Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421e.jpg" width="353">
The number of mass layoff events last month ticked up 0.8% after sharp declines during the prior two months. During all of 1Q, the number of events fell 9.9% from 4Q 2005.
During the last ten years there has been a (negative) 87% correlation between the three month average level of layoff announcements and the y/y change in payroll employment.
The number of persons affected in December by mass layoffs increased a larger 6.4% during March after a 2.9% February rise. Nevertheless, the 1Q level was down 9.7% from 4Q 2005. Layoffs in the transportation equipment sector (+10.4% y/y) have been significant and quite volatile m/m.
The Mass Layoff Statistics (MLS) program collects reports on mass layoff actions that result in workers being separated from their jobs. Monthly mass layoff numbers are from establishments which have at least 50 initial claims for unemployment insurance (UI) filed against them during a 5-week period.
Company mass layoffs: The &quot;other&quot; job shock from the Federal Reserve Bank of Minneapolis is available <a href="http://www.minneapolisfed.org/pubs/fedgaz/05-11/layoffs.cfm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Mass Layoffs</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>
<td class="firstcol">All US Industries (# Events, SA)</td>
<td>1,082</td>
<td>1,073</td>
<td>-10.1%</td>
<td>15,699</td>
<td>15,926</td>
<td>19,220</td>
</tr>
<tr>
<td class="firstcol">Total (# Persons, SA)</td>
<td>118,555</td>
<td>111,468</td>
<td>-11.5%</td>
<td>1,722,452</td>
<td>1,591,081</td>
<td>1,946,548</td>
</tr>
</tbody>
</table>
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The number of mass layoff events last month ticked up 0.8% after sharp declines during the prior two months. During all of 1Q, the number of events fell 9.9% from 4Q 2005. During the last ten years there has been a (negative) 87% [...]

Mass Layoffs Remained Low in March

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421a.jpg" width="353">
The Federal Reserve Bank of Chicago indicated that the National Activity Index (CFNAI) recovered during March to 0.37 from 0.19 in February. The three-month moving average of the CFNAI, however, fell slightly to 0.29 from 0.34.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth and during the last twenty years there has been a 68% correlation between the level of the CFNAI and q/q growth in real GDP.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.
The latest CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_April2006.pdf">here</a>.
Yield Curve Inversions and Cyclical Peaks from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20060501/cover.pdf"> 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/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>0.37</td>
<td>0.19</td>
<td>-0.21</td>
<td>0.20</td>
<td>0.37</td>
<td>-0.11</td>
</tr>
</tbody>
</table>
</body>
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The Federal Reserve Bank of Chicago indicated that the National Activity Index (CFNAI) recovered during March to 0.37 from 0.19 in February. The three-month moving average of the CFNAI, however, fell slightly to 0.29 from 0.34. A zero [...]

Chicago Fed Nat'l Activity Index Recovered

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421b.jpg" width="353">
The Philadelphia Fed Index of General Business Conditions in the manufacturing sector during April rose slightly to 13.2 from an unrevised 12.3 last month. The 0.9 point m/m increase fell somewhat short of Consensus expectations for a rise to 14.8.
During the last ten years there has been a 65% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 49% correlation with q/q growth in real GDP.
Declines in the sub indexes again were broad based as new orders reversed all of the jump during March and shipments reversed the gains of the prior two months. Moving in the other direction, the index covering the number of employees surged to the highest level (21.7) since late 2004. During the last ten years there has been a 75% correlation between the employment index and the three month growth in factory payrolls.
The business conditions index reflects a separate survey question, not the sub indexes.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421c.jpg" width="353">
The prices paid index recovered virtually all of last month&#39;s decline. During the last ten years there has been a 76% correlation between the prices paid index and the three month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months recovered nearly all of last month&#39;s decline and rose to 28.2, near the highs of the last year. Expectations for employment recovered moderately.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0406.html">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/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</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>
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</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>13.2</td>
<td>12.3</td>
<td>24.6</td>
<td>12.4</td>
<td>28.0</td>
<td>10.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>29.0</td>
<td>17.2</td>
<td>47.6</td>
<td>43.5</td>
<td>51.2</td>
<td>16.8</td>
</tr>
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The Philadelphia Fed Index of General Business Conditions in the manufacturing sector during April rose slightly to 13.2 from an unrevised 12.3 last month. The 0.9 point m/m increase fell somewhat short of Consensus expectations for a [...]

Philadelphia Fed Business Activity Index Up Slightly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421b.jpg" width="353">
The Philadelphia Fed Index of General Business Conditions in the manufacturing sector during April rose slightly to 13.2 from an unrevised 12.3 last month. The 0.9 point m/m increase fell somewhat short of Consensus expectations for a rise to 14.8.
During the last ten years there has been a 65% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 49% correlation with q/q growth in real GDP.
Declines in the sub indexes again were broad based as new orders reversed all of the jump during March and shipments reversed the gains of the prior two months. Moving in the other direction, the index covering the number of employees surged to the highest level (21.7) since late 2004. During the last ten years there has been a 75% correlation between the employment index and the three month growth in factory payrolls.
The business conditions index reflects a separate survey question, not the sub indexes.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421c.jpg" width="353">
The prices paid index recovered virtually all of last month&#39;s decline. During the last ten years there has been a 76% correlation between the prices paid index and the three month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months recovered nearly all of last month&#39;s decline and rose to 28.2, near the highs of the last year. Expectations for employment recovered moderately.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0406.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/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</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>
<td class="firstcol">General Activity Index</td>
<td>13.2</td>
<td>12.3</td>
<td>24.6</td>
<td>12.4</td>
<td>28.0</td>
<td>10.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>29.0</td>
<td>17.2</td>
<td>47.6</td>
<td>43.5</td>
<td>51.2</td>
<td>16.8</td>
</tr>
</tbody>
</table>
Chicago Fed Nat'l Activity Index Recovered 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 21, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421a.jpg" width="353">
The Federal Reserve Bank of Chicago indicated that the National Activity Index (CFNAI) recovered during March to 0.37 from 0.19 in February. The three-month moving average of the CFNAI, however, fell slightly to 0.29 from 0.34.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth and during the last twenty years there has been a 68% correlation between the level of the CFNAI and q/q growth in real GDP.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.
The latest CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_April2006.pdf">here</a>.
Yield Curve Inversions and Cyclical Peaks from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20060501/cover.pdf"> 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/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>0.37</td>
<td>0.19</td>
<td>-0.21</td>
<td>0.20</td>
<td>0.37</td>
<td>-0.11</td>
</tr>
</tbody>
</table>
Mass Layoffs Remained Low in March 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 21, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421e.jpg" width="353">
The number of mass layoff events last month ticked up 0.8% after sharp declines during the prior two months. During all of 1Q, the number of events fell 9.9% from 4Q 2005.
During the last ten years there has been a (negative) 87% correlation between the three month average level of layoff announcements and the y/y change in payroll employment.
The number of persons affected in December by mass layoffs increased a larger 6.4% during March after a 2.9% February rise. Nevertheless, the 1Q level was down 9.7% from 4Q 2005. Layoffs in the transportation equipment sector (+10.4% y/y) have been significant and quite volatile m/m.
The Mass Layoff Statistics (MLS) program collects reports on mass layoff actions that result in workers being separated from their jobs. Monthly mass layoff numbers are from establishments which have at least 50 initial claims for unemployment insurance (UI) filed against them during a 5-week period.
Company mass layoffs: The &quot;other&quot; job shock from the Federal Reserve Bank of Minneapolis is available <a href="http://www.minneapolisfed.org/pubs/fedgaz/05-11/layoffs.cfm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Mass Layoffs</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>
<td class="firstcol">All US Industries (# Events, SA)</td>
<td>1,082</td>
<td>1,073</td>
<td>-10.1%</td>
<td>15,699</td>
<td>15,926</td>
<td>19,220</td>
</tr>
<tr>
<td class="firstcol">Total (# Persons, SA)</td>
<td>118,555</td>
<td>111,468</td>
<td>-11.5%</td>
<td>1,722,452</td>
<td>1,591,081</td>
<td>1,946,548</td>
</tr>
</tbody>
</table>
Consumer Prices in Asia 
by <a href="/comment/Stone.html">Carol Stone</a> April 21, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421f.jpg" width="353">
The inflation picture in Asia is harder to interpret than that in Europe because the economies have such different structures and the data collection and definitions are less standardized. Three countries reporting today for March show widely varying patterns of consumer price behavior.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421g.jpg" width="353">
In China, the overall CPI trend shows quite modest gains over the last couple of months, and inflation has definitely slowed from a couple of years ago. Prices of household goods and services are headed higher, which may reflect heating costs, and clothing price changes are distinctly less negative than before. But tobacco and alcohol products, recreation and culture and shelter are slowing down. These outweigh the firming tendencies, so, at just 0.8% year-to-year in March, total CPI inflation in China is the lowest since mid-2003.
In Hong Kong, consumer prices have turned up after a period of outright deflation from 1999 through mid-2004. This too may be energy related as transportation and housing costs are the main movers. Clothing and alcohol and tobacco, though, are exerting downward pressure and durable goods prices are maintaining a steady downward trend at about a 2.5% annual rate. So, while inflation has returned in Hong Kong, it seems to be sustained at a quite moderate pace.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060421h.jpg" width="353">
India encompasses at least two completely different economies, the urban sector and the rural. Inflation in both is presently about equal, however, with the CPI for rural laborers running at 5.3%, year-on-year, in March and 4.7% in February; this follows 4.9% in 2005 and is considerably higher than the 3% range that prevailed in prior years. The current pace is similar for &quot;urban non-manual employees&quot;, at 4.8% in February, although off somewhat from the 5.7% rate for 2005. While we might be concerned over the seemingly rapid pace of Indian inflation at present, it compares quite favorably with 7%-10% rates during the 1980s and 1990s.
These data are all found in Haver&#39;s EMERGEPR database, which we maintain directly from country sources. Regional data for China are carried in the premium CHINA database which we market from CEIC, prominent economic consultants in Asia.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGEPR/@PQ/@PQ5/@PQ51/@PQ51.HTM">Yr/Yr % Change, NSA</a></th>
<th scope="col">Mar 2006</th>
<th scope="col">Feb 2006</th>
<th scope="col">Jan 2006</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">China</td>
<td>0.8</td>
<td>0.9</td>
<td>1.9</td>
<td>1.6</td>
<td>2.4</td>
<td>3.2</td>
<td>-0.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Hong Kong</td>
<td>1.8</td>
<td>1.6</td>
<td>2.6</td>
<td>1.8</td>
<td>0.2</td>
<td>-1.9</td>
<td>-1.6</td>
</tr>
<tr>
<td class="firstcol">India: Rural Laborers</td>
<td>5.3</td>
<td>4.7</td>
<td>4.7</td>
<td>4.9</td>
<td>3.0</td>
<td>3.1</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">India: Urban Non-Manual Employees </td>
<td>--</td>
<td>4.8</td>
<td>5.0</td>
<td>5.7</td>
<td>3.6</td>
<td>4.0</td>
<td>2.8</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/060420e.jpg" width="353">
In March, consumer price inflation in Europe and North America eased or remained steady. Core inflation is also quiescent.
For the Euro-Zone12, the total CPI was up just 2.2% from a year ago, less than in 2005 and 2004. The core rate, which excludes food, energy, alcohol and tobacco, was a mere 1.3%; this is up very slightly from February and January, but equal to or lower than the last few years.
UK inflation is holding below 2.0% as March&#39;s figure eased 0.2% from February to 1.8%. Its core rate was also 0.2% lower, at 1.2% from 1.4% and for all of last year, 1.3%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420f.jpg" width="353">
Incredibly, Austria&#39;s CPI has risen only 0.8% over the past year. In that country, health costs, transportation and communications, and education and recreation costs are all running slower; this is a fairly diverse group, indicating that no single factor is responsible for the slow pace.
Canada&#39;s CPI has been running just above a 2% trend for about three years. Its core, defined to exclude just food and energy, is edging a bit higher, but at 1.5% in March, is still quite temperate.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420g.jpg" width="353">
Finally, it is interesting to note that the high-inflation nation here is the US, with a year-on-year rate of 3.4% and the core at 2.1%. Yesterday, Tom Moeller described the month-to-month changes, which showed gains in a couple of categories coming off declines in February. Even so, the 12-month rate actually eased, similar to other countries, and the core rate was steady at 2.1% for a third straight month. Notably, the BLS has started to compile US CPI using the same structure as the Europeans, the so-called &quot;harmonized index of consumer prices&quot; or &quot;HICP&quot;. On this basis, US inflation is higher still, at 3.7% in March, but it is no worse than 2005&#39;s similar number or 2004&#39;s 3.5%.
We continue to monitor these CPIs around the world for evidence that energy costs are pushing up other non-energy prices. So far, while it may &quot;feel&quot; to some of us, as consumers, that &quot;things&quot; are getting more expensive, the data everywhere show remarkable moderation in pricing of non-energy goods and services. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/G10/@GZ/@GZ5/@GZ5.HTM">NSA, Yr/Yr % Changes</a></th>
<th scope="col">Mar 2006</th>
<th scope="col">Feb 2006</th>
<th scope="col">Jan 2006</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Euro-Zone12</td>
<td>2.2</td>
<td>2.4</td>
<td>2.4</td>
<td>2.3</td>
<td>2.3</td>
<td>2.0</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Core*</td>
<td>1.3</td>
<td>1.2</td>
<td>1.2</td>
<td>1.3</td>
<td>1.9</td>
<td>1.6</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>1.8</td>
<td>2.0</td>
<td>1.9</td>
<td>1.9</td>
<td>1.7</td>
<td>1.3</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Core*</td>
<td>1.2</td>
<td>1.4</td>
<td>1.2</td>
<td>1.3</td>
<td>1.3</td>
<td>0.9</td>
<td>1.8</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>0.8</td>
<td>1.2</td>
<td>1.2</td>
<td>1.5</td>
<td>2.9</td>
<td>1.3</td>
<td>1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Canada</td>
<td>2.2</td>
<td>2.2</td>
<td>2.8</td>
<td>2.2</td>
<td>2.1</td>
<td>2.0</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core**</td>
<td>1.5</td>
<td>1.4</td>
<td>1.4</td>
<td>1.3</td>
<td>1.4</td>
<td>1.0</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">US</td>
<td>3.4</td>
<td>3.6</td>
<td>4.0</td>
<td>3.4</td>
<td>3.3</td>
<td>1.9</td>
<td>2.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core**</td>
<td>2.1</td>
<td>2.1</td>
<td>2.1</td>
<td>2.2</td>
<td>2.2</td>
<td>1.1</td>
<td>1.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; HICP</td>
<td>3.7</td>
<td>4.0</td>
<td>4.5</td>
<td>3.7</td>
<td>3.5</td>
<td>1.8</td>
<td>2.2</td>
</tr>
</tbody>
</table>
</body>
</html>

In March, consumer price inflation in Europe and North America eased or remained steady. Core inflation is also quiescent. For the Euro-Zone12, the total CPI was up just 2.2% from a year ago, less than in 2005 and 2004. The core rate, [...]

Consumer Prices Remain Restrained through March in Europe & Canada

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420c.jpg" width="353">
The Conference Board reported that during March, the Composite Index of Leading Economic Indicators fell 0.1% following a 0.5% February decline that was deeper than initially reported. The decline compared to Consensus expectations for no change.
Six month growth in the leaders slipped to 2.9%, about the middle of the range during the last several months. 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 improved to 60% in March from a downwardly revised 40% during February.
Lower building permits and higher initial claims for unemployment insurance made the largest negative contributions to last month&#39;s decline in the leaders last month.
For the third consecutive month, the spread between yields on the 10 year Treasury Note and Fed funds made a minimal 0.01 percentage point positive contribution to the leaders. 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>. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420d.jpg" width="353">
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 0.2% following a like gain in February that was downwardly revised. All of the four component series rose 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 growth.
The lagging indicators increased 0.3% following an unrevised 0.1% February up tick. Last month, two thirds of the series&#39; components rose while the ratio of coincident to lagging indicators, a measure of actual economic performance versus excess, slipped in March.
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.
The latest World Economic Outlook from the International Monetary Fund can be found <a href="http://www.imf.org/external/pubs/ft/weo/2006/01/index.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/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>-0.1%</td>
<td>-0.5%</td>
<td>2.9%</td>
<td>2.3%</td>
<td>7.4%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2%</td>
<td>0.2%</td>
<td>4.4%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.3%</td>
<td>0.1%</td>
<td>2.5%</td>
<td>3.5%</td>
<td>0.0%</td>
<td>-0.0%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Conference Board reported that during March, the Composite Index of Leading Economic Indicators fell 0.1% following a 0.5% February decline that was deeper than initially reported. The decline compared to Consensus expectations [...]

Leading Economic Indicators Down For Second Month

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420a.jpg" width="353">
Initial claims for jobless insurance reversed about all of the prior week&#39;s rise with a 10,000 worker decline to 303,000. Consensus expectations had been for an unchanged reading at 313,000 claims versus the prior week&#39;s unrevised figure.
The latest figure covers the survey period for April nonfarm payrolls and claims fell 9,000 (-2.9%) from the March period.
During the last ten years there has been a (negative) 75% correlation between the level of initial jobless insurance claims and the m/m change in payroll employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420b.jpg" width="353">
The four-week moving average of initial claims slipped to 305,250 (-9.2% y/y).
Continuing claims for unemployment insurance rose 18,000 during the latest week following a revised 11,000 decline the prior week.
The insured rate of unemployment was stable at 1.9% where it&#39;s been for almost two months.
Are We Working Too Hard of Should We Be Working Harder? A Sample Model of Career Concerns from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/winter2006/foerstermartinez.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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">04/15/06</th>
<th scope="col">04/08/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>303</td>
<td>313</td>
<td>-3.8%</td>
<td>332</td>
<td>343</td>
<td>402</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,439</td>
<td>-7.6%</td>
<td>2,662</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for jobless insurance reversed about all of the prior week's rise with a 10,000 worker decline to 303,000. Consensus expectations had been for an unchanged reading at 313,000 claims versus the prior week's unrevised [...]

Initial Claims for Unemployment Insurance Drop

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420a.jpg" width="353">
Initial claims for jobless insurance reversed about all of the prior week&#39;s rise with a 10,000 worker decline to 303,000. Consensus expectations had been for an unchanged reading at 313,000 claims versus the prior week&#39;s unrevised figure.
The latest figure covers the survey period for April nonfarm payrolls and claims fell 9,000 (-2.9%) from the March period.
During the last ten years there has been a (negative) 75% correlation between the level of initial jobless insurance claims and the m/m change in payroll employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420b.jpg" width="353">
The four-week moving average of initial claims slipped to 305,250 (-9.2% y/y).
Continuing claims for unemployment insurance rose 18,000 during the latest week following a revised 11,000 decline the prior week.
The insured rate of unemployment was stable at 1.9% where it&#39;s been for almost two months.
Are We Working Too Hard of Should We Be Working Harder? A Sample Model of Career Concerns from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/winter2006/foerstermartinez.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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">04/15/06</th>
<th scope="col">04/08/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>303</td>
<td>313</td>
<td>-3.8%</td>
<td>332</td>
<td>343</td>
<td>402</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,439</td>
<td>-7.6%</td>
<td>2,662</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
Leading Economic Indicators Down For Second Month 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 20, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420c.jpg" width="353">
The Conference Board reported that during March, the Composite Index of Leading Economic Indicators fell 0.1% following a 0.5% February decline that was deeper than initially reported. The decline compared to Consensus expectations for no change.
Six month growth in the leaders slipped to 2.9%, about the middle of the range during the last several months. 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 improved to 60% in March from a downwardly revised 40% during February.
Lower building permits and higher initial claims for unemployment insurance made the largest negative contributions to last month&#39;s decline in the leaders last month.
For the third consecutive month, the spread between yields on the 10 year Treasury Note and Fed funds made a minimal 0.01 percentage point positive contribution to the leaders. 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>. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420d.jpg" width="353">
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 0.2% following a like gain in February that was downwardly revised. All of the four component series rose 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 growth.
The lagging indicators increased 0.3% following an unrevised 0.1% February up tick. Last month, two thirds of the series&#39; components rose while the ratio of coincident to lagging indicators, a measure of actual economic performance versus excess, slipped in March.
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.
The latest World Economic Outlook from the International Monetary Fund can be found <a href="http://www.imf.org/external/pubs/ft/weo/2006/01/index.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/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>-0.1%</td>
<td>-0.5%</td>
<td>2.9%</td>
<td>2.3%</td>
<td>7.4%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2%</td>
<td>0.2%</td>
<td>4.4%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.3%</td>
<td>0.1%</td>
<td>2.5%</td>
<td>3.5%</td>
<td>0.0%</td>
<td>-0.0%</td>
</tr>
</tbody>
</table>
Consumer Prices Remain Restrained through March in Europe & Canada 
by <a href="/comment/Stone.html">Carol Stone</a> April 20, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420e.jpg" width="353">
In March, consumer price inflation in Europe and North America eased or remained steady. Core inflation is also quiescent.
For the Euro-Zone12, the total CPI was up just 2.2% from a year ago, less than in 2005 and 2004. The core rate, which excludes food, energy, alcohol and tobacco, was a mere 1.3%; this is up very slightly from February and January, but equal to or lower than the last few years.
UK inflation is holding below 2.0% as March&#39;s figure eased 0.2% from February to 1.8%. Its core rate was also 0.2% lower, at 1.2% from 1.4% and for all of last year, 1.3%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420f.jpg" width="353">
Incredibly, Austria&#39;s CPI has risen only 0.8% over the past year. In that country, health costs, transportation and communications, and education and recreation costs are all running slower; this is a fairly diverse group, indicating that no single factor is responsible for the slow pace.
Canada&#39;s CPI has been running just above a 2% trend for about three years. Its core, defined to exclude just food and energy, is edging a bit higher, but at 1.5% in March, is still quite temperate.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060420g.jpg" width="353">
Finally, it is interesting to note that the high-inflation nation here is the US, with a year-on-year rate of 3.4% and the core at 2.1%. Yesterday, Tom Moeller described the month-to-month changes, which showed gains in a couple of categories coming off declines in February. Even so, the 12-month rate actually eased, similar to other countries, and the core rate was steady at 2.1% for a third straight month. Notably, the BLS has started to compile US CPI using the same structure as the Europeans, the so-called &quot;harmonized index of consumer prices&quot; or &quot;HICP&quot;. On this basis, US inflation is higher still, at 3.7% in March, but it is no worse than 2005&#39;s similar number or 2004&#39;s 3.5%.
We continue to monitor these CPIs around the world for evidence that energy costs are pushing up other non-energy prices. So far, while it may &quot;feel&quot; to some of us, as consumers, that &quot;things&quot; are getting more expensive, the data everywhere show remarkable moderation in pricing of non-energy goods and services. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/G10/@GZ/@GZ5/@GZ5.HTM">NSA, Yr/Yr % Changes</a></th>
<th scope="col">Mar 2006</th>
<th scope="col">Feb 2006</th>
<th scope="col">Jan 2006</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Euro-Zone12</td>
<td>2.2</td>
<td>2.4</td>
<td>2.4</td>
<td>2.3</td>
<td>2.3</td>
<td>2.0</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Core*</td>
<td>1.3</td>
<td>1.2</td>
<td>1.2</td>
<td>1.3</td>
<td>1.9</td>
<td>1.6</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>1.8</td>
<td>2.0</td>
<td>1.9</td>
<td>1.9</td>
<td>1.7</td>
<td>1.3</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Core*</td>
<td>1.2</td>
<td>1.4</td>
<td>1.2</td>
<td>1.3</td>
<td>1.3</td>
<td>0.9</td>
<td>1.8</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>0.8</td>
<td>1.2</td>
<td>1.2</td>
<td>1.5</td>
<td>2.9</td>
<td>1.3</td>
<td>1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Canada</td>
<td>2.2</td>
<td>2.2</td>
<td>2.8</td>
<td>2.2</td>
<td>2.1</td>
<td>2.0</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core**</td>
<td>1.5</td>
<td>1.4</td>
<td>1.4</td>
<td>1.3</td>
<td>1.4</td>
<td>1.0</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">US</td>
<td>3.4</td>
<td>3.6</td>
<td>4.0</td>
<td>3.4</td>
<td>3.3</td>
<td>1.9</td>
<td>2.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core**</td>
<td>2.1</td>
<td>2.1</td>
<td>2.1</td>
<td>2.2</td>
<td>2.2</td>
<td>1.1</td>
<td>1.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; HICP</td>
<td>3.7</td>
<td>4.0</td>
<td>4.5</td>
<td>3.7</td>
<td>3.5</td>
<td>1.8</td>
<td>2.2</td>
</tr>
</tbody>
</table>
</body>
</html>

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

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

Cost of transporting crude oil has soared to series high

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

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

Is recent drop in sentiment signaling softer growth ahead?

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

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

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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Total retail sales rose a larger-than-expected 1.7% m/m (+4.0% y/y) in March following an upwardly revised 0.7% m/m gain in February (previously +0.6% m/m) in February, according to data from the U.S. Census Bureau. The Action Economics Forecast Survey looked for a 1.4% m/m increase. Excluding autos, other sales soared 1.9% m/m (+5.5% y/y) in March after an upwardly revised 0.7% monthly gain in February (previously +0.5% m/m). The Action Economics Forecast Survey looked for a 1.4% m/m increase in sales excluding autos. The March increase in total sales was the largest monthly increase since last March while the March jump in ex-auto sales was the largest monthly gain since January 2023.

As expected, a 15.5% m/m surge in sales at gasoline stations, largely reflecting a previously reported 21.2% m/m jump in retail gasoline prices, accounted for much of the monthly increase in both overall and ex-auto sales in March. However, sales were solid even without gasoline sales. Total sales excluding gasoline rose 0.6% in March versus a 0.7% monthly gain in February. Sales excluding both autos and gasoline increased 0.6% m/m in March, the same rise as in February. Forecasters expected only a 0.2% m/m increase in sales ex both autos and gasoline.

The control group of sales (total sales excluding food services, autos, gasoline and building materials that the BEA uses to construct PCE in the national accounts) posted another solid increase in March, rising 0.7% m/m following an upwardly revised 0.6% monthly increase in February (previously +0.5% m/m). For all of Q1, control group sales were up 1.2% q/q, up from a 0.7% quarterly gain in Q4. This points to a somewhat surprising pickup in household spending growth when Q1 GDP is reported on April 30. Many analysts had feared that the sharp rise in gasoline prices would put significant stress on household finances and thereby slow spending. A possible explanation for the recent resilience of sales is larger income tax refunds this year owing to the OBBBA which reduced taxes during last year while the withholding tables were not adjusted until this year (resulting in more over-withholding last year).

Sales across major sectors generally posted solid gains in March. Auto sales rose 0.5% m/m on top of a 1.0% m/m increase in February. Furniture and appliance sales jumped 1.6%, the third consecutive monthly gain and the largest since December 2024. General merchandise store sales jumped 1.0% m/m, their largest monthly gain since April 2023. Nonstore retail sales increased 1.0% m/m in March, their third consecutive month with an increase of 1% or more. Building material and garden supply store sales rose 0.7% m/m in March, their fifth consecutive monthly increase. Sales at food and beverage stores increased 0.7% m/m in March, their first monthly gain in three months. By contrast, clothing sales were unchanged following a 2.8% monthly jump in February. Sales at sporting goods, book and music stores were also unchanged in March after a 0.7% monthly rise in February. Eating out sales edged up 0.1% m/m in March following a 0.5% m/m increase in February. The only major category posting a monthly decline in March was “miscellaneous” sales which fell 0.9% m/m but this was after 2.2% m/m gains in both January and February.

Retail sales data can be found in Haver’s **USECON** database. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- Total sales jumped 1.7% m/m in March with small upward revisions to January and February.
- Gasoline sales surged 15.5% m/m in March, but even excluding that increase, the remainder of retail sales rose 0.6% m/m.
- Excluding autos, sales soared 1.9% m/m in March with small upward revisions to January and February.
- Sales of the retail control group that is used to construct PCE rose 0.7% m/m in March and 1.2% q/q for all of Q1.

U.S. Retail Sales Jumped in March only Partly Due to Surging Gasoline Prices

Winnie Tapasanun

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The Pending Home Sales Index, a forward-looking measure of home sales based on contract signings, rose 1.5% m/m to 73.7 in March following an upwardly revised 2.5% gain in February (+1.8% initially) and a 1.0% decline in January (unrevised), according to the National Association of Realtors (NAR). March marked the second straight m/m rise and the highest index level since November (77.2). The year-on-year rate was -1.1% in March, the fourth consecutive negative y/y reading, compared to -0.1% in February and -2.1% in March 2025. The index had fallen 41.1% since its October 2021 high of 125.1.

The m/m rise in March pending home sales coincided with an increase in the average 30-year fixed mortgage rate to a three-month-high 6.18% in March after a 6-bps decline to 6.05% in February. These rates, while below a peak of 7.62% in October 2023, had remained above a low of 5.22% in August 2022 and more than double a record-low 2.68% in December 2020.

By region, March pending home sales showed a mixed performance. Sales in the Northeast rebounded 4.4% (-6.5% y/y) in March, the first m/m increase since November, after a 2.6% decrease in February. Sales in the South rose 3.9% (2.3% y/y) following a 3.5% February rise and two successive m/m declines. Sales in the West dropped 2.6% (-1.7% y/y) after a 0.9% February increase, and sales in the Midwest fell 1.3% (-3.1% y/y) after a 5.5% February gain; both regions declined m/m for the first time since December.

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.

- PHSI +1.5% m/m (-1.1% y/y) to 73.7 in Mar., highest level since Nov.
- Home sales m/m up in the Northeast (+4.4%) and South (+3.9%); down in the Midwest (-1.3%) and West (-2.6%).
- Home sales y/y down in the Northeast (-6.5%), Midwest (-3.1%), and West (-1.7%); up in the South (+2.3%).

U.S. Pending Home Sales Up for Second Consecutive Month in March

Robert Brusca

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The overarching survey indicator for March stepped up despite enhanced global challenges. The March headline index rose to 99.3 from 98 in both January and February.

The March level of the headline compares to a 12-month average of 97.2. Nearly all the components in March are above their 12-month averages. The exception is the output change, which is substantially weaker than its 12-month average. Expected production, at 3.1 in March, is just a tick below its 12 month average of 3.2. Finally, expected employment in March is tied with its 12-month average.

In addition, only 3 readings weaker month-to-month in March were output change, expected production, and expected employment.

On the month, output change is a weak reading, falling by 3.5 points month-to-month; it may be the clearest example of the report showing weakness ahead, affected by upcoming global issues related to the war and rising oil and energy prices.

In addition to output change, expected production slipped to 3.1 in March from 4.8 in February. There was also a step back in expected employment, a modest one to 0.8 in March from 1.0 in February.

But order books showed a 10.2 reading in March, up from 5.6 in February. Changes in new foreign orders and total orders both showed more strength in March than in February, with foreign orders at 5.5 in March compared to 5.2 in February. The change in total orders, at 10.2 in March, was much stronger than 5.6 in February. Inventories registered 0.6 in March, up from -0.3 in February.

However, capacity space is being used up as capacity use rose to 77.0 in March from 76.6 in February.

The employment metric at 2.6 in March was much stronger than its zero reading in February.

On balance, the components indicate the sector is moving ahead as the headline gain suggests in March. But the major question mark is probably the strength in orders—which we take to be forward-looking compared to the setback in output change.

The index in March has a 64.1 percentile standing. Only three components in March ranked below their respective 50% marks (below their medians). The strongest readings generated standings in the 90th and mid-80th-percentile levels. These included finished inventories, the change in total orders, and order books. The lagging components, below their median values, were output change, expected production, and capacity utilization.

The French industrial readings are surprising for their resilience.

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France

Bank of France Survey Advances in March

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The German PPI rose by 2.4% month-to-month in March. That was, of course, boosted by oil prices as Brent crude soared, gaining 46.9% month-over-month (yikes!). However, very little of that got into German ex-energy prices, which did rise, but by only 0.4%. Still, do not be fooled by that ‘only.’ That 0.4% rise is the largest rise of that magnitude since February 2023—a period of about 2¼ years. So be wary of what might be in train here; 0.4% does not seem so large, but it annualizes to about a 5% pace.

In addition, 12 months to six months to three months, the headline PPI is accelerating—from a 12-month drop, to a well-behaved 2.1% pace of expansion over six months, and then to an elevated 3.9% annual rate over three months.

The core PPI is a bit more copacetic, but it shows clear acceleration, rising from a 12-month pace of 1.3%, to a 1.8% pace over six months, and to 2.4% annualized over three months.

**Consumer prices in Germany**
The sky is not falling. So far, there is no evidence of inflation in consumer goods: the consumer goods index does not even rise over 12 months, six months, or three months—though it is flat over three months. Investment goods, by contrast, show clear price acceleration, rising from 1.9% over 12 months, to 2.6% over six months, and to 4.1% over three months. Intermediate goods show the inflation wallop as prices rise by 1.5% over 12 months, to a 5.1% pace over six months, and at an 8.1% annual rate pace over three months. That annualized intermediate goods gain is something to watch. It is driven by oil, but other commodities and goods are caught up in supply chain woes as well.

For reference, the headline CPI shows acceleration, rising from a 12-month pace of 2.7% to a 5% annualized rate over three months. The ex-energy CPI, however, remains subdued, rising 2.3% over 12 month and at a more modest 2% annualized pace over three months.

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**Global conditions will call the tune**
The Strait of Hormuz, once shut, was opened. Then, once open, it was again shut. So, we are back at square one with the Trump deadline on Tuesday fast approaching. Soon something will have to give, and that something will affect oil, oil prices, and inflation. Conditions in the Strait and in the oil market globally are distorted by warfare and the threat of it.

Oil is an extremely important commodity and that is doubly so in Europe where nations have still not fully adjusted to the loss of the Russian pipelines.

But fertilizer and helium are two other commodities reported to be put in short supply because of the closing of the Strait. Iran is trying to gain a toehold here for leverage and survival—and to be able to claim victory; meanwhile, they have lost nearly all their military prowess, but they retain the means to enforce their policies on the domestic population—at least for now.

Trump has been declaring that they gave him everything he asked for, but then they close the strait and the U.S. kept its blockage of Iran’s ports in place. There is still a lot going on here. Despite the rhetoric, there is a lot that is unsettled and not agreed to, and a lot that could still go wrong or escalate. This puts both inflation and growth outlooks in jeopardy.

Germany

German PPI Takes Partial Flight

Tian Yong Woon

In this week’s Letter, we take stock of the latest economic data from China, assessing what it tells us about the outlook for growth and policy. We also continue our coverage of the Middle East conflict, focusing on its broader implications for Asia through energy markets, trade routes, and regional risk sentiment.On China, while Q1 GDP data exceeded expectations, putting the economy on a firm footing to meet its annual growth target (chart 1), a closer look at the underlying monthly indicators suggests the headline resilience may be masking a more uneven underlying picture (chart 2). 

As for the Middle East, the latest round of regional March CPI prints largely confirms the initial pass-through from higher oil prices to consumer inflation. If energy prices remain elevated, second-round effects will likely become more evident in the coming months (chart 3). Turning to the Strait of Hormuz, shipping data point to a gradual recovery in flows. However, conflicting signals on the strait’s status—alongside renewed US–Iran tensions—continue to cloud the outlook for a sustained normalization in global oil supply (chart 4). In response, global players have begun to adapt, including rerouting shipments via the longer but safer Cape of Good Hope route, and exploring alternative export channels through Red Sea ports, even though these remain exposed to regional risks (chart 5). Finally, the conflict has prompted a reassessment of the global outlook. In its latest World Economic Outlook, the IMF delivered broad-based growth downgrades across economies, with only a handful of exceptions (chart 6).

**China**
China released a raft of data late last week, with March figures particularly pertinent as they capture the initial effects of the Middle East conflict that erupted in late February. Notably, Q1 GDP exceeded expectations, with the economy expanding 5% y/y despite incorporating March data (chart 1). This suggests China has secured a firm early footing toward its 4.5%–5% growth target for the year—a slight step down from last year’s “about 5%” goal. But a closer look at the March data reveals several nuances. On the external front, export growth slowed sharply year-to-date, falling behind import growth, thereby dragging on trade balance growth. 

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On a more downbeat note, growth in retail sales, industrial production, and fixed asset investment all moderated in March (chart 2). While this may partly reflect spillovers from the Middle East conflict, it likely also points to underlying domestic factors, including the fading impact of earlier, possibly one-off, policy support measures. That said, not all signals point to deterioration. Industrial profits have shown signs of improvement, likely supported in part by authorities’ efforts to curb intense price competition, also termed as “involution”, amid excess supply. This has contributed to a gradual easing in producer price deflation, which is beginning to feed through to a modest improvement in consumer inflation.

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**The Middle East conflict – Impacts**
Among economies that have reported March CPI so far, chart 3 shows that Asian inflation prints have more often than not come in higher y/y than in February. While specific domestic factors are also at play, the uptick has largely coincided with a rebound in energy-related inflation, in line with the global price surge following the Middle East supply shock. Given the pervasive role of energy as a key input across economic activity—from manufacturing to trade—what we are observing thus far likely reflects primarily first-round effects. Should energy prices remain elevated, second-round effects are likely to emerge in subsequent inflation prints.

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Whether energy prices remain elevated in the near term ultimately hinges on the same factor that drove the initial surge: oil flows through the critical Strait of Hormuz. On that front, IMF data suggest shipping volumes have continued to edge higher, though recent headlines have kept crude prices volatile. For instance, earlier assurances by Iranian authorities that the strait was “fully open” triggered a sharp decline in crude oil prices. However, weekend reports of a renewed closure—alongside news that the US had seized an Iranian-flagged vessel—serve as a stark reminder that tensions remain elevated and that disruptions to oil flows may well be set to persist. 

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**The Middle East conflict – Considerations**
That said, the global response has not been passive. Economies have increasingly sought alternative energy sources and rerouted oil shipments via other channels. Over a longer horizon, both producers constrained by exports through the Strait of Hormuz and importers heavily reliant on the route are likely developing contingency plans to hedge against the risk of a prolonged disruption at this critical chokepoint. For instance, amid heightened geopolitical tensions in the Middle East, more shipments are being diverted along the longer—but relatively safer—route via the Cape of Good Hope, bypassing the region. At the same time, there has been growing consideration of redirecting exports through Red Sea ports by shifting flows away from Hormuz-linked terminals. However, these alternatives are not without limitations. They remain exposed to regional risks, while capacity constraints—particularly in existing pipeline infrastructure—mean they could not fully offset a disruption to flows through the strait.

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Lastly, we turn to the IMF’s latest World Economic Outlook, released last week. Reflecting the growth-dampening effects of the Middle East crisis, the IMF downgraded its real GDP forecasts for most economies, resulting in a modest downward revision to global growth overall. Across Asian and major non-Asian economies (chart 6), only India and Japan saw upgrades, likely supported by offsetting domestic or structural drivers. European economies registered the steepest downgrades, while China and the US, though also revised lower, appear relatively more insulated. Importantly, these projections assume the conflict remains contained in duration, intensity, and scope, and begins to fade by mid-year. Should it persist or escalate beyond that, further downside risks to growth are likely to materialize.

Economy in Brief

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Mass Layoffs Remained Low in March

Chicago Fed Nat'l Activity Index Recovered

Philadelphia Fed Business Activity Index Up Slightly

Philadelphia Fed Business Activity Index Up Slightly

Consumer Prices Remain Restrained through March in Europe & Canada

Leading Economic Indicators Down For Second Month

Initial Claims for Unemployment Insurance Drop

Initial Claims for Unemployment Insurance Drop