Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051005c.jpg" width="353">
Challenger, Grey &amp; Christmas reported that job cut announcements rose a slight 1.8% in September to 71,836 following a 31.5% m/m drop during August. The three month average of job cut announcements fell 13.8% to 81,793 (-2.5% y/y).
During the last ten years there has been an 84% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Moderate increases in job cut announcements were scattered throughout industry but large m/m increases in retail (688.4% y/y), consumer goods (-21.3% y/y) and electronics (72.8% y/y) were offset by declines in insurance (20.4% y/y), telecommunications (-91.3% y/y) and pharmaceuticals (67.5% y/y).
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported that announced hiring plans fell sharply m/m (-3.1% y/y).

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>71,836</td>
<td>70,571</td>
<td>-33.4%</td>
<td>1,039,175</td>
<td>1,236,426</td>
<td>1,431,052</td>
</tr>
</tbody>
</table>
</body>
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Challenger, Grey & Christmas reported that job cut announcements rose a slight 1.8% in September to 71,836 following a 31.5% m/m drop during August. The three month average of job cut announcements fell 13.8% to 81,793 (-2.5% y/y). [...]

Challenger Layoffs Up Slightly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051005d.jpg" width="353">
The Business Activity Index for the non-manufacturing sector from the Institute for Supply Management fell a sharp 11.7 points to 53.3 in September. It was a record m/m drop and was at least partly due to Hurricane Katrina. Consensus expectations had been for a lesser decline to 59.7.
Since the series&#39; inception in 1997 there has been a 50% correlation between the Business Activity Index and the q/q change in real GDP for services plus construction.
The orders index reversed more than all of the gains during the prior two months with a 9.2 point decline. The employment index similarly fell to the lowest level since May. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries.
Pricing power surged 14.3 points to a record high.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Sept &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>53.3</td>
<td>65.0</td>
<td>58.7</td>
<td>62.4</td>
<td>58.2</td>
<td>55.1</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>81.4</td>
<td>67.1</td>
<td>70.1</td>
<td>69.0</td>
<td>56.8</td>
<td>54.0</td>
</tr>
</tbody>
</table>


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The Business Activity Index for the non-manufacturing sector from the Institute for Supply Management fell a sharp 11.7 points to 53.3 in September. It was a record m/m drop and was at least partly due to Hurricane Katrina. Consensus [...]

ISM Non-Manufacturing Index Back Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051005d.jpg" width="353">
The Business Activity Index for the non-manufacturing sector from the Institute for Supply Management fell a sharp 11.7 points to 53.3 in September. It was a record m/m drop and was at least partly due to Hurricane Katrina. Consensus expectations had been for a lesser decline to 59.7.
Since the series&#39; inception in 1997 there has been a 50% correlation between the Business Activity Index and the q/q change in real GDP for services plus construction.
The orders index reversed more than all of the gains during the prior two months with a 9.2 point decline. The employment index similarly fell to the lowest level since May. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries.
Pricing power surged 14.3 points to a record high.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.

<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/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Sept &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>53.3</td>
<td>65.0</td>
<td>58.7</td>
<td>62.4</td>
<td>58.2</td>
<td>55.1</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>81.4</td>
<td>67.1</td>
<td>70.1</td>
<td>69.0</td>
<td>56.8</td>
<td>54.0</td>
</tr>
</tbody>
</table>
Challenger Layoffs Up Slightly 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 5, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051005c.jpg" width="353">
Challenger, Grey &amp; Christmas reported that job cut announcements rose a slight 1.8% in September to 71,836 following a 31.5% m/m drop during August. The three month average of job cut announcements fell 13.8% to 81,793 (-2.5% y/y).
During the last ten years there has been an 84% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Moderate increases in job cut announcements were scattered throughout industry but large m/m increases in retail (688.4% y/y), consumer goods (-21.3% y/y) and electronics (72.8% y/y) were offset by declines in insurance (20.4% y/y), telecommunications (-91.3% y/y) and pharmaceuticals (67.5% y/y).
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported that announced hiring plans fell sharply m/m (-3.1% y/y).

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>71,836</td>
<td>70,571</td>
<td>-33.4%</td>
<td>1,039,175</td>
<td>1,236,426</td>
<td>1,431,052</td>
</tr>
</tbody>
</table>
Mortgage Applications Fell With Fewer New Purchases 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 5, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051005a.jpg" width="353">
The total number of mortgage applications fell 1.1% last week following the sharp 6.6% drop the prior week, according to the Mortgage Bankers Association. In September, applications did rise 0.2% from August but the average level was down 6.7% from a recent peak in June.
Purchase applications fell for the third consecutive week. A 1.9% decline reduced the gain in September to 1.0% versus August. During the last ten years there has been a 49% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051005b.jpg" width="353">
Mortgage applications to refinance were roughly unchanged w/w after the 10.5% plunge the prior week. For September, refis fell 0.7% m/m following a 10.6% drop in August.
The effective interest rate on a conventional 30-year mortgage rose to 6.18% from 6.09% the week prior and the effective rate on a 15-year mortgage rose to 5.83%. The interest rate on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
House Prices and Monetary Policy: A Cross-Country Study from the Board of Governors of the Federal Reserve System is available <a href="http://www.federalreserve.gov/pubs/ifdp/2005/841/ifdp841.pdf"> here</a>.
Yesterday&#39;s speeches from several Federal Reserve Board officials contained comments on the economic outlook, the business cycle and Fed Policy. Dallas Fed President Fisher&#39;s comments can be found <a href="http://www.dallasfed.org/news/speeches/fisher/fs051004.html"> here</a>, St. Louis Fed President Poole&#39;s speech is <a href="http://www.stlouisfed.org/news/speeches/2005/10_04_05.htm"> here</a> and Philadelphia Fed President Santomero&#39;s comments are available <a href="http://www.philadelphiafed.org/publicaffairs/speeches/2005_santomero10.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">09/30/05</th>
<th scope="col">09/23/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>713.5</td>
<td>721.2</td>
<td>-1.6%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>473.8</td>
<td>483.1</td>
<td>3.2%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,107.4</td>
<td>2,106.6</td>
<td>-7.2%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
Labor Costs in France Stabilize After Slowdown, an Aid to Workers' Purchasing Power 
by <a href="/comment/Stone.html">Carol Stone</a> October 5, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051005f.jpg" width="353">
Labor costs in France have maintained a steady trend over the last several months, rising at about a 2-1/2% pace, year-on-year.These hourly data are reported for selected sectors of French industry, with mechanical/electrical manufacturers running just above 2.5% and business services just below that rate. Labor costs in the textile industry have seen a pickup this year to 3.2% in June from 2.3% in December 2004, while clothing and leather have risen slightly faster this year at 2.15% compared with 1.77%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051005e.jpg" width="353">
For workers, the flatter trends in machinery and services since last autumn would be a welcome development after several years of progressively slower gains. In addition, as noted in the table below, consumer prices through June had also slowed noticeably. In this comparison, we chose the CPI for urban workers, which may reflect more closely than the overall CPI the group covered by the labor cost data. The combination of the labor cost and CPI figures shows that through the first half of this year, the real purchasing power of hourly compensation picked up to about 1% for both mechanical equipment and service workers from only about 0.5% across last year. This is evident in the second graph.
Since June the CPI has begun rising more rapidly, with a 1.7% year-on-year increase in August. So the improvement in workers&#39; purchasing power may have ended. But at least any slowing would be from a faster rate than had prevailed last year, and in the service sector, 2003 as well.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/FRANCE/FRANCE.HTM">France: Hourly Labor Costs</a> (NSA, yr/yr % chg)</th>
<th scope="col">June 2005</th>
<th scope="col">May 2005</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Mechanical/Electrical Industries</td>
<td>2.53</td>
<td>2.53</td>
<td>2.41</td>
<td>3.49</td>
<td>4.07</td>
</tr>
<tr class="odd">
<td class="firstcol">Business Services Industries</td>
<td>2.47</td>
<td>2.56</td>
<td>2.52</td>
<td>2.84</td>
<td>4.08</td>
</tr>
<tr>
<td class="firstcol">CPI: Urban Workers</td>
<td>1.53</td>
<td>1.53</td>
<td>2.01</td>
<td>2.43</td>
<td>2.39</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/051004f.jpg" width="353">
Diverse inflation rates, defined as the year-over-year percentage increases in the consumer price indexes, were reported for six countries--Indonesia, Korea, Peru, Switzerland, Turkey and Venezuela--yesterday and today.
The two oil producing countries, Indonesia and Venezuela, reported inflation rates of 16.0% and 9.1%, respectively. The trends in their inflation rates are shown in the first chart. From a peak of near 40% in mid 2002, inflation in Venezuela appears to have stabilized at about 15%. Indonesia, which is the only member of the Organization of Petroleum Exporting Countries (OPEC) that is a net oil importer, has held inflation in check, until recently, by subsidizing domestic fuel costs.On October 1, however, the government reduced, dramatically, these subsidies by almost tripling the price of kerosene and more than doubling the price of diesel. The central bank has just raised its benchmark interest rate a full point to 11%, the highest rate in more than two years to contain the expected rise in inflation.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051004g.jpg" width="353">
Peru which suffered bouts of hyper inflation prior to the early nineties experienced a marked decline in its inflation through early 2002, when it subsequently began to rise moderately. From a peak of 4.75% in July, 2004, it has since declined to 1.11% in September. As one of the currently low inflation countries its inflation rate is shown with that of Switzerland, another low inflation country, albeit of longer standing. In September Peru&#39;s inflation rate at 1.11% was actually below that of Switzerland&#39;s 1.36%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051004h.jpg" width="353">
Turkey is another country that has experienced bouts of hyper inflation in the past and has since taken measures that have brought about a reduction in the rate of inflation from 73% in January, 2002 to 8% in September. In the third chart inflation in Turkey is shown with that of Korea. Different scales have been used in this chart as inflation in Korea has ranged only between roughly 2% and 5.2% while that of Turkey has ranged from 7% to 73%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Consumer Price Indexes</th>
<th scope="col">Sep 05&nbsp;</th>
<th scope="col">Aug 05</th>
<th scope="col">Sep 04</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2004 &nbsp;%</th>
<th scope="col">2003 %</th>
<th scope="col">2002 %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Indonesia (2002=1000</td>
<td>124.33</td>
<td>123.48</td>
<td>114.00</td>
<td>0.89</td>
<td>9.06</td>
<td>6.06</td>
<td>6.77</td>
<td>11.91</td>
</tr>
<tr>
<td class="firstcol">Korea (2000=100)</td>
<td>119.0</td>
<td>118.2</td>
<td>115.9</td>
<td>0.68</td>
<td>2.67</td>
<td>3.59</td>
<td>3.51</td>
<td>2.76</td>
</tr>
<tr class="odd">
<td class="firstcol">Peru (12/2001=100)</td>
<td>108.58</td>
<td>108.68</td>
<td>107.39</td>
<td>-0.09</td>
<td>1.11</td>
<td>3.06</td>
<td>2.26</td>
<td>0.19</td>
</tr>
<tr>
<td class="firstcol">Switzerland (5/2000=100)</td>
<td>104.7</td>
<td>104.3</td>
<td>103.3</td>
<td>0.38</td>
<td>1.36</td>
<td>0.82</td>
<td>0.63</td>
<td>0.64</td>
</tr>
<tr class="odd">
<td class="firstcol">Turkey (2003=100)</td>
<td>118.33</td>
<td>117.13</td>
<td>109.57</td>
<td>1.02</td>
<td>7.99</td>
<td>8.60</td>
<td>21.60</td>
<td>44.96</td>
</tr>
<tr>
<td class="firstcol">Venezuela (1997=100)</td>
<td>513.85</td>
<td>505.35</td>
<td>442.26</td>
<td>1.48</td>
<td>15.96</td>
<td>21.75</td>
<td>31.04</td>
<td>22.43</td>
</tr>
</tbody>
</table>
</body>
</html>

Diverse inflation rates, defined as the year-over-year percentage increases in the consumer price indexes, were reported for six countries--Indonesia, Korea, Peru, Switzerland, Turkey and Venezuela--yesterday and today. The two oil [...]

Varied Reports of Inflation

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051004e.jpg" width="353">
Factory inventories slipped 0.1% in August following an upwardly revised 0.6% gain in July. To emphasize a notion that the turn toward inventory restocking has not yet begun, factory inventories less petroleum gave back most of the prior month&#39;s gain, fell 0.2% and have been virtually unchanged since March.
Electrical equipment inventories fell 0.1% (+2.5% y/y) for the fourth straight monthly decline. Computer inventories also slipped 0.2% (-0.5% y/y), primary metal inventories fell 0.5% (+17.6% y/y) for the third consecutive monthly drop and fabricated metals fell for the fourth consecutive month, off 0.4% (+7.1% y/y). Machinery inventories rose 0.4% (9.7% y/y) led by turbines and construction machinery.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051004d.jpg" width="353">
Factory shipments surged 1.7% following a downwardly revised July gain. Less a 4.7% jump in shipments from petroleum refineries, factory shipments surged 1.4% (3.6% y/y). Electrical equipment shipments jumped 2.1% (6.0% y/y) and machinery rose 1.4% (8.4% y/y).
Factory sector orders reversed all of a a deepened 2.5% decline in July. The advance report of a surge in durables orders was little revised and they rose 3.3%.
Unfilled orders added 1.6% to the 1.0% jump in July. Nondefense aircraft &amp; parts (32.5% y/y) again led the strength with a 3.9% surge. Less the transportation sector altogether, backlogs rose 1.8% (9.0% y/y) and the ratio of unfilled orders to shipments continued a moderate climb.<a href="http://research.stlouisfed.org/publications/review/05/07/Gali.pdf"> </a>

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>-0.1%</td>
<td>0.6%</td>
<td>5.3%</td>
<td>7.7%</td>
<td>-1.1%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>2.5%</td>
<td>-2.5%</td>
<td>7.5%</td>
<td>9.3%</td>
<td>3.5%</td>
<td>-2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>1.7%</td>
<td>0.1%</td>
<td>5.8%</td>
<td>9.5%</td>
<td>1.5%</td>
<td>-2.5%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>1.6%</td>
<td>1.0%</td>
<td>10.1%</td>
<td>8.4%</td>
<td>8.0%</td>
<td>-8.5%</td>
</tr>
</tbody>
</table>
</body>
</html>

Factory inventories slipped 0.1% in August following an upwardly revised 0.6% gain in July. To emphasize a notion that the turn toward inventory restocking has not yet begun, factory inventories less petroleum gave back most of the [...]

U.S. Factory Inventories Slip

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051004c.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS survey reported that chain store sales rose another 0.6% last week following a 0.1% up tick the week prior. For the full month, however, sales look to have fallen 1.7% from the August average which fell 0.1% from July. 
During the last ten years there has been a 56% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The leading indicator of chain store sales from ICSC jumped 1.0% higher (-1.9% y/y) following declines during four of the prior five weeks.
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></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">09/31/05</th>
<th scope="col">09/24/05</th>
<th scope="col">Y/Y</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>448.0</td>
<td>445.5</td>
<td>3.0%</td>
<td>4.6%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


</html>

The International Council of Shopping Centers (ICSC)-UBS survey reported that chain store sales rose another 0.6% last week following a 0.1% up tick the week prior. For the full month, however, sales look to have fallen 1.7% from the [...]

Weekly Chain Store Sales Recover A Bit More

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051004a.jpg" width="353">
US sales of light vehicles slid 2.6% m/m to 16.36M last month, according to the Autodata Corporation. The end of manufacturers&#39; employee price discount programs lowered sales generally but higher gasoline prices hit light truck sales especially hard.
Sales of US made cars and trucks fell 2.8% (-8.3% y/y) following the 21.8% m/m drop in August. Truck sales added a 6.2% (-16.9% y/y) decline to the 30.9% August slide. Domestic car sales benefited from consumers&#39; switch to fuel efficiency and rose 2.1% (6.0% y/y).
Sales of imported cars &amp; trucks slipped 1.6% m/m (+2.2% y/y). Imported car sales rose 2.6% (10.8% y/y) but truck sales fell another 9.8% (-12.7% y/y) on top of the 10.0% August decline.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051004b.jpg" width="353">
Import&#39;s share of the US light vehicle market rose slightly m/m to 20.7% versus 19.9% during all of last year.
Gasoline prices spiked 16.8% last month. In addition to the evidence from lower truck sales, consumers&#39; response to the jump is reinforced by a 9.2% (-6.2% y/y) decline in gasoline consumption. Gas consumption typically falls sharply in September with the end of the summer driving season, but the 2005 decline was a record as was the y/y drop.
Last week US retail gasoline prices rose 12.5 cents w/w to $2.93 per gallon (+51.1% y/y) versus an average $2.90 during September.
Gasoline Prices Soar; Heating Oil Set for Winter Hike from the Federal Reserve Bank of Dallas can be found <a href="http://www.dallasfed.org/eyi/usecon/0508gas.html"> here</a>.
Gasoline Affordability, a 2004 article from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20041101/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>16.36</td>
<td>16.79</td>
<td>-6.3%</td>
<td>16.87</td>
<td>16.63</td>
<td>16.81</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.95</td>
<td>7.78</td>
<td>7.4%</td>
<td>7.49</td>
<td>7.62</td>
<td>8.07</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>8.41</td>
<td>9.01</td>
<td>-16.4%</td>
<td>9.37</td>
<td>9.01</td>
<td>8.74</td>
</tr>
</tbody>
</table>
</body>
</html>

US sales of light vehicles slid 2.6% m/m to 16.36M last month, according to the Autodata Corporation. The end of manufacturers' employee price discount programs lowered sales generally but higher gasoline prices hit light truck sales [...]

U.S. Vehicle Sales Slide As Truck Sales Collapse

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051004a.jpg" width="353">
US sales of light vehicles slid 2.6% m/m to 16.36M last month, according to the Autodata Corporation. The end of manufacturers&#39; employee price discount programs lowered sales generally but higher gasoline prices hit light truck sales especially hard.
Sales of US made cars and trucks fell 2.8% (-8.3% y/y) following the 21.8% m/m drop in August. Truck sales added a 6.2% (-16.9% y/y) decline to the 30.9% August slide. Domestic car sales benefited from consumers&#39; switch to fuel efficiency and rose 2.1% (6.0% y/y).
Sales of imported cars &amp; trucks slipped 1.6% m/m (+2.2% y/y). Imported car sales rose 2.6% (10.8% y/y) but truck sales fell another 9.8% (-12.7% y/y) on top of the 10.0% August decline.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051004b.jpg" width="353">
Import&#39;s share of the US light vehicle market rose slightly m/m to 20.7% versus 19.9% during all of last year.
Gasoline prices spiked 16.8% last month. In addition to the evidence from lower truck sales, consumers&#39; response to the jump is reinforced by a 9.2% (-6.2% y/y) decline in gasoline consumption. Gas consumption typically falls sharply in September with the end of the summer driving season, but the 2005 decline was a record as was the y/y drop.
Last week US retail gasoline prices rose 12.5 cents w/w to $2.93 per gallon (+51.1% y/y) versus an average $2.90 during September.
Gasoline Prices Soar; Heating Oil Set for Winter Hike from the Federal Reserve Bank of Dallas can be found <a href="http://www.dallasfed.org/eyi/usecon/0508gas.html"> here</a>.
Gasoline Affordability, a 2004 article from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20041101/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>16.36</td>
<td>16.79</td>
<td>-6.3%</td>
<td>16.87</td>
<td>16.63</td>
<td>16.81</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.95</td>
<td>7.78</td>
<td>7.4%</td>
<td>7.49</td>
<td>7.62</td>
<td>8.07</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>8.41</td>
<td>9.01</td>
<td>-16.4%</td>
<td>9.37</td>
<td>9.01</td>
<td>8.74</td>
</tr>
</tbody>
</table>
Weekly Chain Store Sales Recover A Bit More 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 4, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051004c.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS survey reported that chain store sales rose another 0.6% last week following a 0.1% up tick the week prior. For the full month, however, sales look to have fallen 1.7% from the August average which fell 0.1% from July. 
During the last ten years there has been a 56% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The leading indicator of chain store sales from ICSC jumped 1.0% higher (-1.9% y/y) following declines during four of the prior five weeks.
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></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">09/31/05</th>
<th scope="col">09/24/05</th>
<th scope="col">Y/Y</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>448.0</td>
<td>445.5</td>
<td>3.0%</td>
<td>4.6%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
U.S. Factory Inventories Slip 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 4, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051004e.jpg" width="353">
Factory inventories slipped 0.1% in August following an upwardly revised 0.6% gain in July. To emphasize a notion that the turn toward inventory restocking has not yet begun, factory inventories less petroleum gave back most of the prior month&#39;s gain, fell 0.2% and have been virtually unchanged since March.
Electrical equipment inventories fell 0.1% (+2.5% y/y) for the fourth straight monthly decline. Computer inventories also slipped 0.2% (-0.5% y/y), primary metal inventories fell 0.5% (+17.6% y/y) for the third consecutive monthly drop and fabricated metals fell for the fourth consecutive month, off 0.4% (+7.1% y/y). Machinery inventories rose 0.4% (9.7% y/y) led by turbines and construction machinery.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051004d.jpg" width="353">
Factory shipments surged 1.7% following a downwardly revised July gain. Less a 4.7% jump in shipments from petroleum refineries, factory shipments surged 1.4% (3.6% y/y). Electrical equipment shipments jumped 2.1% (6.0% y/y) and machinery rose 1.4% (8.4% y/y).
Factory sector orders reversed all of a a deepened 2.5% decline in July. The advance report of a surge in durables orders was little revised and they rose 3.3%.
Unfilled orders added 1.6% to the 1.0% jump in July. Nondefense aircraft &amp; parts (32.5% y/y) again led the strength with a 3.9% surge. Less the transportation sector altogether, backlogs rose 1.8% (9.0% y/y) and the ratio of unfilled orders to shipments continued a moderate climb.<a href="http://research.stlouisfed.org/publications/review/05/07/Gali.pdf"> </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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>-0.1%</td>
<td>0.6%</td>
<td>5.3%</td>
<td>7.7%</td>
<td>-1.1%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>2.5%</td>
<td>-2.5%</td>
<td>7.5%</td>
<td>9.3%</td>
<td>3.5%</td>
<td>-2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>1.7%</td>
<td>0.1%</td>
<td>5.8%</td>
<td>9.5%</td>
<td>1.5%</td>
<td>-2.5%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>1.6%</td>
<td>1.0%</td>
<td>10.1%</td>
<td>8.4%</td>
<td>8.0%</td>
<td>-8.5%</td>
</tr>
</tbody>
</table>
Varied Reports of Inflation 
by <a href="/comment/Curley.html">Louise Curley</a> October 4, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051004f.jpg" width="353">
Diverse inflation rates, defined as the year-over-year percentage increases in the consumer price indexes, were reported for six countries--Indonesia, Korea, Peru, Switzerland, Turkey and Venezuela--yesterday and today.
The two oil producing countries, Indonesia and Venezuela, reported inflation rates of 16.0% and 9.1%, respectively. The trends in their inflation rates are shown in the first chart. From a peak of near 40% in mid 2002, inflation in Venezuela appears to have stabilized at about 15%. Indonesia, which is the only member of the Organization of Petroleum Exporting Countries (OPEC) that is a net oil importer, has held inflation in check, until recently, by subsidizing domestic fuel costs. On October 1, however, the government reduced, dramatically, these subsidies by almost tripling the price of kerosene and more than doubling the price of diesel. The central bank has just raised its benchmark interest rate a full point to 11%, the highest rate in more than two years to contain the expected rise in inflation.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051004g.jpg" width="353">
Peru which suffered bouts of hyper inflation prior to the early nineties experienced a marked decline in its inflation through early 2002, when it subsequently began to rise moderately. From a peak of 4.75% in July, 2004, it has since declined to 1.11% in September. As one of the currently low inflation countries its inflation rate is shown with that of Switzerland, another low inflation country, albeit of longer standing. In September Peru&#39;s inflation rate at 1.11% was actually below that of Switzerland&#39;s 1.36%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051004h.jpg" width="353">
Turkey is another country that has experienced bouts of hyper inflation in the past and has since taken measures that have brought about a reduction in the rate of inflation from 73% in January, 2002 to 8% in September. In the third chart inflation in Turkey is shown with that of Korea. Different scales have been used in this chart as inflation in Korea has ranged only between roughly 2% and 5.2% while that of Turkey has ranged from 7% to 73%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Consumer Price Indexes</th>
<th scope="col">Sep 05&nbsp;</th>
<th scope="col">Aug 05</th>
<th scope="col">Sep 04</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2004 &nbsp;%</th>
<th scope="col">2003 %</th>
<th scope="col">2002 %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Indonesia (2002=1000</td>
<td>124.33</td>
<td>123.48</td>
<td>114.00</td>
<td>0.89</td>
<td>9.06</td>
<td>6.06</td>
<td>6.77</td>
<td>11.91</td>
</tr>
<tr>
<td class="firstcol">Korea (2000=100)</td>
<td>119.0</td>
<td>118.2</td>
<td>115.9</td>
<td>0.68</td>
<td>2.67</td>
<td>3.59</td>
<td>3.51</td>
<td>2.76</td>
</tr>
<tr class="odd">
<td class="firstcol">Peru (12/2001=100)</td>
<td>108.58</td>
<td>108.68</td>
<td>107.39</td>
<td>-0.09</td>
<td>1.11</td>
<td>3.06</td>
<td>2.26</td>
<td>0.19</td>
</tr>
<tr>
<td class="firstcol">Switzerland (5/2000=100)</td>
<td>104.7</td>
<td>104.3</td>
<td>103.3</td>
<td>0.38</td>
<td>1.36</td>
<td>0.82</td>
<td>0.63</td>
<td>0.64</td>
</tr>
<tr class="odd">
<td class="firstcol">Turkey (2003=100)</td>
<td>118.33</td>
<td>117.13</td>
<td>109.57</td>
<td>1.02</td>
<td>7.99</td>
<td>8.60</td>
<td>21.60</td>
<td>44.96</td>
</tr>
<tr>
<td class="firstcol">Venezuela (1997=100)</td>
<td>513.85</td>
<td>505.35</td>
<td>442.26</td>
<td>1.48</td>
<td>15.96</td>
<td>21.75</td>
<td>31.04</td>
<td>22.43</td>
</tr>
</tbody>
</table>


</html>

Recent pickup in 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

US productivity growth has been significantly faster than in other major economies

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Mortgage applications declined 0.8% w/w (-5.6% y/y) in the week ending April 3. The weekly decline eased relative to the prior three weeks, when mortgage applications dropped by 10.4% w/w (+14.2% y/y) in the week ending March 27, and by 10.5% and 10.9% in the March 20 and 13 weeks, respectively, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house rose 1.1% w/w (-6.7% y/y) in the April 3 week, after declining 2.6% w/w (+0.8% y/y) in the week ending March 27.  Applications for loan refinancing dropped by a smaller 2.8% w/w (-4.3% y/y) in the latest week, following weekly declines of 17.3% (+33.2% y/y) in the March 27 week, 14.6% in the March 20 week, and of 18.5% in the week ending March 13.

The effective interest rate on a 30-year fixed-rate loan declined 8bps to 6.68% in the week ending April 3 from 6.76% in the week ending March 27 and after having risen by 52bps since the February 27 week. The rate on 15-year fixed-rate mortgages rose 1bp to 6.09% in the latest week from 6.08% in the prior week. The 30-year Jumbo rate declined 6bps to 6.65% in the week ending April 3 from 6.71% in the March 27 week. The rate on a 5-year ARM eased 3bps to 5.85% in the latest week from 5.88% in the week ending March 27.

The share of applications for refinancing an existing loan declined to 44.3% of total applications in the week of April 3, from 45.3% in the March 27 week. The adjustable-rate mortgage (ARM) share of activity rose to 8.6% in the week ending April 3 from 8.0% in the week ending March 27.

The average size of a mortgage loan edged up 0.2% w/w (-9.1% y/y) to $390,100 in the week ending April 3, after declining 1.3% w/w (-1.9% y/y) to $389,200 in the week ending March 27. The average size of a purchase loan edged down 0.3% w/w (-0.9% y/y) to $448,100 in the latest week, following a decline of 0.8% w/w (+0.4% y/y) to $449,400 in the March 27 week. The average size of a loan to refinance a mortgage edged up 0.1% w/w (-20.7% y/y) to $317,000 in the week ending April 3 after declining 5.5% w/w (+0.3% y/y) to $316,600 in the March 27 week. From the week ending February 27 to the week ending March 27, the average size of a loan to refinance a mortgage had declined 21.8%.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Signs of stabilization in mortgage applications emerged in the latest week.
- Applications for loans to purchase posted a small increase, while applications for loan refinancing posted a small decline in the latest week.
- Interest rate on 30-year fixed-rate loans eased 8bps to 6.68%. 
- Average loan size edged up.

U.S. Mortgage Applications Edged Down in the April 3 Week

Robert Brusca

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**Chaotic trends**
Producer price trends for the European Monetary Union in February show great deal of weakness. The headline measure in February for total PPI prices (excluding construction) fell 0.5% after rising 0.5% in January. The three-month annualized change was -1.3%, over six months it was -0.7%, and year-over-year it was -3.1%. The trend is not particularly conclusive although the table also produces the trend for the HICP-core on the same timeline where there is acceleration in train. Despite this report and any trends, it may show that the risk to inflation in the PPI is now through elevated Brent crude prices, which we see in the chart has been historically well correlated with changes in the PPI.

**The past may not be prologue**
The chart offers some insight into this matter as we see that recently the spike in Brent crude is substantial—and the chart doesn't even take us up-to-date to what we're dealing with in the markets today! We can see that in 2021 when all prices went up sharply, that preceded a spike in the PPI as well. However, in 2017 when there was a short-lived spike, there wasn't much impact on producer prices at all. Then, later in 2018, when prices spiked not quite so high or suddenly, but had a bit more sustained growth, there also was a very small knock-on impact on producer prices. One of the key features for whether the Brent rise gets into producer prices or not is how long-lived the spike remains in force and how people perceive it. In this case, there's closing of the Strait of Hormuz and a war in place; there's a good chance that investors are going to treat this as a real event and one with potential longevity. That means that this spike will elevate producer prices.

**Overall PPI is tempered but, by country...not so much**
However, the table is based on data through February, and so oil spiking prices really haven't entered the picture as far as the table is concerned. On that basis, we're seeing a lot of price declines: an annualized three-month decline of 7.9% in Spain, 7.3% in Portugal, 3.6% in Germany, and so on. These figures clearly do not reflect what will be the lasting effect on oil prices as we get deeper into 2026. Even despite this weakness in headline inflation across countries in the monetary union, and in Europe generally, inflation is tempered year-over-year where it only rises compared to a year earlier for 7.7% of the reporters, but then over six months inflation accelerates for all of the reporters compared to its 12-month pace, and then, over three months it accelerates for about 70% of the reporters compared to the six-month pace.

**PPI headline vs. core... where available**
There are two observations at the bottom of the table for the PPI excluding energy—for France and Germany. In both cases, the difference between the excluding energy price and the headline price is remarkable. For Germany, the ex-energy price is rising and clearly accelerating; in contrast, the headline trends show prices declining or a tendency toward deceleration. For France, the ex-energy prices are rising and sustaining larger increases over six months and three months than over 12 months. However, for France, in the table, the total PPI headline inflation rate declines on all horizons although the pace of decline is undergoing erosion. Once we set aside the weighting scheme for the monetary union, the PPI is looking instead at the average result of the countries in the table (an average that includes some non-monetary union members) where the inflation rate is clearly headed higher, not lower.

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**The trend and the future**
Despite the controversies implicit in these data, at its last meeting the European Central Bank put markets on notice that, if the war were still ongoing, there was a high likelihood that the ECB would raise interest rates at its next meeting. It's easy to see why since the inflation picture isn't particularly glowing. Even before the new oil price impact is factored in, there is evidence of acceleration in producer prices.

**War! And price trends**
War creates a lot of uncertainty. In addition to oil prices, there are going to be knock-on effects for weakness across the global economy and also a tendency for oil prices to spread increases since the oil price increase is high enough that it's likely to have a significant impact on transportation costs for all goods. Central banks are clearly going to be on notice and wary. Even so, it's also true that spiking oil prices, even if they spread inflation, tend to spread economic weakness. Policymaking in 2026 is going to be far more contentious and difficult than it was in 2025, everywhere globally.

Europe

EMU PPI Trends Are Chaotic; It Could Get Worse

Winnie Tapasanun

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New orders for durable goods fell a more-than-expected 1.4% m/m in February, the fourth monthly fall in five months, after decreases of 0.5% in January (0.0% initially) and 0.9% in December (unrevised), according to today’s advance report by the U.S. Census Bureau. The Action Economics Forecast Survey had expected a 1.0% m/m February decline. The year-on-year rate eased to 7.3% in February, the lowest since October, from 9.9% in January, though remaining positive since January 2025. Durable goods orders excluding the transportation sector rose 0.8% (6.0% y/y) in February, the 10th straight m/m rise, after a 0.3% increase in January. Durable goods orders excluding defense fell 1.2% (+7.3% y/y) following a 0.2% January rebound.

The m/m fall in February durable goods orders was led by a 28.6% m/m plunge in orders for nondefense aircraft & parts following decreases of 1.7% in January and 22.7% in December. Orders for defense aircraft & parts fell 3.8% after a 27.2% January slump and an 11.8% December jump. Orders excluding aircraft rose 1.2% (6.6% y/y), the seventh m/m rise in eight months, after a 0.3% January increase.

Durable goods orders for transportation fell 5.4% (+10.1% y/y) in February, the fourth m/m fall in five months, after a 1.9% decline in January. In addition to February m/m drops in nondefense and defense aircraft orders, motor vehicles & parts orders rose 3.1% (7.6% y/y), the third consecutive m/m rise, after a 0.7% January gain. Orders for electrical equipment, appliances & components slipped 0.1% (+5.0% y/y) following a 1.0% January decline, while orders for primary metals advanced 2.2% (10.2% y/y), the third successive m/m increase, after a 1.1% January rise. Machinery orders climbed 1.5% (9.2% y/y), the 10th straight m/m gain, on top of a 0.6% January increase. Orders for fabricated metal products rose 0.5% (5.4% y/y), the seventh m/m rise in eight months, following a flat January reading. Orders for all other durable goods rose 0.5% (1.3% y/y), up for the sixth consecutive month, after a 0.3% January rise. Meanwhile, orders for computers & electronic products were essentially unchanged (+7.5% y/y) after five straight m/m gains.

Capital goods orders fell 6.6% (+11.5% y/y) in February, the fourth m/m fall in five months, after a 3.0% drop in January. Nondefense capital goods orders slid 7.4% (+9.5% y/y), the fifth m/m slide in six months, after a 1.0% January decrease. Core capital goods orders (i.e., nondefense capital goods orders excluding aircraft) rebounded 0.6% (5.1% y/y), the seventh m/m rise in eight months, following a 0.4% January decline. Defense capital goods orders fell 1.1% (+25.1% y/y), down for the fourth time in five months, after a 14.2% January drop. Notably, core capital goods shipments (core capex shipments)—a reliable coincident indicator of business spending on equipment in the national accounts—rose 0.9% (5.7% y/y), the fifth m/m increase in six months, after no change in January.

Shipments of all manufactured goods advanced 1.4% (3.5% y/y) in February, the fourth m/m gain in five months, after a 0.7% increase in January. Durable goods shipments rose 1.3% (6.8% y/y), up for the fifth time in six months, after a 0.9% January gain. Nondurable goods shipments climbed 1.4% (0.1% y/y), the third straight m/m rise, after a 0.5% January increase.

Unfilled orders of durable goods edged up 0.1% (11.1% y/y) in February, the seventh straight m/m gain, after a 0.6% rise in January. Excluding transportation, unfilled orders increased 0.2% (1.9% y/y), also up for the seventh consecutive month, following a 0.3% January rise.

Manufacturing inventories inched up 0.1% (0.8% y/y) in February, the fourth straight m/m increase, after a 0.1% uptick in January. Durable goods inventories edged up 0.1% (1.8% y/y) in February, the fifth consecutive m/m increase, after a 0.2% rise in January, while nondurable goods inventories were virtually unchanged (-0.8% y/y) following two successive m/m declines.

Manufacturers’ orders and shipments of durable and nondurable goods, along with unfilled orders and inventories, are compiled by the U.S. Census Bureau. They are available in Haver’s **USECON** database. The Action Economics forecast data are in the **AS1REPNA** database.

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- Headline orders -1.4% (+7.3% y/y) in Feb., fourth m/m decline in five mths.
- Nondefense aircraft & parts -28.6% m/m following January’s -1.7%.
- Transportation orders -5.4%, down for the fourth time in five mths.; orders ex transportation +0.8%, 10th straight m/m rise.
- Core capital goods shipments +0.9%, fifth m/m gain in six mths.
- Durable goods shipments +1.3%; unfilled orders +0.1%; inventories +0.1%.

U.S. Durable Goods Orders Fall in February, Led by a Plunge in Nondefense Aircraft Orders

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The S&P composite PMIs in March weakened decisively across the board, with only four of 25 reporters showing an improvement in March compared to February. February had been a strong month, with only 10 of 25 monthly composite indicators weaker on a month-to-month basis. In January, 11 of the composite indicators weakened month-to-month. So, between January and March, the proportion of countries showing composite indicators as weaker month-to-month went up from 40% to 44% and then all the way up to 80%, a huge shift for the worse.

**Sequential trends**
Sequentially, looking at 12-months compared to 12-months ago, six-months compared to 12-months, and three-months compared to six-months, we see a similar progression. Over 12 months, 43.5% of the reporters were weaker; over six months, 39.1% of them were weaker period-to-period. And then over three months, that proportion jumped to 65.2% that were weaker month-to-month.

The war in Iran has been reflected in these numbers. We see it very clearly for the March data, the first full month after the attack. The average and median total PMI readings deteriorated from February to March: the average readings fell from 52.6 in February to 50.7 in March, and the median readings fell from 52.1 to 51.4.

The number of reporters with PMI values below 50, indicating contraction, jumped to 9 in March from 4 in February and 5 in January.

The data show that there has been broad weakening among these reporters. In addition, there has been a sharp rise in the number of them reporting outright economic contraction. The composite indexes are showing not just weakness month-to-month, but actual stepped-up contraction.

The queue percentile standings are also substantially degraded, with only eight of the 25 queue metrics that are reported above their historic medians on data back to January 2022. And the countries that are reporting good performance are often very small countries. Ghana and Zambia show very strong queue percentile standings. Sweden shows a high percentile standing. However, Japan and Hong Kong also show percentile standings in their 90th percentile, and Germany's standing has gotten to its 70th percentile. However, if oil prices climb and shortages in a variety of supply chains begin to be impacted because of the lack of oil, and in some cases, fertilizer and other commodities, we are going to start to see weakness spread.

In some developing countries, there's already a more generalized economic weakness being caused by fuel rationing because prices are so high. If the Strait of Hormuz is not open soon, these conditions are going to get demonstrably worse. Even though the U.S. economy has done relatively well and is unaffected by oil supply shortages—although prices in the U.S. certainly have risen—the U.S. composite PMI index has only a 19.6 percentile standing, not a terribly good place to say that the economy is largely unaffected by these events. The U.S. composite PMI has fallen for two months in a row.

Not surprisingly, three countries have reported the lowest composite PMI readings since 2022 when these rankings began. They are Saudi Arabia, Qatar, and the United Arab Emirates, all of whom are in the middle of this Middle East conflict.

The European Monetary Union posted a queue standing above its 50th percentile, at 54.9. And its diffusion reading on the month at 50.5 is similar to the U.S. at 50.3, indicating that economic activity is still expanding in the community—but barely. Both France and Italy logged composite PMI readings below 50; France has generated three sub-50 diffusion readings in a row, and in addition, three more of them sequentially over three months, six months, and 12 months. The queue standings may overstate the case for resiliency in some instances. There was plenty of weakness to go around across economies in March.

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Composite PMIs Retreat Broadly

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The U.S. ISM Services PMI decreased to 54.0 in March following a 2.3-point rise to 56.1 in February (the highest reading since July 2022), according to today’s report by the Institute for Supply Management, indicating expansion in the services sector for the 21st consecutive month but at a slower pace. The March index, while above 50.8 in March 2025 and a low of 49.4 in June 2024, remained below a high of 55.5 in October 2024 and a record-high 67.5 in November 2021. The 12-month average was 52.3, pointing to continued growth in the U.S. services sector. The Action Economics Forecast Survey had expected 54.9 for March.

Haver Analytics constructs a composite index combining the services index and the manufacturing reading. This index fell to 53.8 in March after a 2.0-point increase to 55.7 in February, signaling expansion for the 10th straight month, albeit at a slower rate. The latest reading was above 50.6 in March 2025 and a low of 49.3 in June 2024, while remaining below a record-high 66.7 in November 2021. These series date back to July 1997.

In the latest services survey, the business activity index declined to 53.9 in March after rising to 59.9 in February, indicating continued expansion in business activity for 21 consecutive months, though at the slowest pace since September. The index was above a low of 50.0 in June 2024 but below a record-high 70.9 in November 2021. In March, 22.8% of respondents (NSA) reported higher activity while 14.6% reported an activity decline. The new orders index rose to 60.6 in March after increasing to 58.6 in February, reflecting expansion in new orders for the 10th straight month and the highest level since February 2023. The index was above its recent low of 47.2 in May 2025 but below a high of 61.0 in February 2023 and a record-high 69.2 in October 2021. In March, 32.0% of respondents (NSA) reported higher new orders while a lessened 12.6% reported declines. Meanwhile, the supplier deliveries index (NSA) increased to 56.2 in March from 53.9 in February, indicating slower supplier delivery performance for the 16th straight month after one month in faster territory in November 2024.

On the labor front, the employment index fell to 45.2 in March after rising to 51.8 in February, showing employment activity in the services sector contracted for the first time since November and at the lowest level since December 2023. The latest reading was above a low of 43.5 in December 2023 but below a high of 54.1 in June 2023 and a high of 58.9 in April 2021. A reduced 10.7% of respondents (NSA) indicated higher employment in March while an increased 18.4% reported declines.

On the inflation front, the prices index jumped to 70.7 in March from 63.0 in February, indicating prices paid by services organizations for materials and services had risen (i.e., above 50) since June 2017 and at the fastest pace since October 2022. The index was above a low of 53.9 in March 2024 and a low of 55.1 in June 2023 but significantly below a peak of 83.7 in March 2022. An increased 45.7% of respondents (NSA) reported higher prices in March while only 1.2% reported price declines.

Additionally, the new export orders index dropped to 50.7 in March from 57.2 in February, showing new export orders expanded for the third time in four months but at a slower rate. The imports index rose to 55.2 in March from 51.8 in February, registering the third expansion in four months and the highest level since January 2024. The inventories index declined to 54.8 in March from 56.4 in February, indicating inventories expanded for the fourth time in five months but at a slower pace. The inventory sentiment index slipped to 54.3 in March from 55.3 in February, showing continued expansion since May 2023. The backlog of orders index fell to 53.6 in March from 55.9 in February, marking the second successive month of expansion following 11 straight months of contraction. These series are not seasonally adjusted and not included in the ISM Services PMI total.

The ISM Services PMI is a composite index consisting of four equally weighted diffusion indexes: Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector; below 50 suggests contraction. Supplier Deliveries is the only ISM index that is inversed; a reading above 50 indicates slower deliveries. The ISM figures are available in Haver's **USECON** database, with additional detail in the **SURVEYS** database. The expectations figure from Action Economics is in the **AS1REPNA** database.

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- ISM Services PMI at 54.0 in Mar., down 2.1 pts. from Feb.; below forecasts but above the 12-month avg. of 52.3.
- Business Activity (53.9, 21st straight month of expansion); New Orders (60.6, 10th consecutive month of expansion and fastest since Feb. ’23); Employment (45.2, first contraction since Nov.); Supplier Deliveries (56.2 vs. 53.9).
- Prices Index (70.7) indicates prices rising since June ’17, the fastest pace since Oct. ’22.

Economy in Brief

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