1, down from 1.0% q/q in Q4. This tied the Q3 2024 quarterly rise as the smallest increase since Q2 2021. It was also the smallest y/y increase since Q2 2021. Benefits increased by an outsized 1.2% q/q (3.9% y/y) in Q1 versus 0.8% q/q in Q4. This is the largest quarterly gain since Q2 2022. In general, employment cost gains remain above the pace observed prior to the pandemic but are slowing gradually.

Private industry workers’ compensation rose 0.8% q/q (3.4% y/y) in Q1, down from 0.9% q/q (3.6% y/y) in Q4. Wages and salaries for private industry workers increased 0.8% q/q (3.4% y/y) in Q1 versus 0.8% q/q (3.7% y/y) in Q4. The quarterly gain in Q1 tied that in Q3 2024 as the smallest increase since Q4 2020. Benefits for private industry workers jumped 1.2% q/q (3.6% y/y). the largest quarterly gain since Q2 2022. The acceleration in benefits in Q1 was primarily in service-producing industries.

Compensation in private goods-producing industries increased 1.0% q/q (3.2% y/y) in Q1, the largest quarterly gain in five quarters, versus a 0.7% q/q increase in Q4. Compensation in construction jumped 1.3% q/q, its largest quarterly increase since Q2 2022, up from a 0.6% q/q gain in Q4. Manufacturing compensation growth slowed to 0.7% q/q, its slowest quarterly advance since Q4 2020, from 0.8% q/q in Q4. Compensation in private service-producing industries increased 0.8% q/q (3.5% y/y), down slightly from a 0.9% q/q gain in Q4. Compensation in education and health services jumped 1.3% q/q, its largest quarterly gain since Q3 2023. In contrast, compensation in other services edged up 0.1% q/q in Q1, its smallest quarterly advance since before the pandemic.

The employment cost index measures the change in the cost of labor, free from the influence of employment shifts across occupations and industries. It is provided by the Bureau of Labor Statistics and is available in Haver’s **USECON** database. Consensus estimates from the Action Economics Forecast Survey are in Haver’s **AS1REPNA** database.

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- Compensation grew 0.9 q/q in Q1, the same pace as in Q4.
- Wage growth slowed to 0.8% q/q while benefits surged 1.2% q/q, their largest quarterly increase since Q2 2022.

Employment Cost Growth Steady in Q1 2025

Kathleen Stephansen, CBE

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The ADP National Employment Report indicated that nonfarm private sector payrolls rose 62,000 (1.4% y/y) during April after increasing 147,000 (1.4% y/y) during March, revised from 155,000. A 124,000 April rise in ADP employment had been expected in the Action Economics Forecast Survey.

Growth in median annual pay for "job stayers" eased to 4.5% y/y during April, from 4.6% y/y in March and from 4.7% y/y in the prior two months. Manufacturing sector pay grew 4.6% y/y during April, down from 4.8% y/y in March. Construction sector pay was unchanged at 4.7% y/y. Natural resource & mining sector pay grew 4.4% y/y. Financial sector pay rose 5.1% y/y, while education & health services pay rose 4.7% y/y. Leisure & hospitality pay also increased 4.7% y/y. Professional & business service sector pay increased 4.3% y/y as did trade, transportation & utilities pay. Information pay rose 4.1% y/y. Median annual pay for “job changers” rose 6.9% y/y after 6.7% y/y in March.

Small business hiring (less than 50 employees) rose 11,000 (0.6% y/y) after rising 18,000 (0.6% y/y) in March, revised down from 52,000. Employment at medium-sized firms (50-499,000 employees) rose 40,000 (1.1% y/y) after rising 43,000 (1.1% y/y). Large business hiring (500+ employees) rose 12,000 (3.4% y/y) in April, after rising 61,000 (3.6% y/y) in March, revised from 59,000.

Goods-producing employment rose 26,000 (1.3% y/y) in April, after rising 16,000 (1.3% y/y) during March, revised from 24,000. Manufacturing jobs rose 4,000 (-0.2% y/y) after rising 17,000 (-0.3% y/y) in March. The number of construction sector jobs rose 16,000 (3.4% y/y) in April, following a 2,000 (3.6% y/y) March increase, revised from 6,000. Natural resources & mining jobs rose 6,000 (2.8% y/y) in April after falling 3,000 (+1.9% y/y) in March.

The number of service-producing jobs rose 34,000 (1.4% y/y) during April, following a rise of 131,000 (1.4% y/y) in March. Professional & business services employment fell 2,000 (0.6% y/y) after rising 46,000 (0.7% y/y) in the prior month, revised from 57,000. Employment in the financial industry rose 20,000 (2.1% y/y) in April, after rising 38,000 (2.0% y/y) in March. Leisure and hospitality employment increased 27,000 (3.0% y/y), following a 23,000 (2.9% y/y) March increase, revised from 17,000. The number of education & health care jobs fell 23,000 (1.6% y/y) in April, following a 15,000 (1.8% y/y) rise in March, revised from 12,000. Information sector employment fell 8,000 (-0.1% y/y) after a rise of 3,000 (0.2% y/y) in March. The number of jobs in trade, transportation & utilities rose 21,000 (0.4% y/y) in April, after falling 4,000 (+0.4% y/y) in March, revised from a 6,000 fall. Employment in “other” services rose fell 1,000 (+3.2% y/y) following a 10,000 (3.4% y/y) rise in March, revised from 11,000.

By region, employment in the Northeast increased 10,000 (1.9% y/y) in April, following an increase of 95,000 (2.0% y/y) in March, revised from 89,000. Employment in the Midwest rose 42,000 (1.5% y/y) after a gain of 84,000 (1.4% y/y) in March, revised from 81,000. In the South, employment rose 3,000 (1.3% y/y) during April, after rising 10,000 (1.4% y/y) in March, revised from 27,000. In the West, employment rose 9,000 (0.6% y/y) after declining 43,000 (+0.6% y/y), revised from a 41,000 decline in March.

The ADP National Employment Report and Pay Insights data can be found in Haver's **USECON** database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's **AS1REPNA** database.

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- Employment increase is modest in both services & factory sectors.
- Wage growth for “job stayers” moderates.
- Small and medium-sized business employment slows.

Economy in Brief

Jump to:

U.S. Construction Again Firm

ISM Activity & Pricing Indexes Up

U.S. Income, Spending & Prices Firm in March

U.S. Income, Spending & Prices Firm in March

Jobs in Canada Show Pick-Up, Even in Manufacturing

Employment Cost Index Eased

U.S. Consumer Sentiment Slipped in Late April

US GDP Growth Back on Track in 1Q