Louise Curley

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050816g.jpg" width="353"></p>
<p>Spain reported balance of payment data for May today. Spain&#39;s presentation of balance of payments data differs from that of most other countries. Included in the financial account is the category, &quot;Bank of Spain.&quot; This item includes the change in international reserves, which in most presentations is a separate item, in addition to international transactions of the Bank of Spain. As a result the balance on Spain&#39;s current account is completely offset by the sum of the capital account, the financial account and the residual item, &quot;errors and omissions.&quot; The first chart shows the current account and the financial account balances.</p>
<p>Over the past year and a half, the current account deficit has become increasingly more negative, while the financial account has become more positive. As most developed countries have abandoned capital controls over the international flow of funds, it has become more difficult to decide whether it is the current account or the financial account that calls the tune in the eventual balancing of the accounts. Before the relaxation of capital controls, it was generally agreed that the driving force in a country&#39;s balance of payments was its balance on current account. Now, however, it is agreed that capital flows are an additional factor, or in some cases, the major factor in determining the eventual balance of the accounts.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050816h.jpg" width="353"></p>
<p>The elements of the current account, exports and imports goods, services and the balance of wages and income from foreign activities tend to show rather smooth trends. The elements of the financial account, however, exhibit very volatile trends. For example, there was a net outflow of &quot;other investment,&quot; in May of 7,834 million euros after an inflow of 5,657 million euros in April, resulting in an negative change of 13,491 million euros between April and May. Direct and portfolio investment, derivatives and financial flows of the Bank of Spain, however, all contributed to an almost equal positive change. The volatility and the diverse movements of the various capital flows are illustrated in the second chart that shows net portfolio and net &quot;other&quot; investments in Spain&#39;s balance of payments.</p>
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<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/SPAIN/SPAIN.HTM">Spain:&nbsp; Balance of Payments</a><br> (Mil. Euros)</b></th>
<th scope="col"><b>May 05</b></th>
<th scope="col"><b>Apr 05</b></th>
<th scope="col"><b>May 04</b></th>
<th scope="col"><b>M/M Dif </b></th>
<th scope="col"><b>Y/Y Dif</b></th>
<th scope="col"><b>2004</b></th>
<th scope="col"><b>2003</b></th>
<th scope="col"><b>2002</b></th>
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<td class="firstcol">Current Account</td>
<td>-5258</td>
<td>-6014</td>
<td>-3314</td>
<td>756</td>
<td>-1944</td>
<td>-44450</td>
<td>-27908</td>
<td>-23812</td>
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<td class="firstcol">Capital Account</td>
<td>990</td>
<td>308</td>
<td>1867</td>
<td>682</td>
<td>-877</td>
<td>8547</td>
<td>8165</td>
<td>7663</td>
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<td class="firstcol">Financial Account</td>
<td>4347</td>
<td>6183</td>
<td>1104</td>
<td>-1836</td>
<td>3243</td>
<td>36836</td>
<td>18875</td>
<td>15988</td>
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<td class="firstcol">&nbsp; Net Direct Investment</td>
<td>247</td>
<td>-902</td>
<td>46</td>
<td>1149</td>
<td>201</td>
<td>-26345</td>
<td>-1418</td>
<td>6904</td>
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<td class="firstcol">&nbsp; Net Portfolio Investment</td>
<td>7086</td>
<td>3231</td>
<td>-6650</td>
<td>3855</td>
<td>13736</td>
<td>85804</td>
<td>-26592</td>
<td>4727</td>
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<td class="firstcol">&nbsp; Net Other Investment</td>
<td>-7834</td>
<td>5657</td>
<td>13610</td>
<td>-13491</td>
<td>-21446</td>
<td>-9776</td>
<td>48750</td>
<td>5712</td>
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<td class="firstcol">&nbsp; Derivatives</td>
<td>-123</td>
<td>-1036</td>
<td>308</td>
<td>913</td>
<td>-431</td>
<td>1162</td>
<td>-3434</td>
<td>-4915</td>
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<td class="firstcol">&nbsp; Bank of Spain</td>
<td>4970</td>
<td>-767</td>
<td>-6209</td>
<td>5737</td>
<td>11179</td>
<td>-14010</td>
<td>1576</td>
<td>3561</td>
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<td class="firstcol">Errors and Omissions</td>
<td>-79</td>
<td>-478</td>
<td>343</td>
<td>399</td>
<td>-422</td>
<td>36836</td>
<td>18875</td>
<td>15988</td>
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Spain reported balance of payment data for May today. Spain's presentation of balance of payments data differs from that of most other countries. Included in the financial account is the category, "Bank of Spain." This item includes [...]

Spain's Balance of Payments in May

Tom Moeller

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050816f.jpg" width="353"></p>
<p>Chain store sales dipped for the second week according to the International Council of Shopping Centers (ICSC)-UBS survey. A 0.2% w/w decline followed a 0.8% fall during the opening week of August. Sales so far this month are 0.2% ahead of the July average which rose 0.8% from June.</p>
<p>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.</p>
<p>The leading indicator of chain store sales from ICSC recouped about half of the prior week&#39;s decline with a 0.4% (-0.3% y/y) rise.</p>
<p>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.</p>
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<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></b></th>
<th scope="col"><u><b>08/13/05</b></u></th>
<th scope="col"><u><b>08/06/05</b></u></th>
<th scope="col"><b><u>Y/Y</u></b></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><u><b>2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
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<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>458.0</td>
<td>458.9</td>
<td>4.4%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
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Chain store sales dipped for the second week according to the International Council of Shopping Centers (ICSC)-UBS survey. A 0.2% w/w decline followed a 0.8% fall during the opening week of August. Sales so far this month are 0.2% [...]

Chain Store Sales Dipped Again

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050816e.jpg" width="353"></p>
<p>Industrial production increased 0.1% last month following a downwardly revised 0.8% gain in June. Consensus expectations had been for a 0.5% rise. Factory sector output also slowed to half the prior month&#39;s gain and rose 0.2% (3.1% y/y) in July.</p>
<p>Lower motor vehicle production, off 2.3% (+4.4% y/y), was responsible for much of last month&#39;s weakness in output growth. Less motor vehicles, factory output rose 0.3% (2.8% y/y) after a 0.2% June increase.</p>
<p>With a 2.6% (19.0% y/y) spike, output of computers &amp; peripheral equipment posted the largest one month increase since January. Excluding the high tech sector as well as autos, factory output rose 0.2% (1.8% y/y).</p>
<p>Output of industrial &amp; other equipment jumped 1.3% (1.8% y/y) and furniture output rose 0.4% (-1.9% y/y). On the weak side was nondurable goods which fell 0.2% (+1.2% y/y).</p>
<p>Total capacity utilization dipped to 79.7% and capacity grew 1.1% y/y. Factory sector utilization was stable at 78.3%, up from 77.0% last July and capacity rose 1.3% y/y.</p>
<p><b> The Relationship Between Capacity Utilization and Inflation</b> from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/files/br/Q2_05_Dotsey_Stark.pdf">here</a>.</p>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM"><b>Production &amp; Capacity</b></a></th>
<th scope="col"><b>July</b></th>
<th scope="col"><b>June</b></th>
<th scope="col"><u><b>Y/Y</b></u></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><u><b>2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
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<td class="firstcol">Industrial Production</td>
<td>0.1%</td>
<td>0.8%</td>
<td>3.0%</td>
<td>4.1%</td>
<td>-0.0%</td>
<td>-0.3%</td>
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<td class="firstcol">&nbsp; Consumer Goods</td>
<td>-0.4%</td>
<td>1.1%</td>
<td>3.0%</td>
<td>2.7%</td>
<td>0.3%</td>
<td>1.4%</td>
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<td class="firstcol">&nbsp; Business Equipment</td>
<td>1.2%</td>
<td>0.2%</td>
<td>6.7%</td>
<td>9.5%</td>
<td>1.2%</td>
<td>-7.9%</td>
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<td class="firstcol">Capacity Utilization</td>
<td>79.7%</td>
<td>79.8%</td>
<td>78.3% (7/04)</td>
<td>78.1%</td>
<td>75.5%</td>
<td>75.3%</td>
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Industrial production increased 0.1% last month following a downwardly revised 0.8% gain in June. Consensus expectations had been for a 0.5% rise. Factory sector output also slowed to half the prior month's gain and rose 0.2% (3.1% [...]

Industrial Production Increase Light

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050816b.jpg" width="353"></p>
<p>The National Association of Home Builders&#39; (NAHB) Composite Housing Market Index fell sharply in August to 67 from an unrevised 70 In July.</p>
<p>During the last twenty years, annual changes in the composite index had an 85% correlation with the change in single family housing starts.</p>
<p>The August index for current sales of single family homes fell for the second consecutive month (-5.3%% y/y) but the index of expected sales in six months was stable (-1.3% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050816d.jpg" width="353"></p>
<p>Traffic of prospective home buyers fell from July&#39;s record high.</p>
<p><span style="COLOR: #333333">The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.</span></p>
<p>Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.</p>
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<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></b><b> </b></th>
<th scope="col"><u><b>August</b></u></th>
<th scope="col"><u><b>July</b></u></th>
<th scope="col"><u><b>August</b></u><b><u> &#39;04</u></b></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><b><u>2003</u></b></th>
<th scope="col"><b><u>2002</u></b></th>
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<td class="firstcol">Composite Housing Market Index</td>
<td>67</td>
<td>70</td>
<td>70</td>
<td>68</td>
<td>64</td>
<td>61</td>
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The National Association of Home Builders' (NAHB) Composite Housing Market Index fell sharply in August to 67 from an unrevised 70 In July. During the last twenty years, annual changes in the composite index had an 85% correlation [...]

NAHB Housing Market Index Down Sharply in August

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050816c.jpg" width="353"></p>
<p>Housing starts remained firm last month at 2.042M units versus an upwardly revised 2.045M units in June.Consensus expectations had been for a slight decline to 2.025M starts.</p>
<p>Single-family starts nudged up 0.5% after a 1.2% decline in June. Single family starts in the Midwest rose 5.0% (0.6% y/y) and in the West rose 4.1% (-7.4% y/y). Single family starts in the Northeast starts fell 7.6% (+12.6% y/y) and in the South starts fell 1.5% (+9.0% y/y).</p>
<p>Multi family starts gave back half of the prior month&#39;s rise and fell 3.2%.</p>
<p>Building permits increased for the second consecutive month and rose 1.6%.</p>
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<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></b><b> </b></th>
<th scope="col"><u><b>July</b></u></th>
<th scope="col"><u><b>June</b></u></th>
<th scope="col"><b><u>Y/Y</u></b></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><b><u>2003</u></b></th>
<th scope="col"><b><u>2002</u></b></th>
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<td class="firstcol">Total</td>
<td>2,042</td>
<td>2,045</td>
<td>2.8%</td>
<td>1,950</td>
<td>1,854</td>
<td>1,7 10</td>
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<td class="firstcol">&nbsp; Single-family</td>
<td>1,711</td>
<td>1,703</td>
<td>3.0%</td>
<td>1,604</td>
<td>1,505</td>
<td>1,363</td>
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<td class="firstcol">&nbsp; Multi-family</td>
<td>331</td>
<td>342</td>
<td>1.8%</td>
<td>345</td>
<td>349</td>
<td>347</td>
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<td class="firstcol">Building Permits</td>
<td>2,167</td>
<td>2,132</td>
<td>2.5%</td>
<td>2,058</td>
<td>1,8 88</td>
<td>1,749</td>
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Housing starts remained firm last month at 2.042M units versus an upwardly revised 2.045M units in June.Consensus expectations had been for a slight decline to 2.025M starts. Single-family starts nudged up 0.5% after a 1.2% decline in [...]

Housing Starts Firm

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<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050816a.jpg" width="353"></p>
<p>Consumer prices (CPI-U) rose 0.5% last month following no change in June and a 0.1% decline in May. Consensus expectations had been for a 0.4% July increase.</p>
<p>Energy prices jumped 3.8% led by a 6.1% (19.5% y/y) increase in gasoline prices to an average $2.29 per gallon. In August gasoline prices have risen further to $2.55 per gallon. Fuel oil prices also posted a strong 6.2% (34.3% y/y increase while natural gas prices gained 1.1% (7.1% y/y) and have strengthened further this month..</p>
<p>Less food &amp; energy prices rose 0.1% for the third consecutive month. Consensus expectations had been for a 0.2% increase.</p>
<p>Core goods prices, down 0.3%, fell for the third month in the last four led by a 1.0% (+0.3% y/y) decline in new vehicle prices. Appliance prices fell 0.5% (+2.0% y/y) and apparel prices tumbled 0.9% (-1.9% y/y), down hard for the third month in the last four.</p>
<p>Core services prices rose 0.3% as medical care services prices doubled the gain in June with a 0.4% (4.8% y/y) increase. Public transportation prices jumped 1.0% (5.5% y/y) and school tuition costs gained 0.6% (6.6% y/y). Shelter prices rose 0.3% (2.5% y/y).</p>
<p>The chained CPI which adjusts for shifts in the mix of consumer purchases rose 0.4% but less food &amp; energy chain prices were unchanged.</p>
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<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> </b></th>
<th scope="col"><u><b>July</b></u></th>
<th scope="col"><u><b>June</b></u></th>
<th scope="col"><b><u>Y/Y</u></b></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><b><u>2003</u></b></th>
<th scope="col"><b><u>2002</u></b></th>
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<td class="firstcol">Total&nbsp;</td>
<td>0.5%</td>
<td>0.0%</td>
<td>3.1%</td>
<td>2.7%</td>
<td>2.3%</td>
<td>1.6%</td>
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<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>2.3%</td>
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<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.3%</td>
<td>-0.2%</td>
<td>0.4%</td>
<td>-0.9%</td>
<td>-2.0%</td>
<td>-1.1%</td>
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<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.3%</td>
<td>0.2%</td>
<td>2.8%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>3.8%</td>
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<td class="firstcol">&nbsp;Energy</td>
<td>3.8%</td>
<td>-0.5%</td>
<td>14.2%</td>
<td>10.9%</td>
<td>12.2%</td>
<td>-5.9%</td>
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<td class="firstcol">&nbsp;Food</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.2%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</td>
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<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<td class="firstcol"><b><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a> </b></td>
<td>0.4%</td>
<td>-0.1%</td>
<td>2.6%</td>
<td>2.3%</td>
<td>2.0%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.0%</td>
<td>-0.2%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>1.9%</td>
</tr>
</tbody>
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Consumer prices (CPI-U) rose 0.5% last month following no change in June and a 0.1% decline in May. Consensus expectations had been for a 0.4% July increase. Energy prices jumped 3.8% led by a 6.1% (19.5% y/y) increase in gasoline [...]

CPI Lifted By Strong Energy Prices

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<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050816a.jpg" width="353"></p>
<p>Consumer prices (CPI-U) rose 0.5% last month following no change in June and a 0.1% decline in May. Consensus expectations had been for a 0.4% July increase.</p>
<p>Energy prices jumped 3.8% led by a 6.1% (19.5% y/y) increase in gasoline prices to an average $2.29 per gallon. In August gasoline prices have risen further to $2.55 per gallon. Fuel oil prices also posted a strong 6.2% (34.3% y/y increase while natural gas prices gained 1.1% (7.1% y/y) and have strengthened further this month..</p>
<p>Less food &amp; energy prices rose 0.1% for the third consecutive month. Consensus expectations had been for a 0.2% increase.</p>
<p>Core goods prices, down 0.3%, fell for the third month in the last four led by a 1.0% (+0.3% y/y) decline in new vehicle prices. Appliance prices fell 0.5% (+2.0% y/y) and apparel prices tumbled 0.9% (-1.9% y/y), down hard for the third month in the last four.</p>
<p>Core services prices rose 0.3% as medical care services prices doubled the gain in June with a 0.4% (4.8% y/y) increase. Public transportation prices jumped 1.0% (5.5% y/y) and school tuition costs gained 0.6% (6.6% y/y). Shelter prices rose 0.3% (2.5% y/y).</p>
<p>The chained CPI which adjusts for shifts in the mix of consumer purchases rose 0.4% but less food &amp; energy chain prices were unchanged.</p>
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<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> </b></th>
<th scope="col"><u><b>July</b></u></th>
<th scope="col"><u><b>June</b></u></th>
<th scope="col"><b><u>Y/Y</u></b></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><b><u>2003</u></b></th>
<th scope="col"><b><u>2002</u></b></th>
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<td class="firstcol">Total&nbsp;</td>
<td>0.5%</td>
<td>0.0%</td>
<td>3.1%</td>
<td>2.7%</td>
<td>2.3%</td>
<td>1.6%</td>
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<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>2.3%</td>
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<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.3%</td>
<td>-0.2%</td>
<td>0.4%</td>
<td>-0.9%</td>
<td>-2.0%</td>
<td>-1.1%</td>
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<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.3%</td>
<td>0.2%</td>
<td>2.8%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>3.8%</td>
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<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>3.8%</td>
<td>-0.5%</td>
<td>14.2%</td>
<td>10.9%</td>
<td>12.2%</td>
<td>-5.9%</td>
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<td class="firstcol">&nbsp;Food</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.2%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</td>
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<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<td class="firstcol"><b><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a> </b></td>
<td>0.4%</td>
<td>-0.1%</td>
<td>2.6%</td>
<td>2.3%</td>
<td>2.0%</td>
<td>1.3%</td>
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<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.0%</td>
<td>-0.2%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>1.9%</td>
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<span id="articletitle">Housing Starts Firm</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom Moeller</a> August 16, 2005</span>
<span id="articletext">
<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050816c.jpg" width="353"></p>
<p>Housing starts remained firm last month at 2.042M units versus an upwardly revised 2.045M units in June.Consensus expectations had been for a slight decline to 2.025M starts.</p>
<p>Single-family starts nudged up 0.5% after a 1.2% decline in June. Single family starts in the Midwest rose 5.0% (0.6% y/y) and in the West rose 4.1% (-7.4% y/y). Single family starts in the Northeast starts fell 7.6% (+12.6% y/y) and in the South starts fell 1.5% (+9.0% y/y).</p>
<p>Multi family starts gave back half of the prior month&#39;s rise and fell 3.2%.</p>
<p>Building permits increased for the second consecutive month and rose 1.6%.</p>
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<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></b><b> </b></th>
<th scope="col"><u><b>July</b></u></th>
<th scope="col"><u><b>June</b></u></th>
<th scope="col"><b><u>Y/Y</u></b></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><b><u>2003</u></b></th>
<th scope="col"><b><u>2002</u></b></th>
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<td class="firstcol">Total</td>
<td>2,042</td>
<td>2,045</td>
<td>2.8%</td>
<td>1,950</td>
<td>1,854</td>
<td>1,7 10</td>
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<td class="firstcol">&nbsp; Single-family</td>
<td>1,711</td>
<td>1,703</td>
<td>3.0%</td>
<td>1,604</td>
<td>1,505</td>
<td>1,363</td>
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<td class="firstcol">&nbsp; Multi-family</td>
<td>331</td>
<td>342</td>
<td>1.8%</td>
<td>345</td>
<td>349</td>
<td>347</td>
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<td class="firstcol">Building Permits</td>
<td>2,167</td>
<td>2,132</td>
<td>2.5%</td>
<td>2,058</td>
<td>1,8 88</td>
<td>1,749</td>
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<span id="articletitle">NAHB Housing Market Index Down Sharply in August</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom Moeller</a> August 16, 2005</span>
<span id="articletext">
<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050816b.jpg" width="353"></p>
<p>The National Association of Home Builders&#39; (NAHB) Composite Housing Market Index fell sharply in August to 67 from an unrevised 70 In July.</p>
<p>During the last twenty years, annual changes in the composite index had an 85% correlation with the change in single family housing starts.</p>
<p>The August index for current sales of single family homes fell for the second consecutive month (-5.3%% y/y) but the index of expected sales in six months was stable (-1.3% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050816d.jpg" width="353"></p>
<p>Traffic of prospective home buyers fell from July&#39;s record high.</p>
<p><span style="COLOR: #333333">The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.</span></p>
<p>Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.</p>
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<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></b><b> </b></th>
<th scope="col"><u><b>August</b></u></th>
<th scope="col"><u><b>July</b></u></th>
<th scope="col"><u><b>August</b></u><b><u> &#39;04</u></b></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><b><u>2003</u></b></th>
<th scope="col"><b><u>2002</u></b></th>
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<tbody>
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<td class="firstcol">Composite Housing Market Index</td>
<td>67</td>
<td>70</td>
<td>70</td>
<td>68</td>
<td>64</td>
<td>61</td>
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<span id="articletitle">Industrial Production Increase Light</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom Moeller</a> August 16, 2005</span>
<span id="articletext">
<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050816e.jpg" width="353"></p>
<p>Industrial production increased 0.1% last month following a downwardly revised 0.8% gain in June. Consensus expectations had been for a 0.5% rise. Factory sector output also slowed to half the prior month&#39;s gain and rose 0.2% (3.1% y/y) in July.</p>
<p>Lower motor vehicle production, off 2.3% (+4.4% y/y), was responsible for much of last month&#39;s weakness in output growth. Less motor vehicles, factory output rose 0.3% (2.8% y/y) after a 0.2% June increase.</p>
<p>With a 2.6% (19.0% y/y) spike, output of computers &amp; peripheral equipment posted the largest one month increase since January. Excluding the high tech sector as well as autos, factory output rose 0.2% (1.8% y/y).</p>
<p>Output of industrial &amp; other equipment jumped 1.3% (1.8% y/y) and furniture output rose 0.4% (-1.9% y/y). On the weak side was nondurable goods which fell 0.2% (+1.2% y/y).</p>
<p>Total capacity utilization dipped to 79.7% and capacity grew 1.1% y/y. Factory sector utilization was stable at 78.3%, up from 77.0% last July and capacity rose 1.3% y/y.</p>
<p><b> The Relationship Between Capacity Utilization and Inflation</b> from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/files/br/Q2_05_Dotsey_Stark.pdf">here</a>.</p>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM"><b>Production &amp; Capacity</b></a></th>
<th scope="col"><b>July</b></th>
<th scope="col"><b>June</b></th>
<th scope="col"><u><b>Y/Y</b></u></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><u><b>2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
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</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production</td>
<td>0.1%</td>
<td>0.8%</td>
<td>3.0%</td>
<td>4.1%</td>
<td>-0.0%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>-0.4%</td>
<td>1.1%</td>
<td>3.0%</td>
<td>2.7%</td>
<td>0.3%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Business Equipment</td>
<td>1.2%</td>
<td>0.2%</td>
<td>6.7%</td>
<td>9.5%</td>
<td>1.2%</td>
<td>-7.9%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>79.7%</td>
<td>79.8%</td>
<td>78.3% (7/04)</td>
<td>78.1%</td>
<td>75.5%</td>
<td>75.3%</td>
</tr>
</tbody>
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<span id="articletitle">Chain Store Sales Dipped Again</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom Moeller</a> August 16, 2005</span>
<span id="articletext">
<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050816f.jpg" width="353"></p>
<p>Chain store sales dipped for the second week according to the International Council of Shopping Centers (ICSC)-UBS survey. A 0.2% w/w decline followed a 0.8% fall during the opening week of August. Sales so far this month are 0.2% ahead of the July average which rose 0.8% from June.</p>
<p>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.</p>
<p>The leading indicator of chain store sales from ICSC recouped about half of the prior week&#39;s decline with a 0.4% (-0.3% y/y) rise.</p>
<p>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.</p>
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<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></b></th>
<th scope="col"><u><b>08/13/05</b></u></th>
<th scope="col"><u><b>08/06/05</b></u></th>
<th scope="col"><b><u>Y/Y</u></b></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><u><b>2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>458.0</td>
<td>458.9</td>
<td>4.4%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
<span id="articletitle">Spain's Balance of Payments in May</span><br>
<span id="byline">by <a href="/comment/Curley.html">Louise Curley</a> August 16, 2005</span>
<span id="articletext">
<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050816g.jpg" width="353"></p>
<p>Spain reported balance of payment data for May today. Spain&#39;s presentation of balance of payments data differs from that of most other countries. Included in the financial account is the category, &quot;Bank of Spain.&quot; This item includes the change in international reserves, which in most presentations is a separate item, in addition to international transactions of the Bank of Spain. As a result the balance on Spain&#39;s current account is completely offset by the sum of the capital account, the financial account and the residual item, &quot;errors and omissions.&quot; The first chart shows the current account and the financial account balances.</p>
<p>Over the past year and a half, the current account deficit has become increasingly more negative, while the financial account has become more positive. As most developed countries have abandoned capital controls over the international flow of funds, it has become more difficult to decide whether it is the current account or the financial account that calls the tune in the eventual balancing of the accounts. Before the relaxation of capital controls, it was generally agreed that the driving force in a country&#39;s balance of payments was its balance on current account. Now, however, it is agreed that capital flows are an additional factor, or in some cases, the major factor in determining the eventual balance of the accounts.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050816h.jpg" width="353"></p>
<p>The elements of the current account, exports and imports goods, services and the balance of wages and income from foreign activities tend to show rather smooth trends. The elements of the financial account, however, exhibit very volatile trends. For example, there was a net outflow of &quot;other investment,&quot; in May of 7,834 million euros after an inflow of 5,657 million euros in April, resulting in an negative change of 13,491 million euros between April and May. Direct and portfolio investment, derivatives and financial flows of the Bank of Spain, however, all contributed to an almost equal positive change. The volatility and the diverse movements of the various capital flows are illustrated in the second chart that shows net portfolio and net &quot;other&quot; investments in Spain&#39;s balance of payments.</p>
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<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/SPAIN/SPAIN.HTM">Spain:&nbsp; Balance of Payments</a><br> (Mil. Euros)</b></th>
<th scope="col"><b>May 05</b></th>
<th scope="col"><b>Apr 05</b></th>
<th scope="col"><b>May 04</b></th>
<th scope="col"><b>M/M Dif </b></th>
<th scope="col"><b>Y/Y Dif</b></th>
<th scope="col"><b>2004</b></th>
<th scope="col"><b>2003</b></th>
<th scope="col"><b>2002</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account</td>
<td>-5258</td>
<td>-6014</td>
<td>-3314</td>
<td>756</td>
<td>-1944</td>
<td>-44450</td>
<td>-27908</td>
<td>-23812</td>
</tr>
<tr>
<td class="firstcol">Capital Account</td>
<td>990</td>
<td>308</td>
<td>1867</td>
<td>682</td>
<td>-877</td>
<td>8547</td>
<td>8165</td>
<td>7663</td>
</tr>
<tr class="odd">
<td class="firstcol">Financial Account</td>
<td>4347</td>
<td>6183</td>
<td>1104</td>
<td>-1836</td>
<td>3243</td>
<td>36836</td>
<td>18875</td>
<td>15988</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Net Direct Investment</td>
<td>247</td>
<td>-902</td>
<td>46</td>
<td>1149</td>
<td>201</td>
<td>-26345</td>
<td>-1418</td>
<td>6904</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Portfolio Investment</td>
<td>7086</td>
<td>3231</td>
<td>-6650</td>
<td>3855</td>
<td>13736</td>
<td>85804</td>
<td>-26592</td>
<td>4727</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Net Other Investment</td>
<td>-7834</td>
<td>5657</td>
<td>13610</td>
<td>-13491</td>
<td>-21446</td>
<td>-9776</td>
<td>48750</td>
<td>5712</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Derivatives</td>
<td>-123</td>
<td>-1036</td>
<td>308</td>
<td>913</td>
<td>-431</td>
<td>1162</td>
<td>-3434</td>
<td>-4915</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Bank of Spain</td>
<td>4970</td>
<td>-767</td>
<td>-6209</td>
<td>5737</td>
<td>11179</td>
<td>-14010</td>
<td>1576</td>
<td>3561</td>
</tr>
<tr class="odd">
<td class="firstcol">Errors and Omissions</td>
<td>-79</td>
<td>-478</td>
<td>343</td>
<td>399</td>
<td>-422</td>
<td>36836</td>
<td>18875</td>
<td>15988</td>
</tr>
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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050815b.jpg" width="353"></p>
<p>China&#39;s exports of merchandise declined in July by $3,802 million from June, but since imports declined by $4,435 million, the trade surplus increased $633 million to $10,445 million from $9,812 million in June. The growth of the China&#39;s trade surplus over the past few years is evident in the first chart. Most of the surplus is with the United States. Countries other than the United States have, as a whole, run a trade deficit with China as can be seen in the table below.</p>
<p>Only total trade figures are available for July. The latest data on trade by country are for June. In the table below, we show China&#39;s total exports, exports to the United States and all other countries, total imports and imports from the United States and all other countries, and the total balance of trade and the balances for the United States and all other countries. While the surplus with the United States is still increasing in the first half of this year, there appears to be a sharp deceleration in the deficit with countries other than the U. S. In 2004 the deficit with these countries was $47,452 million, but in the first half of this year the deficit was only $3,645 million. There has been a decline in exports to these countries but a much greater decline in imports from them has reduced their deficit with China. The second and third charts show exports to and imports from Europe and Japan. The trends in the first half of this year shown in these charts are typical of most of the countries for which data are available. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050815d.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050815c.jpg" width="353"></p>
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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/EMERGEPR/@P1/@P1.HTM">China&#39;s Merchandise Trade (Million US$)</a>&nbsp;</b></th>
<th scope="col"><b>2005 1st H</b></th>
<th scope="col"><b>2004&nbsp;</b></th>
<th scope="col"><b>2003</b></th>
<th scope="col"><b>2002 </b></th>
<th scope="col"><b>2001</b></th>
<th scope="col"><b>2000</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total</td>
<td>365,996</td>
<td>593,633</td>
<td>438,398</td>
<td>325,596</td>
<td>266,108</td>
<td>249,202</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; US</td>
<td>78,152</td>
<td>124,973</td>
<td>92,512</td>
<td>69,959</td>
<td>54,319</td>
<td>52,142</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rest of the world</td>
<td>287,844</td>
<td>468,660</td>
<td>345,886</td>
<td>255,637</td>
<td>211,789</td>
<td>197,060</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total</td>
<td>315,594</td>
<td>560,765</td>
<td>412,840</td>
<td>295,170</td>
<td>243,554</td>
<td>225,092</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; US</td>
<td>24,105</td>
<td>44,653</td>
<td>33,883</td>
<td>27,228</td>
<td>26,204</td>
<td>22,365</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rest of the world</td>
<td>291,489</td>
<td>516,112</td>
<td>278,957</td>
<td>267,942</td>
<td>217,350</td>
<td>202,727</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total</td>
<td>50,402</td>
<td>32,868</td>
<td>25,558</td>
<td>30,426</td>
<td>22,554</td>
<td>24,110</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; US</td>
<td>54,047</td>
<td>80,320</td>
<td>58,629</td>
<td>42,731</td>
<td>28,115</td>
<td>29,777</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rest of the world</td>
<td>-3.645</td>
<td>-47,452</td>
<td>-33,071</td>
<td>-12,305</td>
<td>-5,561</td>
<td>-5,667</td>
</tr>
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China's exports of merchandise declined in July by $3,802 million from June, but since imports declined by $4,435 million, the trade surplus increased $633 million to $10,445 million from $9,812 million in June. The growth of the [...]

China's Trade Surplus Growing: Not Only is the Surplus with the United States Rising, but the Deficit with All [...]

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

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

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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

Robert Brusca

260407E.jpg

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.

U.S. ISM Services PMI Slips in March, Still Indicating Expansion for the 21st Straight Month

Tian Yong Woon

In this week’s Letter, we examine the first-round price impacts of the surge in oil prices stemming from the ongoing Middle East conflict in Asia. Despite recent rhetoric and reports suggesting a potentially swift resolution, the conflict continues to unfold, with a ceasefire hanging in the balance, and with some measures of shipping volumes through the Strait of Hormuz still reduced to a trickle. At the same time, crude oil prices have been whipsawing amid shifting market perceptions about the persistence of the current supply shock (chart 1). The initial effects of higher oil prices are already showing up in hard data, particularly in energy- and fuel-related inflation across Indonesia, South Korea, and Vietnam (chart 2). In response, several governments have rolled out sizeable subsidy programmes to cushion rising energy costs, though these measures come with significant fiscal strain.

We also assess recent consumer inflation expectations in South Korea and Taiwan, which show early signs of edging higher (chart 3), although there is as yet no clear evidence of a meaningful unanchoring. To add further nuance, our latest Blue Chip survey suggests that most panellists expect only a limited and temporary pass-through from higher energy prices to core inflation, though a non-trivial minority anticipate a more persistent effect (chart 4). On the policy front, respondents broadly expect central banks to delay easing while avoiding outright tightening, with outcomes likely to diverge across regions (chart 5). In the near term, upcoming policy decisions in India, New Zealand, and South Korea—alongside other key data releases—will provide a useful test of these expectations (chart 6).

**The Middle East conflict**
The Middle East conflict continues to rage, with IMF-tracked shipping volumes through the Strait of Hormuz still reduced to a trickle. Meanwhile, crude oil prices remain volatile, gyrating alongside shifting perceptions over how soon normal oil flows might resume. In reality, there is still little sign of a substantive resolution, and no agreement to fully reopen the strait appears imminent, suggesting that oil flows are likely to remain constrained at low levels in the near term. That said, some investors are closely monitoring developments following reports of discussions around a potential 45-day ceasefire, which could pave the way toward a more lasting resolution. Until then, and absent any meaningful supply relief, crude oil prices—and by extension, energy-related inflation—are likely to face continued upward pressure, particularly for oil-dependent, importing economies.

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**Initial price impacts**
The initial inflation concerns among policymakers and investors stemming from the surge in oil prices are now beginning to show up in the data, as illustrated in chart 2. The latest March readings—capturing the period after the onset of the Middle East conflict—already point to a sharp acceleration in energy-related prices on a year-ago basis. Indonesia’s energy CPI basket has risen by around 9%, while diesel prices in South Korea have jumped 17%. Vietnam’s retail gasoline prices have seen an even more pronounced increase, at roughly 25.6%. Given the scale of these price surges, and their direct impact on everyday essentials—particularly fuel for daily commutes and broader economic activity—governments across Asia have begun rolling out sizeable subsidy programmes. These measures, often implemented at significant fiscal cost, aim to cushion the burden on households and firms. For instance, South Korea’s finance ministry proposed a supplementary budget of around $17.3 billion in late March to support low-income households, youth, and businesses amid higher oil prices, with approval expected by April 10. Meanwhile, Indonesia has allocated approximately $22.4 billion toward energy subsidies and support for selected energy and utilities firms to help keep prices affordable.

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**Consumer inflation expectations**
What policymakers are likely to focus on—beyond the immediate price impacts—is how the recent surge in oil prices feeds into inflation expectations. If left unanchored, these expectations could pose a far greater challenge than the supply-driven price shock itself, including reduced monetary policy effectiveness in reining in inflation and the risk of a self-fulfilling inflation cycle—though it is worth noting that such dynamics are not yet close to materialising. So far, there are some early, albeit inconclusive, signs that near-term consumer inflation expectations are beginning to drift higher in certain economies. As shown in chart 3, one-year-ahead inflation expectations edged up to 2.7% in March, while in Taiwan, consumer sentiment regarding domestic price trends over the next six months has turned notably more pessimistic relative to overall confidence.

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**The latest Blue Chip survey**
Turning to investor perspectives on how higher energy prices may feed into inflation, our special questions in the latest Blue Chip Financial Forecasts (BCFF) survey offer some useful nuance. As shown in chart 4, around two-thirds of panellists expect only a limited and temporary pass-through from higher oil prices to core inflation. That said, a non-trivial minority (31%) anticipate a more moderate and persistent pass-through. This is notable given the focus on core inflation, and underscores how energy prices can generate second-round effects even in typically non-energy components, reflecting the pervasive role of energy in everyday economic activity—from manufacturing to the upkeep of a wide range of goods and services.

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Delving deeper, we also asked panellists about their views on the prospective path of central bank policy should energy-driven inflation prove persistent. As shown in chart 5, responses broadly coalesce around two themes: central banks are likely to delay easing rather than tighten, and policy responses will vary meaningfully across regions. The former is already playing out to some extent in recent central bank decisions across Asia, with several explicitly citing the ongoing Middle East conflict as a reason to remain vigilant on inflation and refrain from easing policy prematurely. As for the latter, there are already signs of divergence in how different central banks are approaching the situation.

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**The week ahead**
Looking to the week ahead, there will be ample opportunities to assess whether investor expectations for central bank policy moves play out across Asia, with several rate decisions due—most notably in India, New Zealand, and South Korea. Also on the docket are China’s March CPI print and a range of Japan-related releases. Policymakers are likely to remain focused on balancing inflation control with supporting growth and maintaining currency stability. For now, and absent offsetting domestic factors, expectations for further near-term easing have been tempered by rising inflation risks. In China, recent CPI readings point to a modest pickup, while producer price deflation has begun to ease after a prolonged period of weak or negative inflation.

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Asia

Economic Letter from Asia: First-Round Effects

Michael J. Moran

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The report on payroll employment for March was impressive when viewed in isolation. Job growth was strong at 178,000, and the advance was broadly based. The construction and manufacturing sectors both posted solid gains, and the service-producing sector registered its firmest performance in more than a year. However, the gain might be viewed as a continuation of an unusual bout of random volatility. The March advance followed a notable drop in February (-133,000, revised down from -92,000), which followed an upside surprise in January (160,000, revised up from 126,000).

To be sure, statistical noise has been a factor in the past three months, but the results also represent an encouraging shift in job growth from that in the second half of last year, when employment rose only marginally in the third quarter and fell in the fourth. The net change in the past three months seems to signal that job growth is not drying up. The net advance so far this year is far from brisk, but it is clearly in the plus column and noticeably better than results in late 2025.

The unemployment rate also might be viewed as favorable, as it dipped 0.1 percentage point to 4.3%, although it was a “soft” decline. That is, employment as measured by the household survey declined 64,000, but the size of the labor force fell by a larger amount (off 396,000). Still, the jobless rate has climbed only modestly higher since the labor market started to ease in 2023, and it has inched lower in the past few months.

Unemployment has been contained despite modest hiring because layoffs also have been light. Initial claims for unemployment benefits have moved sideways in the past few years, indicating no change in the pace of layoffs. This pattern is confirmed by terminations data in the report on job openings and labor turnover (JOLTs) from the Bureau of Labor Statistics.

A supply-side shift in the labor market also has helped to contain the unemployment rate. Growth in the size of the labor force has slowed, and with fewer individuals seeking employment, those searching are more easily absorbed. Measures of the size of the labor force can be difficult to assess because there are breaks in the series every year. The Bureau of Labor Statistics adjusts the population controls used in its estimating procedure every January without revising past data to align with the new estimates. Thus, every January involves a discontinuity in the series, which will distort year-over-year changes.

However, Haver Analytics maintains a smoothed series originally developed by BLS to eliminate the breaks in the labor force data. As shown in the chart below, the smoothed series on the size of the labor force had been growing at a pace centered on 1.2% through 2022, but it has slowed irregularly since then (an observation for October is not available because of limited data collection during the government shutdown). The overall labor force is still growing, but the slower pace means fewer individuals looking for work, which most likely results in fewer being counted as unemployed.

The BLS collects data every month on both native-born and foreign-born individuals in the labor force. The breaks in these series are an issue, and Haver does not maintain smoothed series. However, the use of moving averages achieves enough smoothing to provide a sense of underlying changes. The native-born labor force has moved erratically in the past couple of years, but it has continued to advance. The foreign-born labor force, in contrast, seems to have peaked in mid-2025 and has generally declined since then.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- The jump of 178,000 in payroll employment in March easily exceeded the expected gain of 51,000.
- Following a net gain in January and February, the employment setting seems to have brightened slightly.
- A dip in the unemployment rate continued the recent pattern of marginal changes.

Economy in Brief

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