Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321a.jpg" width="353">
The Producer Price Index for Finished Goods fell 1.4% last month. It was the largest decline in the index since April 2003 and easily outpaced Consensus expectations for a 0.3% decline.
Producer prices less food &amp; energy (core), however, rose 0.3% and were stronger than expectations for a 0.1% increase. The gain was boosted by strength in floor coverings (9.4% y/y), mobile homes (4.9% y/y), construction machinery (6.6% y/y), power transformers (9.7% y/y), heavy motor trucks (4.1% y/y) and civilian aircraft (4.3% y/y).
Prices of all finished consumer goods less food &amp; energy rose 0.2% (1.8% y/y) and core consumer nondurable goods prices increased 0.4% (2.8% y/y). Capital equipment prices increased a modest 0.1% (1.5% y/y), held back by another decline in electronic computer prices (-22.6% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321b.jpg" width="353">
Finished energy prices slumped 4.7% (+16.9% y/y) during February as gasoline prices dropped 11.0% (+18.4% y/y). Home heating oil also fell by 1.1% (+29.0% y/y) along with natural gas prices which fell 4.1% (+25.6% y/y). Residential electric power costs were unchanged after a 3.0% January rise (8.8% y/y).
Intermediate goods prices eased 0.3% after the 1.2% January surge although core intermediate prices continued strong with a 0.5% advance.
Crude goods prices dropped sharply as crude energy prices tumbled 16.2% (+26.0% y/y). In March, the volatility in crude oil prices has left the average about even with last month. Core crude prices rose a sharp 3.3% on the strength of high prices for copper base scrap (59.4% y/y), aluminum scrap (30.3% y/y) and iron &amp; steel scrap (3.9% y/y). 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.
Reflections on the Yield Curve and Monetary Policy, remarks by Federal Reserve Board Chairman Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/BoardDocs/speeches/2006/20060320/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/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</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>-1.4%</td>
<td>0.2%</td>
<td>3.8%</td>
<td>4.9%</td>
<td>3.6%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.3%</td>
<td>0.4%</td>
<td>1.7%</td>
<td>2.4%</td>
<td>1.5%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-0.3%</td>
<td>1.2%</td>
<td>8.2%</td>
<td>8.0%</td>
<td>6.6%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.5%</td>
<td>1.0%</td>
<td>4.8%</td>
<td>5.5%</td>
<td>5.7%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-9.2%</td>
<td>-0.5%</td>
<td>12.8%</td>
<td>14.6%</td>
<td>17.5%</td>
<td>25.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>3.3%</td>
<td>-0.1%</td>
<td>11.9%</td>
<td>4.9%</td>
<td>26.5%</td>
<td>12.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Producer Price Index for Finished Goods fell 1.4% last month. It was the largest decline in the index since April 2003 and easily outpaced Consensus expectations for a 0.3% decline. Producer prices less food & energy (core), [...]

Producer Price Index Down, Core Prices Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321a.jpg" width="353">
The Producer Price Index for Finished Goods fell 1.4% last month. It was the largest decline in the index since April 2003 and easily outpaced Consensus expectations for a 0.3% decline.
Producer prices less food &amp; energy (core), however, rose 0.3% and were stronger than expectations for a 0.1% increase. The gain was boosted by strength in floor coverings (9.4% y/y), mobile homes (4.9% y/y), construction machinery (6.6% y/y), power transformers (9.7% y/y), heavy motor trucks (4.1% y/y) and civilian aircraft (4.3% y/y).
Prices of all finished consumer goods less food &amp; energy rose 0.2% (1.8% y/y) and core consumer nondurable goods prices increased 0.4% (2.8% y/y). Capital equipment prices increased a modest 0.1% (1.5% y/y), held back by another decline in electronic computer prices (-22.6% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321b.jpg" width="353">
Finished energy prices slumped 4.7% (+16.9% y/y) during February as gasoline prices dropped 11.0% (+18.4% y/y). Home heating oil also fell by 1.1% (+29.0% y/y) along with natural gas prices which fell 4.1% (+25.6% y/y). Residential electric power costs were unchanged after a 3.0% January rise (8.8% y/y).
Intermediate goods prices eased 0.3% after the 1.2% January surge although core intermediate prices continued strong with a 0.5% advance.
Crude goods prices dropped sharply as crude energy prices tumbled 16.2% (+26.0% y/y). In March, the volatility in crude oil prices has left the average about even with last month. Core crude prices rose a sharp 3.3% on the strength of high prices for copper base scrap (59.4% y/y), aluminum scrap (30.3% y/y) and iron &amp; steel scrap (3.9% y/y). 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.
Reflections on the Yield Curve and Monetary Policy, remarks by Federal Reserve Board Chairman Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/BoardDocs/speeches/2006/20060320/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/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</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>-1.4%</td>
<td>0.2%</td>
<td>3.8%</td>
<td>4.9%</td>
<td>3.6%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.3%</td>
<td>0.4%</td>
<td>1.7%</td>
<td>2.4%</td>
<td>1.5%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-0.3%</td>
<td>1.2%</td>
<td>8.2%</td>
<td>8.0%</td>
<td>6.6%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.5%</td>
<td>1.0%</td>
<td>4.8%</td>
<td>5.5%</td>
<td>5.7%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-9.2%</td>
<td>-0.5%</td>
<td>12.8%</td>
<td>14.6%</td>
<td>17.5%</td>
<td>25.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>3.3%</td>
<td>-0.1%</td>
<td>11.9%</td>
<td>4.9%</td>
<td>26.5%</td>
<td>12.4%</td>
</tr>
</tbody>
</table>
Chain Store Sales Flat 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 21, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321c.jpg" width="353">
Chain store sales slipped 0.1% lower last week after the prior period&#39;s 0.1% up tick, according to the International Council of Shopping Centers (ICSC)-UBS survey.
The average level of sales so far in March is 1.4% ahead of the February average which rose 1.1% from January.
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 slipped 0.3% and in March is a scant 0.1% ahead of February.
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.

<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">03/18/06</th>
<th scope="col">03/11/06</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>470.0</td>
<td>470.5</td>
<td>3.4%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
 Early Indicators Pointing to Good First Quarter for Finland 
by <a href="/comment/Curley.html">Louise Curley</a> March 21, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321d.jpg" width="353">
Indicators released today are pointing to an increase in the rate of growth of Finland&#39;s GDP in the first quarter from the 0.91% rate of the fourth quarter of 2005. The trend of the monthly total production series, which is a good indicator of Finland&#39;s Gross Domestic Product increased 0.18% in January from December and 2.61% from January, 2005. The first chart plots the monthly index of total production with the quarterly values of real GDP to show the leading characteristic of the monthly series. To show that the total production index is a good indicator of GDP, we have aggregated the monthly series quarterly and compared it with the quarterly GDP data as shown in the second chart. The correlation between the two series is .99.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321e.jpg" width="353">
Another sign of increased activity in the first quarter is the rising trend of employment. In Finland, many series, the total production series noted above and some of the labor force data, are reported on seasonally adjusted basis. Instead of computing seasonally adjusted data, Finland computes trends of the unadjusted data. The third chart shows the trend and seasonally unadjusted data for employment. The trend continues to rise in January and February.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321f.jpg" width="353">

<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/NORDIC/@NF/@NF.HTM">Finland</a></th>
<th scope="col">Jan 06</th>
<th scope="col">Dec 05</th>
<th scope="col">Jan 05</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2005&nbsp; </th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">TOTAL PRODUCTION (2000=100)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Seasonally Unadjusted</td>
<td>108.6</td>
<td>115.7</td>
<td>105.1</td>
<td>-6.14</td>
<td>3.33</td>
<td>111.9</td>
<td>109.6</td>
<td>105.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Trend</td>
<td>113.8</td>
<td>113.6</td>
<td>110.9</td>
<td>0.18</td>
<td>2.61</td>
<td>112.1</td>
<td>109.2</td>
<td>105.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;</td>
<td>Feb 06</td>
<td>Jan 06</td>
<td>Feb 05</td>
<td>M/M %</td>
<td>Y/Y %</td>
<td>2005&nbsp; </td>
<td>2004&nbsp;</td>
<td>2003&nbsp;&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">EMPLOYMENT (000)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Seasonally Unadjusted</td>
<td>&nbsp;2395</td>
<td>2353&nbsp;</td>
<td>2348&nbsp;</td>
<td>1.78&nbsp;</td>
<td>2.00&nbsp;</td>
<td>2401&nbsp;</td>
<td>2365&nbsp;</td>
<td>2365&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Trend</td>
<td>2436</td>
<td>2433</td>
<td>2385</td>
<td>0.12</td>
<td>2.14</td>
<td>2401</td>
<td>2364</td>
<td>2366</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/060320c.jpg" width="353">
Producer prices in Germany rose 0.7% in February. Prices of intermediate goods were up 0.56%, those of investment goods fell 0.10% and prices of consumer goods were unchanged. The rise was due almost entirely to continued rising energy costs. As the first chart shows, energy price increases have greatly exceeded those of the index excluding construction and energy since early 2005, widening the gap between the two series
The rise in February was larger than expected and is likely to increase inflation concerns of the European Central Bank (ECB). The ECB has already raised its key interest rate from 2%, which had been in place since June 2003, to 2.25% last December and again in March to 2.5%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060320d.jpg" width="353">
While the ECB focuses on the consumer price index, it is mindful of the potential impact that rising producer prices may have on consumer prices. The second chart shows the course of consumer and producer prices over the past five years.The rise in producer prices over the past year has been bigger and more persistent than previous rises and is, therefore, more likely to have a significant impact on consumer prices.
Even if energy prices should stabilize or decline, these second-round effects of the high energy prices could soon begin to affect consumer prices particularly as the economy continues to show signs of increased activity. Early this month, February new orders, both foreign and domestic were reported to have increased and last week, Manpower reported that German employers intended to increase employment in the first two quarters of this year.

<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/@D4/@D45/@D45.HTM">German Producer&nbsp; Price Index (2000=100)</a></th>
<th scope="col">Feb 06</th>
<th scope="col">Jan 06</th>
<th scope="col">Feb 05</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2005&nbsp; </th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total ex construction</td>
<td>114.9</td>
<td>114.1</td>
<td>108.5</td>
<td>0.70</td>
<td>5.89</td>
<td>110.7</td>
<td>105.8</td>
<td>104.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Intermediate goods&nbsp;</td>
<td>108.2</td>
<td>107.6</td>
<td>106.4</td>
<td>0.56</td>
<td>1.69</td>
<td>106.5</td>
<td>103.2</td>
<td>100.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Investment goods</td>
<td>103.3</td>
<td>103.4</td>
<td>102.9</td>
<td>-0.10</td>
<td>0.39</td>
<td>103.0</td>
<td>102.1</td>
<td>101.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer goods</td>
<td>107.7</td>
<td>107.7</td>
<td>106.4</td>
<td>0.00</td>
<td>1.22</td>
<td>106.9</td>
<td>105.2</td>
<td>104.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Energy</td>
<td>148.8</td>
<td>145.8</td>
<td>121.2</td>
<td>2.06</td>
<td>22.77</td>
<td>131.5</td>
<td>115.4</td>
<td>112.6</td>
</tr>
<tr>
<td class="firstcol">Total ex construction &amp; energy&nbsp;</td>
<td>106.7&nbsp;</td>
<td>106.4</td>
<td>105.5</td>
<td>0.28&nbsp;</td>
<td>1.14&nbsp;</td>
<td>105.5&nbsp;</td>
<td>103.5&nbsp;</td>
<td>102.0&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Consumer Price Index</td>
<td>109.4</td>
<td>109.2</td>
<td>107.1</td>
<td>0.18</td>
<td>2.15</td>
<td>108.3</td>
<td>106.2</td>
<td>104.5</td>
</tr>
</tbody>
</table>
</body>
</html>

Producer prices in Germany rose 0.7% in February. Prices of intermediate goods were up 0.56%, those of investment goods fell 0.10% and prices of consumer goods were unchanged. The rise was due almost entirely to continued rising [...]

Inflation at the Producer Level Heats up in Germany

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060320a.jpg" width="353">
The weekly leading index of the US economy published by the Economic Cycle Research Institute (ECRI) slipped 0.1% last week. The decline was the fifth in the last six weeks and lowered the index&#39;s six month growth rate to 3.0% from an early February high of 5.1%.
During the last ten years there has been a 53% correlation between the change in the weekly leading index and US real GDP growth during the following quarter. The correlation has risen to 71% during the last five years.
The very recent deceleration in the leaders&#39; growth follows improvement early this year. That slowdown mirrors the pattern of slightly slower growth in the leading series from the Conference Board and the OECD.
Visit the <a href="http://www.businesscycle.com/">Economic Cycle Research Institute</a> for analysis of US and international business cycles.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Economic Cycle Research Institute&nbsp;</th>
<th scope="col">3/10/06</th>
<th scope="col">12/30/05</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>
<td class="firstcol">Weekly Leading Index</td>
<td>136.8</td>
<td>135.7</td>
<td>0.8%</td>
<td>134.5</td>
<td>132.6</td>
<td>124.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; 6 Month Growth Rate</td>
<td>3.0%</td>
<td>3.1%</td>
<td>&nbsp;</td>
<td>1.9%</td>
<td>4.2%</td>
<td>6.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

The weekly leading index of the US economy published by the Economic Cycle Research Institute (ECRI) slipped 0.1% last week. The decline was the fifth in the last six weeks and lowered the index's six month growth rate to 3.0% from an [...]

ECRI Leading Index: Momentum Strength Diminished

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060320b.jpg" width="353">
The Composite Index of Leading Economic Indicators fell 0.2% last month following four months of increase, reported the Conference Board. The decline about matched Consensus expectations for a 0.3% drop but it was accompanied by a revision to January which halved that month&#39;s gain to 0.5% from the 1.1% surge estimated initially.
During the last ten years there has been a 43% correlation between the six-month change in the leading indicators and quarterly growth in real GDP.
The breadth of one month gain amongst the 10 components of the leading index fell to 50% in February from 70% in January although over six months the breadth of gain in the leaders surged back to 90%.
Higher initial claims for unemployment insurance, easier vendor performance, lower consumer expectations and lower building permits made large negative contributions to last month&#39;s decline in the leading index.
The minimal 0.01 percentage point positive contribution from the spread between yields on the 10 year Treasury Note and the Fed funds rate was the was the second in two months. The method of calculating the contribution to the index from the interest rate yield spread has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators rose 0.3% following an unchanged reading for January, initially reported at +0.2%. All of the four component series rose both last month and during the last six months. During the last ten years there has been a 64% correlation between the change in the coincident indicators and real GDP.
The lagging indicators rose just 0.1% following a downwardly revised 0.5% January gain. Over the last six months, three quarters of the series&#39; components rose. The ratio of coincident to lagging indicators, a measure of actual economic performance versus excess, reversed most of the prior month&#39;s decline.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">6 Month Chg., AR</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">Leading</td>
<td>-0.2%</td>
<td>0.5%</td>
<td>4.7%</td>
<td>2.3%</td>
<td>7.4%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.3%</td>
<td>0.0%</td>
<td>2.0%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.1%</td>
<td>0.5%</td>
<td>3.7%</td>
<td>3.5%</td>
<td>0.0%</td>
<td>-0.0%</td>
</tr>
</tbody>
</table>
</body>
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The Composite Index of Leading Economic Indicators fell 0.2% last month following four months of increase, reported the Conference Board. The decline about matched Consensus expectations for a 0.3% drop but it was accompanied by a [...]

Leading Economic Indicators Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060320b.jpg" width="353">
The Composite Index of Leading Economic Indicators fell 0.2% last month following four months of increase, reported the Conference Board. The decline about matched Consensus expectations for a 0.3% drop but it was accompanied by a revision to January which halved that month&#39;s gain to 0.5% from the 1.1% surge estimated initially.
During the last ten years there has been a 43% correlation between the six-month change in the leading indicators and quarterly growth in real GDP.
The breadth of one month gain amongst the 10 components of the leading index fell to 50% in February from 70% in January although over six months the breadth of gain in the leaders surged back to 90%.
Higher initial claims for unemployment insurance, easier vendor performance, lower consumer expectations and lower building permits made large negative contributions to last month&#39;s decline in the leading index.
The minimal 0.01 percentage point positive contribution from the spread between yields on the 10 year Treasury Note and the Fed funds rate was the was the second in two months. The method of calculating the contribution to the index from the interest rate yield spread has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators rose 0.3% following an unchanged reading for January, initially reported at +0.2%. All of the four component series rose both last month and during the last six months. During the last ten years there has been a 64% correlation between the change in the coincident indicators and real GDP.
The lagging indicators rose just 0.1% following a downwardly revised 0.5% January gain. Over the last six months, three quarters of the series&#39; components rose. The ratio of coincident to lagging indicators, a measure of actual economic performance versus excess, reversed most of the prior month&#39;s decline.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">6 Month Chg., AR</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">Leading</td>
<td>-0.2%</td>
<td>0.5%</td>
<td>4.7%</td>
<td>2.3%</td>
<td>7.4%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.3%</td>
<td>0.0%</td>
<td>2.0%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.1%</td>
<td>0.5%</td>
<td>3.7%</td>
<td>3.5%</td>
<td>0.0%</td>
<td>-0.0%</td>
</tr>
</tbody>
</table>
ECRI Leading Index: Momentum Strength Diminished 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 20, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060320a.jpg" width="353">
The weekly leading index of the US economy published by the Economic Cycle Research Institute (ECRI) slipped 0.1% last week. The decline was the fifth in the last six weeks and lowered the index&#39;s six month growth rate to 3.0% from an early February high of 5.1%.
During the last ten years there has been a 53% correlation between the change in the weekly leading index and US real GDP growth during the following quarter. The correlation has risen to 71% during the last five years.
The very recent deceleration in the leaders&#39; growth follows improvement early this year. That slowdown mirrors the pattern of slightly slower growth in the leading series from the Conference Board and the OECD.
Visit the <a href="http://www.businesscycle.com/">Economic Cycle Research Institute</a> for analysis of US and international business cycles.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Economic Cycle Research Institute&nbsp;</th>
<th scope="col">3/10/06</th>
<th scope="col">12/30/05</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>
<td class="firstcol">Weekly Leading Index</td>
<td>136.8</td>
<td>135.7</td>
<td>0.8%</td>
<td>134.5</td>
<td>132.6</td>
<td>124.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; 6 Month Growth Rate</td>
<td>3.0%</td>
<td>3.1%</td>
<td>&nbsp;</td>
<td>1.9%</td>
<td>4.2%</td>
<td>6.7%</td>
</tr>
</tbody>
</table>
 Inflation at the Producer Level Heats up in Germany 
by <a href="/comment/Curley.html">Louise Curley</a> March 20, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060320c.jpg" width="353">
Producer prices in Germany rose 0.7% in February. Prices of intermediate goods were up 0.56%, those of investment goods fell 0.10% and prices of consumer goods were unchanged. The rise was due almost entirely to continued rising energy costs. As the first chart shows, energy price increases have greatly exceeded those of the index excluding construction and energy since early 2005, widening the gap between the two series
The rise in February was larger than expected and is likely to increase inflation concerns of the European Central Bank (ECB). The ECB has already raised its key interest rate from 2%, which had been in place since June 2003, to 2.25% last December and again in March to 2.5%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060320d.jpg" width="353">
While the ECB focuses on the consumer price index, it is mindful of the potential impact that rising producer prices may have on consumer prices. The second chart shows the course of consumer and producer prices over the past five years.The rise in producer prices over the past year has been bigger and more persistent than previous rises and is, therefore, more likely to have a significant impact on consumer prices.
Even if energy prices should stabilize or decline, these second-round effects of the high energy prices could soon begin to affect consumer prices particularly as the economy continues to show signs of increased activity. Early this month, February new orders, both foreign and domestic were reported to have increased and last week, Manpower reported that German employers intended to increase employment in the first two quarters of this year.

<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/@D4/@D45/@D45.HTM">German Producer&nbsp; Price Index (2000=100)</a></th>
<th scope="col">Feb 06</th>
<th scope="col">Jan 06</th>
<th scope="col">Feb 05</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2005&nbsp; </th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total ex construction</td>
<td>114.9</td>
<td>114.1</td>
<td>108.5</td>
<td>0.70</td>
<td>5.89</td>
<td>110.7</td>
<td>105.8</td>
<td>104.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Intermediate goods&nbsp;</td>
<td>108.2</td>
<td>107.6</td>
<td>106.4</td>
<td>0.56</td>
<td>1.69</td>
<td>106.5</td>
<td>103.2</td>
<td>100.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Investment goods</td>
<td>103.3</td>
<td>103.4</td>
<td>102.9</td>
<td>-0.10</td>
<td>0.39</td>
<td>103.0</td>
<td>102.1</td>
<td>101.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer goods</td>
<td>107.7</td>
<td>107.7</td>
<td>106.4</td>
<td>0.00</td>
<td>1.22</td>
<td>106.9</td>
<td>105.2</td>
<td>104.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Energy</td>
<td>148.8</td>
<td>145.8</td>
<td>121.2</td>
<td>2.06</td>
<td>22.77</td>
<td>131.5</td>
<td>115.4</td>
<td>112.6</td>
</tr>
<tr>
<td class="firstcol">Total ex construction &amp; energy&nbsp;</td>
<td>106.7&nbsp;</td>
<td>106.4</td>
<td>105.5</td>
<td>0.28&nbsp;</td>
<td>1.14&nbsp;</td>
<td>105.5&nbsp;</td>
<td>103.5&nbsp;</td>
<td>102.0&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Consumer Price Index</td>
<td>109.4</td>
<td>109.2</td>
<td>107.1</td>
<td>0.18</td>
<td>2.15</td>
<td>108.3</td>
<td>106.2</td>
<td>104.5</td>
</tr>
</tbody>
</table>
</body>
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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/060317c.jpg" width="353">
This morning, the Bureau of Labor Statistics published January employment and unemployment data for US metropolitan areas. These are contained in Haver&#39;s EMPLR database. The database includes labor force, employment, unemployment and unemployment rates for states, Census regions, metro areas and smaller municipalities. The data for states and some of the metro areas are available seasonally adjusted, but the data shown here for 8 selected large US metro areas are all not seasonally adjusted.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060317d.jpg" width="353">
We spoke yesterday and the day before about labor market conditions in Europe and commented that such conditions can vary widely, even in neighboring regions there. The same is true here, as seen in the differences between Los Angeles and San Francisco. The economies of these two West Coast cities surely have differing characters, and this appears in the employment trends and the level of the unemployment rates. Employment growth in LA has generally been stronger, but the unemployment rate in San Francisco tends to be lower.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060317e.jpg" width="353">
Denver, with a fairly consistent growth trend over the past several years nevertheless has an unemployment rate slightly higher than the national average, at least in the latest month. We are pleasantly surprised by the good growth in our own locale, New York City, over the past two years, a nice cyclical rebound after the 2001 recession and the developments associated with 9/11.
Such major non-economic events can have a pointed economic impact, of course. Hurricane Katrina was devastating to the economy of New Orleans, and these figures show how dramatic that has been. Employment in the New Orleans-Metairie-Kenner MSA is off by nearly 200,000 from a year ago. The unemployment rate there is more than 50% higher than for the nation as a whole. Notably, though, employment has edged upward in the last three months. The increase totals only 2,900, but it&#39;s certainly a step in the right direction for that city.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060317f.jpg" width="353">
Finally, Houston may be a beneficiary of migration out of New Orleans. Even though the September &quot;reference week&quot; for labor market data was very soon after the storm, that month showed a marked and unusual increase in the Houston area labor force. Compared with the total drop in New Orleans, this 24,700 increase is just a fraction, but September has often been a month when the Houston labor force declines, implying that a special factor was in play. A boost to employment in Houston seems to have come just in January, when the normal post-Christmas drop in the number employed did not take place, but instead held just about steady with December. In the previous 16 years of data, the smallest decrease in January was 14,000.
It is often said that &quot;all politics is local&quot;. The widely varying developments in labor markets reported this week in both entire adjoining countries and individual US cities suggest that much of economics must be local too. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
Jan 2006
<th scope="col">Mo/Mo % Chg</th>
<th scope="col">Jan 2005</th>
<th scope="col">Yr/Yr % Chg</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">Unemployment Rate</td>
<td>Number Employed</td>
</tr>
<tr>
<td class="firstcol">Total US</td>
<td>5.1</td>
<td>141,481</td>
<td>-1.0</td>
<td>138,682</td>
<td>2.0</td>
<td>1.8</td>
<td>1.1</td>
<td>0.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Los Angeles</td>
<td>4.9</td>
<td>6,117</td>
<td>-2.9</td>
<td>6,032</td>
<td>1.4</td>
<td>2.9</td>
<td>1.4</td>
<td>0.5</td>
</tr>
<tr>
<td class="firstcol">San Francisco</td>
<td>4.4</td>
<td>2,078</td>
<td>-3.1</td>
<td>2,067</td>
<td>0.5</td>
<td>2.2</td>
<td>-0.3</td>
<td>-2.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Denver</td>
<td>5.3</td>
<td>1,238</td>
<td>-0.3</td>
<td>1,222</td>
<td>1.3</td>
<td>1.2</td>
<td>2.1</td>
<td>1.6</td>
</tr>
<tr>
<td class="firstcol">Houston</td>
<td>5.6</td>
<td>2,512</td>
<td>-0.0</td>
<td>2,422</td>
<td>3.7</td>
<td>2.4</td>
<td>1.4</td>
<td>0.9</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orleans</td>
<td>7.8</td>
<td>394</td>
<td>0.2</td>
<td>582</td>
<td>-32.4</td>
<td>-9.6</td>
<td>1.5</td>
<td>0.2</td>
</tr>
<tr>
<td class="firstcol">Chicago</td>
<td>5.6</td>
<td>4,466</td>
<td>-0.2</td>
<td>4,440</td>
<td>0.6</td>
<td>0.8</td>
<td>1.2</td>
<td>-0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Boston</td>
<td>4.7</td>
<td>2,317</td>
<td>-1.4</td>
<td>2,311</td>
<td>0.2</td>
<td>0.1</td>
<td>0.0</td>
<td>-1.3</td>
</tr>
<tr>
<td class="firstcol">New York</td>
<td>5.1</td>
<td>8,742</td>
<td>-0.5</td>
<td>8,570</td>
<td>2.0</td>
<td>1.6</td>
<td>1.3</td>
<td>-0.2</td>
</tr>
</tbody>
</table>
</body>
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This morning, the Bureau of Labor Statistics published January employment and unemployment data for US metropolitan areas. These are contained in Haver's EMPLR database. The database includes labor force, employment, unemployment and [...]

"All Economics Is Local": Labor Markets in US Cities

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060317b.jpg" width="353">
The index of consumer sentiment remained unchanged early this month versus February at 86.7, according to the University of Michigan. Consensus expectations for an increase to 88.0.
Sentiment figures are not seasonally adjusted and 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 index ticked up 0.6% m/m after a 4.3% decline during February. The index of personal finances rose just 0.9% (-3.4% y/y) after the 5.1% February collapse and the reading of buying conditions for large household goods remained unchanged (-0.6% y/y). Consumers&#39; assessment of gov&#39;t economic policy fell to the lowest level this year. The index level of 80 (-14.0% y/y) compared to an average of 88 during 2005.
Consumer expectations slipped 0.4% from February, the third consecutive monthly decline. The economic outlook deteriorated sharply with the index of expected business conditions during the next twelve months off 5.2% (-12.5% y/y).
The mean expected inflation rate for the next twelve months rose m/m to 3.8%, still well below the 5.5% expected in October &amp; September.
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.
Consumer Sentiment, the Economy, and the News Media from the Federal Reserve board can be found <a href="http://www.federalreserve.gov/pubs/feds/2004/200451/200451abs.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/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">March (p)</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">Consumer Sentiment</td>
<td>86.7</td>
<td>86.7</td>
<td>-6.4%</td>
<td>88.6</td>
<td>95.2</td>
<td>87.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>106.2</td>
<td>105.6</td>
<td>-1.7%</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>74.2</td>
<td>74.5</td>
<td>-10.4%</td>
<td>77.4</td>
<td>88.5</td>
<td>81.4</td>
</tr>
</tbody>
</table>
</body>
</html>

The index of consumer sentiment remained unchanged early this month versus February at 86.7, according to the University of Michigan. Consensus expectations for an increase to 88.0. Sentiment figures are not seasonally adjusted and [...]

U.S. Consumer Sentiment Unchanged

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

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

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The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) rose 0.6% (-3.6% y/y) during the four weeks ended May 9, 2025. The improvement followed sharp declines in April.

Miscellaneous group prices increased 2.4% (5.9% y/y) over the last four weeks. Natural rubber price soared 13.9% (11.7% y/y). The price of tallow (used in the soap industry) rose 10.6% (41.3% y/y) in four weeks but the cost of framing lumber declined 5.6%, but rose 7.3% y/y.

Prices in the Metals group edged 0.2% higher (-7.3% y/y) over the most recent four weeks. Variation in pricing was wide. Copper scrap prices rose 7.4% (-3.3% y/y) while lead costs rose 4.0% in four weeks (-11.1% y/y). The cost of aluminum increased 2.3% in four weeks, off 4.4% y/y. Working lower, the cost of steel scrap declined 8.1% (-11.6% y/) in four weeks while tin prices followed with a 4.9% decline (-2.9% y/y). Zinc prices eased 0.7% in four weeks and declined 10.3% y/y.

Crude Oil & Benzene group prices edged 0.1% higher (-19.4% y/y) in four weeks. The cost of West Texas Intermediate crude oil weakened 4.0% to $58.50 per barrel and was 25.6% lower y/y. The cost of the petrol-chemical benzene, used for making plastics & synthetic fibers, strengthened 8.5% (-41.8% y/y) in the last four weeks. Excluding crude oil, the industrial commodity price index rose 0.9% (-2.1% y/y) during the last four weeks.

Textile group prices edged 0.9% lower (-0.5% y/y) during the last four weeks. Burlap costs declined 14.3% (+7.4% y/y) but the cost of cotton rose 4.5% (-7.7% y/y) over four weeks.

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

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- Metals prices are mixed.
- Crude oil prices fall sharply.
- Textile prices ease.

FIBER: Industrial Commodity Price Movement Diverges in Latest Four Weeks

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Wholesale trade inventories increased 0.4% (2.2% y/y) during March after rising 0.5% in February, revised from 0.3% after a 0.8% January rise. The increase compared to expectations for a 0.5% rise in the Informa Global Markets Survey and compared to a 0.6% gain in the advance report issued two weeks ago.

Durable goods inventories rose 0.6% in March (1.5% y/y) after rising 0.5% in February. Machinery inventories, the largest sector, increased 0.6% (1.7% y/y) while inventories of motor vehicles & parts, the second largest grouping, rose 1.2% (0.8% y/y). Furniture inventories strengthened 2.7% (6.8% y/y) while electrical equipment inventories declined 1.0% (-3.1% y/y). Inventories of nondurable goods edged 0.1% higher (3.4% y/y). Drug inventories, which make up one-quarter of nondurable inventories, advanced 1.0% (4.6% y/y). Grocery inventories, the second largest category, rose 0.4% (8.3% y/y). Apparel inventories fell 0.8% (-6.5% y/y) and chemical inventories rose 2.1% both m/m and y/y. Petroleum inventories increased 0.7% (0.3% y/y).

Sales at the wholesale level rose 0.6% (6.1% y/y) in March after rising 2.0% in February and falling 0.9% in January. A 0.9% March rise had been expected in the Action Economics Forecast Survey.

Durable goods sales rose 1.0% (8.5% y/y) in March after strengthening 3.2% in February. Sales of electrical equipment & electronic goods, the largest sector, rose 2.5% (20.9% y/y), after a 2.3% rise. Professional and commercial equipment sales, which includes computers, rose 1.2% (11.9% y/y), while vehicle sales declined 1.0% (1.1% y/y). Sales of machinery improved 0.7% (4.2% y/y). Nondurable product sales rose 0.3% (3.9% y/y) in March after gaining 0.9% in February. Drug store sales, the largest category, increased 2.8% (13.4% y/y), while grocery store sales eased 0.2% (+4.3% y/y). Sales of apparel weakened 0.8% (+3.5% y/y) while paper sales declined 1.7% (0.5% y/y). Petroleum product sales fell 4.6% both m/m and y/y.

The inventory-to-sales (I/S) ratio at the wholesale level remained at 1.30 in March and has been moving lower for the last two years.

The wholesale I/S ratio for durable goods eased to 1.69 in March and also has been trending lower. The machinery ratio fell to 2.92 while motor vehicles rose to 1.78. The I/S ratio for nondurable goods slipped to 0.93 and remained down from 1.02 early in 2023. The drug industry ratio eased to 0.94. Apparel's I/S ratio held at 2.06, but remained below its 2.28 level one year earlier, and has been declining since early 2023. The petroleum industry I/S ratio rose to 0.33.

The wholesale trade figures are available in Haver's **USECON** database. The expectations figure for inventories is contained in the **MMSAMER** database. Expectations for sales are from the **AS1REPNA** database.

**Assessing Maximum Employment** from Federal Reserve Governor Adriana D. Kugler is available [here](https://www.federalreserve.gov/newsevents/speech/kugler20250509a.htm).

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- Inventories trend higher y/y.
- Sales increase broadly.
- Inventory-to-sales ratio steadies.

U.S. Wholesale Inventories & Sales Increase in March

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Nonfarm labor productivity fell 0.8% (SAAR) during Q1’25 after increasing 1.7% in Q4’24, revised from 1.5%. A 0.6% decline had been expected in the Action Economics Forecast Survey. It was the first productivity decline since Q2’22. The y/y increase during Q1 fell to 1.4% from 2.1% in Q4. It was below a 3.3% high in the first quarter of last year. Productivity fell as real value-added output dropped 0.3% last quarter (+2.2% y/y) after increasing 2.5% in Q4, and hours worked lengthened 0.6% (0.8% y/y) following a 0.8% gain.

Compensation per hour increased 4.8% last quarter following a 3.7% Q4 rise. Despite the strength of these last two increases, y/y growth decelerated to 2.7% from a 6.8% high one year earlier. Nevertheless, the productivity decline raised unit labor costs by 5.7% (1.3% y/y) in Q1 versus expectations for a 5.2% increase. It followed a 2.0% gain during Q4 and was the strongest quarterly increase in a year.

Factory sector productivity surged 4.5% (1.5% y/y) during Q1’25 following three consecutive increases of roughly 0.5%. This strength was accompanied by a 6.2% rise (2.2% y/y) in hourly compensation which came after two consecutive increases of approximately 4.1%. The strength in productivity lowered the rise in unit labor costs to 1.6% from 3.8% in Q4. The y/y gain fell to 0.7% from 2.0% in Q4 and stood below the 6.2% y/y increase in Q1’24.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

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- Productivity declines with lower output.
- Compensation surge exacerbates labor market stress.
- Factory sector productivity surge lessens cost pressure.

U.S. Productivity Declines in Q1’25; Unit Labor Costs Surge

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The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) rose 0.6% (3.2% y/y) in March to 103.2 after rising 0.9% to 102.6 in February and rising 0.8% in January to 101.7. The level of home affordability has risen 14.8% from its low of 89.9 in October 2023. It remains 42.4% below the high of 179.2 in April 2020.

The rise in affordability in March occurred as the median price of an existing single-family home rose 1.8% (2.9% y/y) to $408,000 which was offset by a decline in mortgage rates to 6.73% from 6.92% in February. The price compared to the record $432,900 in June 2024. The decline in mortgage rates compared to a recent low of 6.26% in September of last year and a 7.70% high during October of 2023. It remained well above a December 2020 low of 2.73%. These changes lowered the principal & interest payment by 0.2% (+1.1% y/y) to $2,113 per month. That was well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged a lessened 24.2% of income during March. They remained up from a low of 14.0% of income in April 2020.

The rise in housing costs in March was accompanied by improvement in median family income. It increased 0.4% (4.4% y/y) to a record $104,705 after rising 0.4% in February and 0.7% in January.

Housing affordability improved m/m across the country in March. The index edged 0.1% higher (2.8% y/y) to 134.5 in the Midwest. It remains the most affordable region of the country. In the South, the index 0.9% (5.4% y/y) to 106.6 and the affordability index in the Northeast increased 2.1% (-2.6% y/y) to 95.7. In the West, where homes are the least affordable, the index rose 0.8% (3.3% y/y) to 71.8 in March.

The Housing Affordability Index (HAI) equals 100 when a median-income borrower qualifies for an 80% mortgage on a median-priced existing single-family home. The HAI had exceeded 100 in each month since July 1990 and reached its all-time high of 213.3 in January 2013; since then, it fell below 100 for the first time in June 2022.

Data on Housing Affordability can be found in Haver’s **REALTOR** database. Median home sales prices are also available in **USECON**. Higher frequency interest rate data are found in **SURVEYS**, **WEEKLY**, and **DAILY**.

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- Home prices rise but mortgage rates decline.
- Median income improves.
- Affordability increases across the country.

U.S. Housing Affordability Improves Slightly in March

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Initial claims for unemployment insurance were 228,000 seasonally adjusted in the week ended May 3, down from 241,000 in the previous week, which was unrevised. For the latest week, the Action Economics Forecast Survey had expected a smaller decline to 233,000.

In the week ended April 26, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – was 1.879 million, down from 1.908 million in the April 19 week.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, returned to its longstanding rate of 1.2% in the April 26 week; this rate has held that amount since continuously since the week of January 6, 2024, except for the prior week’s 1.3%.

As we do highlight in every week’s discussion, economic conditions vary widely across individual states and territories. In the week ended April 19, the highest unemployment rates were in New Jersey and Rhode Island (both at 2.48%), California (2.26%), Washington (2.14%) and New York (1.85%). The lowest were in Florida (0.36%), South Dakota (0.37%), Alabama (0.41%), Virginia (0.45%) and Nebraska (0.47%). Rates in other notable states include Illinois (1.78%), Pennsylvania (1.53%) and Texas (1.14%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Continued claims for unemployment insurance decreased 29, 000 in the week ended April 26.
- Insured unemployment rate returns to longstanding 1.2%.
- Across the states, the insured unemployment rate ranges from 0.36% to 2.48%.

Economy in Brief

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Producer Price Index Down, Core Prices Firm

Producer Price Index Down, Core Prices Firm

Inflation at the Producer Level Heats up in Germany

ECRI Leading Index: Momentum Strength Diminished

Leading Economic Indicators Fell

Leading Economic Indicators Fell

"All Economics Is Local": Labor Markets in US Cities

U.S. Consumer Sentiment Unchanged