Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050420b.jpg" width="353">
Consumer Prices (CPI-U) rose 0.6% in March versus Consensus expectations for a 0.5% rise.Prices less food &amp; energy rose 0.4%, double expectations for a 0.2% increase.
Energy prices doubled the prior month&#39;s increase with a 4.0% gain fueled by a 7.9% (16.8% y/y) jump in gasoline prices. In April gasoline prices have moved higher to an average $2.25 per gallon versus $2.08 in March although in the latest week prices backed off the high of $2.28. Fuel oil prices rose 4.6% (28.2% y/y) but natural gas &amp; electricity prices fell 0.3% (+6.4% y/y).
Services price inflation firmed further last month. Less energy, the 0.5% gain in March was the strongest since November 2001. Shelter prices doubled the prior month&#39;s increase with a 0.6% (3.0% y/y) rise and medical care services prices again popped 0.6% (5.0% y/y). Public transportation prices surged 1.3% (0.2% y/y) following three months of flat-to-down movement and school tuition firmed further with a 0.6% (6.4% y/y) rise.
Core goods price inflation again was tame owing to a 0.4% (+0.9%) decline in new vehicle prices, a 0.7% decline (NSA, -15.2% y/y) in computer prices, no change in furniture prices (0.3% y/y) and no change in medical care commodities (2.2% y/y). Apparel prices, however, firmed and rose 0.8% (0.0% y/y).
Food prices rose 0.2%s. Fruit &amp; vegetable prices declined for the fourth straight month (+1.6% y/y) and meat, poultry &amp; fish prices rose 0.2% (2.7% y/y).
The chained CPI which adjusts for shifts in the mix of consumer purchases jumped 0.7%. Core chain prices rose 0.5%.
Has the Bond Market Forgotten Oil? from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20050501/cover.pdf"> here</a>.

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</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&nbsp;</td>
<td>0.6%</td>
<td>0.4%</td>
<td>3.2%</td>
<td>2.7%</td>
<td>2.3%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.4%</td>
<td>0.3%</td>
<td>2.4%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.6%</td>
<td>-0.9%</td>
<td>-2.0%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.5%</td>
<td>0.3%</td>
<td>3.0%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>4.0%</td>
<td>2.0%</td>
<td>12.3%</td>
<td>10.9%</td>
<td>12.2%</td>
<td>-5.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.6%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</td>
</tr>
<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>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a></td>
<td>0.7%</td>
<td>0.5%</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>0.5%</td>
<td>0.6%</td>
<td>1.9%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>1.9%</td>
</tr>
</tbody>
</table>
Mortgage Applications Lower 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 20, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050323b.jpg" width="353">
The Mortgage Bankers Association reported that mortgage applications fell 1.6% last week and pulled the average level so far in April 3.5% below March which fell 4.8% from February.
Purchase applications fell 1.6% for the second decline in three weeks. The average in April still is 1.0% ahead of March which rose 6.1% from February. During the last ten years there has been a 50% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance fell 1.6% and the April average is off 9.4% from March.
The effective interest rate on a conventional 30-year mortgage fell to 6.08% from 6.22% the prior week. The effective rate on a 15-year mortgage also fell to 5.70%.
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>.

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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">04/15/05</th>
<th scope="col">04/08/05</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>672.6</td>
<td>683.6</td>
<td>-9.7%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>466.7</td>
<td>474.5</td>
<td>7.5%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,870.0</td>
<td>1,899.6</td>
<td>-26.7%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
Chinese GDP Growth Remains Strong in Q1 
by <a href="/comment/Stone.html">Carol Stone</a> April 20, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050420c.jpg" width="353">
China&#39;s GDP gained 9.5% year-on-year in the first quarter, according to data reported this morning in Beijing. This followed a similar performance in Q4 2004, and compared with at least one analyst survey that showed a consensus forecast slowing to 9.0%.
Of the three broad industry groups reported today, two indeed slowed. Growth in the &quot;primary&quot; sector, mainly agriculture, decreased to 4.6% from 5.5% during all of 2004. Even so, these and the previous three quarters remain notably stronger than any pace in the prior six years of these output data.
The services sectors, &quot;tertiary&quot; industries, also retreated somewhat in Q1, expanding 7.6% versus 8.6% during 2004. Both periods, however, have similar rates to those that have prevailed in previous recent years.
&quot;Secondary&quot; industries include mining, manufacturing and utilities. There growth picked up a bit in Q1, to 11.3% from the 10.9% pace in 2004.
Policymakers have hoped for more distinct slowing in growth, and have tightened credit to try to achieve that. So far, their success has obviously been limited. The result of today&#39;s GDP report is likely to be continued restraint, and several forecasters today pointed toward still more interest rate increases. The People&#39;s Bank of China key 1-year lending rate is presently 5.58%, last raised in October.

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<th scope="col" class="firstcol">4-Qtr % Changes</th>
<th scope="col">Q1 2005</th>
<th scope="col">Q4 2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Nominal GDP</td>
<td>15.7</td>
<td>15.4</td>
<td>22.3</td>
<td>7.0</td>
<td>5.2</td>
</tr>
<tr>
<td class="firstcol">Real GDP</td>
<td>9.5</td>
<td>9.5</td>
<td>9.9</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Cumulative YTD: Nominal GDP</td>
<td>15.7</td>
<td>17.0</td>
<td>14.0</td>
<td>6.7</td>
<td>7.3</td>
</tr>
<tr>
<td class="firstcol">Real GDP</td>
<td>9.5</td>
<td>9.5</td>
<td>9.3</td>
<td>8.3</td>
<td>7.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Primary Industries*</td>
<td>4.6</td>
<td>5.5</td>
<td>2.5</td>
<td>2.9</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">Secondary**</td>
<td>11.3</td>
<td>10.9</td>
<td>12.7</td>
<td>9.8</td>
<td>8.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Tertiary***</td>
<td>7.6</td>
<td>8.5</td>
<td>7.3</td>
<td>8.7</td>
<td>8.4</td>
</tr>
</tbody>
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Consumer Prices (CPI-U) rose 0.6% in March versus Consensus expectations for a 0.5% rise.Prices less food & energy rose 0.4%, double expectations for a 0.2% increase. Energy prices doubled the prior month's increase with a 4.0% gain [...]

CPI Boosted by Energy & Services

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050419d.jpg" width="353">
After becoming slightly more optimistic regarding the German economic outlook six months ahead in each of the first three months of this year, the institutional investors and analysts who respond to the ZEW survey became decidedly more pessimistic in April. The excess of optimists over pessimists dropped to 20.1% in April from 36.3% in March and from 59.1% a year ago.
The same but more pessimistic trend is apparent in the respondents&#39; view of current conditions in Germany. In April, the percentage of respondents who considered current conditions bad was 73% greater than those who considered them good. The -73% figure compares with -66% in March and -72.5% in April of last year. In general, pessimistic appraisals of current conditions tend to outweigh the optimistic appraisals, while optimistic appraisals of expectations of future conditions tend to outweigh the pessimistic appraisals, as can be seen in the attached chart. (&quot;Hope springs eternal in the human breast./ Man never is, but always to be, blest.&quot;) <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050419e.jpg" width="353">
The ZEW survey also covers opinions on current conditions and expectations in the Euro zone as a whole. Since Germany represents such a large part of the Euro zone, it is not surprising that appraisals of current conditions and expectations in the Euro Zone tend to be similar to those of Germany. Expectations of economic conditions in Germany and in the Euro Zone are shown in the second chart.
With their pessimistic outlook for the economy, the institutional investors and analysts see little to cheer about in the profit outlook. There are only three industries, banking, telecommunications and information technology, in which the optimists outweigh the pessimists by more than 50%. The profit expectations for selected industries are shown in the table below.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/GERMANY.HTM">GERMANY %</a></th>
<th scope="col">Apr 05</th>
<th scope="col">Mar 05</th>
<th scope="col">Mar 04</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp; 2002</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Expectations</td>
<td>20.1</td>
<td>36.3</td>
<td>49.7</td>
<td>-16.2</td>
<td>-29.6</td>
<td>49.6</td>
<td>38.4</td>
<td>45.3</td>
</tr>
<tr>
<td class="firstcol">Current conditions</td>
<td>-73.0</td>
<td>-66.0</td>
<td>-42.5</td>
<td>-7.0</td>
<td>-0.5</td>
<td>-67.7</td>
<td>-92.6</td>
<td>-83.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Profit expectations</td>
<td>&nbsp;</td>
<td>&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; Banking</td>
<td>52.4</td>
<td>55.5</td>
<td>67.2</td>
<td>-3.1</td>
<td>-14.8</td>
<td>59.6</td>
<td>30.5</td>
<td>-8.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Telecommunications</td>
<td>51.1</td>
<td>56.5</td>
<td>69.2</td>
<td>-5.4</td>
<td>-18.1</td>
<td>62.5</td>
<td>49.7</td>
<td>9.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Information technology</td>
<td>52.5</td>
<td>59.4</td>
<td>71.9</td>
<td>-6.9</td>
<td>-19.4</td>
<td>63.0</td>
<td>45.2</td>
<td>17.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer/trade</td>
<td>-26.9</td>
<td>-22.6</td>
<td>-13.7</td>
<td>-4.3</td>
<td>-13.2</td>
<td>-18.2</td>
<td>-33.7</td>
<td>-28.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Machinery</td>
<td>37.3</td>
<td>45.6</td>
<td>52.4</td>
<td>-8.3</td>
<td>-15.1</td>
<td>53.4</td>
<td>7.0</td>
<td>5.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;Vehicle/automotive&nbsp;</td>
<td>-19.0</td>
<td>-2.9</td>
<td>5.9</td>
<td>-16.1</td>
<td>-24.9</td>
<td>-0.1</td>
<td>-8.2</td>
<td>-6.0</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/GERMANY.HTM">EURO ZONE %</a></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations</td>
<td>24.6</td>
<td>37.3</td>
<td>59.1</td>
<td>-12.7</td>
<td>-34.5</td>
<td>52.1</td>
<td>48.9</td>
<td>53.1</td>
</tr>
<tr>
<td class="firstcol">Current conditions</td>
<td>-32.8</td>
<td>-24.8</td>
<td>-55.4</td>
<td>-5.0</td>
<td>21.6</td>
<td>-41.4</td>
<td>-78.5</td>
<td>67.5</td>
</tr>
</tbody>
</table>
</body>
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After becoming slightly more optimistic regarding the German economic outlook six months ahead in each of the first three months of this year, the institutional investors and analysts who respond to the ZEW survey became decidedly [...]

More Gloom from Germany

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050419a.jpg" width="353">
Chain store sales rose 1.0% last week according to the International Council of Shopping Centers (ICSC)-UBS survey. Coming on the heels of 0.3% increases during the prior two weeks, the increase lifted the average level in April up 0.4% versus March when sales moved sideways for much of the month.
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 nonauto retail sales less gasoline.
The leading indicator of chain store sales from ICSC gained 0.3% (-0.8% y/y) for the first rise in four 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.

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<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">04/16/05</th>
<th scope="col">04/09/05</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>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>457.4</td>
<td>452.9</td>
<td>3.9%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
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</tbody>
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</body>
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Chain store sales rose 1.0% last week according to the International Council of Shopping Centers (ICSC)-UBS survey. Coming on the heels of 0.3% increases during the prior two weeks, the increase lifted the average level in April up [...]

Chain Store Sales Pass A "Soft Spot"

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050419c.jpg" width="353">
Housing starts fell a sharp 17.6% from the record high the prior month which was revised slightly higher from the initial report. March starts of 1.837M were the lowest since November of last year.Consensus expectations had been for a lesser decline to 2.10M starts.
Single-family starts of 1.54M slid 14.4% m/m from the upwardly revised record high in February. Single family starts in the Northeast dropped 19.9% (-16.9% y/y) while single family starts in the Midwest reversed all of the prior month&#39;s jump with a 18.5% (-8.5% y/y) slump. Single family starts in the South fell 15.3% (-4.8% y/y) and starts in the West were off 7.8% (+0.2% y/y).
Multi family starts cratered by nearly a third to the lowest level since June of last year.
Building permits fell 4.0% but the decline the prior month was revised shallower.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">Mar</th>
<th scope="col">Feb</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>1,837</td>
<td>2,229</td>
<td>-8.2%</td>
<td>1,952</td>
<td>1,853</td>
<td>1,7 10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,539</td>
<td>1,798</td>
<td>-5.2%</td>
<td>1,605</td>
<td>1,505</td>
<td>1,363</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>298</td>
<td>431</td>
<td>-20.7%</td>
<td>347</td>
<td>348</td>
<td>347</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,023</td>
<td>2,107</td>
<td>0.2%</td>
<td>2,035</td>
<td>1,8 89</td>
<td>1,749</td>
</tr>
</tbody>
</table>
</body>
</html>

Housing starts fell a sharp 17.6% from the record high the prior month which was revised slightly higher from the initial report. March starts of 1.837M were the lowest since November of last year.Consensus expectations had been for a [...]

Housing Starts Off Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050419b.jpg" width="353">
The Producer Price Index for finished goods rose 0.7% in March, the largest one month rise since November and surpassed Consensus expectations for a 0.6% gain. Excluding food &amp; energy prices, however, the PPI rose 0.1% for the second consecutive month. Consensus expectations had been for a 0.2% increase.
Finished energy prices advanced 3.3% (15.3% y/y) as gasoline prices jumped 12.3% (31.9% y/y) and fuel oil prices rose 16.1% (55.8% y/y). In April, prices for crude petroleum and for refined petroleum products are down versus March.
Core finished consumer goods prices rose 0.1% (2.6% y/y). Consumer durable goods prices fell by 0.1% (1.6% y/y) for the second consecutive monthly decline. Passenger cars fell again (+1.1% y/y) and home electronic equipment prices were off 0.2% (-4.0% y/y). Household appliance prices rose 0.3% (1.8% y/y).
Core consumer nondurable goods prices rose 0.1% (3.3% y/y) and capital goods prices increased 0.3% (+2.7% y/y). Finished food prices rose 0.3% (3.8% y/y).
Intermediate goods prices posted the largest increase since October. The 1.0% advance reflected a 3.7% (16.7% y/y) gain in energy prices. Core intermediate prices rose 0.3% though plywood prices fell (-13.9% y/y) as did hardwood lumber prices (-0.8% y/y).
Crude prices jumped 4.3% on the strength of surging oil prices, up 5.5% (28.4% y/y). Core crude prices rose for the first month in four. The 1.0% increase reflected price jumps for copper (15.9% y/y) &amp; aluminum (8.9% y/y) base scrap. During the last thirty years &quot;core&quot; crude prices have been a fair indicator of industrial sector activity with a 48% correlation between the six month change in core crude prices and the change in factory sector industrial production.
Inflation Targeting under Commitment and Discretion from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/review/2005/dennis.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/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</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">Finished Goods</td>
<td>0.7%</td>
<td>0.4%</td>
<td>4.9%</td>
<td>3.6%</td>
<td>3.2%</td>
<td>-1.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.6%</td>
<td>1.5%</td>
<td>0.2%</td>
<td>0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>1.0%</td>
<td>0.7%</td>
<td>8.4%</td>
<td>6.6%</td>
<td>4.6%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.3%</td>
<td>0.5%</td>
<td>7.6%</td>
<td>5.7%</td>
<td>2.0%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>4.3%</td>
<td>-1.6%</td>
<td>10.8%</td>
<td>17.6%</td>
<td>25.1%</td>
<td>-10.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>1.0%</td>
<td>-3.0%</td>
<td>3.4%</td>
<td>26.5%</td>
<td>12.4%</td>
<td>3.8%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Producer Price Index for finished goods rose 0.7% in March, the largest one month rise since November and surpassed Consensus expectations for a 0.6% gain. Excluding food & energy prices, however, the PPI rose 0.1% for the second [...]

PPI Again Boosted by Petroleum

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050419b.jpg" width="353">
The Producer Price Index for finished goods rose 0.7% in March, the largest one month rise since November and surpassed Consensus expectations for a 0.6% gain. Excluding food &amp; energy prices, however, the PPI rose 0.1% for the second consecutive month. Consensus expectations had been for a 0.2% increase.
Finished energy prices advanced 3.3% (15.3% y/y) as gasoline prices jumped 12.3% (31.9% y/y) and fuel oil prices rose 16.1% (55.8% y/y). In April, prices for crude petroleum and for refined petroleum products are down versus March.
Core finished consumer goods prices rose 0.1% (2.6% y/y). Consumer durable goods prices fell by 0.1% (1.6% y/y) for the second consecutive monthly decline. Passenger cars fell again (+1.1% y/y) and home electronic equipment prices were off 0.2% (-4.0% y/y). Household appliance prices rose 0.3% (1.8% y/y).
Core consumer nondurable goods prices rose 0.1% (3.3% y/y) and capital goods prices increased 0.3% (+2.7% y/y). Finished food prices rose 0.3% (3.8% y/y).
Intermediate goods prices posted the largest increase since October. The 1.0% advance reflected a 3.7% (16.7% y/y) gain in energy prices. Core intermediate prices rose 0.3% though plywood prices fell (-13.9% y/y) as did hardwood lumber prices (-0.8% y/y).
Crude prices jumped 4.3% on the strength of surging oil prices, up 5.5% (28.4% y/y). Core crude prices rose for the first month in four. The 1.0% increase reflected price jumps for copper (15.9% y/y) &amp; aluminum (8.9% y/y) base scrap. During the last thirty years &quot;core&quot; crude prices have been a fair indicator of industrial sector activity with a 48% correlation between the six month change in core crude prices and the change in factory sector industrial production.
Inflation Targeting under Commitment and Discretion from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/review/2005/dennis.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/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</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">Finished Goods</td>
<td>0.7%</td>
<td>0.4%</td>
<td>4.9%</td>
<td>3.6%</td>
<td>3.2%</td>
<td>-1.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.6%</td>
<td>1.5%</td>
<td>0.2%</td>
<td>0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>1.0%</td>
<td>0.7%</td>
<td>8.4%</td>
<td>6.6%</td>
<td>4.6%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.3%</td>
<td>0.5%</td>
<td>7.6%</td>
<td>5.7%</td>
<td>2.0%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>4.3%</td>
<td>-1.6%</td>
<td>10.8%</td>
<td>17.6%</td>
<td>25.1%</td>
<td>-10.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>1.0%</td>
<td>-3.0%</td>
<td>3.4%</td>
<td>26.5%</td>
<td>12.4%</td>
<td>3.8%</td>
</tr>
</tbody>
</table>
Housing Starts Off Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 19, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050419c.jpg" width="353">
Housing starts fell a sharp 17.6% from the record high the prior month which was revised slightly higher from the initial report. March starts of 1.837M were the lowest since November of last year.Consensus expectations had been for a lesser decline to 2.10M starts.
Single-family starts of 1.54M slid 14.4% m/m from the upwardly revised record high in February. Single family starts in the Northeast dropped 19.9% (-16.9% y/y) while single family starts in the Midwest reversed all of the prior month&#39;s jump with a 18.5% (-8.5% y/y) slump. Single family starts in the South fell 15.3% (-4.8% y/y) and starts in the West were off 7.8% (+0.2% y/y).
Multi family starts cratered by nearly a third to the lowest level since June of last year.
Building permits fell 4.0% but the decline the prior month was revised shallower.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">Mar</th>
<th scope="col">Feb</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>1,837</td>
<td>2,229</td>
<td>-8.2%</td>
<td>1,952</td>
<td>1,853</td>
<td>1,7 10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,539</td>
<td>1,798</td>
<td>-5.2%</td>
<td>1,605</td>
<td>1,505</td>
<td>1,363</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>298</td>
<td>431</td>
<td>-20.7%</td>
<td>347</td>
<td>348</td>
<td>347</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,023</td>
<td>2,107</td>
<td>0.2%</td>
<td>2,035</td>
<td>1,8 89</td>
<td>1,749</td>
</tr>
</tbody>
</table>
Chain Store Sales Pass A "Soft Spot" 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 19, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050419a.jpg" width="353">
Chain store sales rose 1.0% last week according to the International Council of Shopping Centers (ICSC)-UBS survey. Coming on the heels of 0.3% increases during the prior two weeks, the increase lifted the average level in April up 0.4% versus March when sales moved sideways for much of the month.
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 nonauto retail sales less gasoline.
The leading indicator of chain store sales from ICSC gained 0.3% (-0.8% y/y) for the first rise in four 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><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">04/16/05</th>
<th scope="col">04/09/05</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>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>457.4</td>
<td>452.9</td>
<td>3.9%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
More Gloom from Germany 
by <a href="/comment/Curley.html">Louise Curley</a> April 19 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050419d.jpg" width="353">
After becoming slightly more optimistic regarding the German economic outlook six months ahead in each of the first three months of this year, the institutional investors and analysts who respond to the ZEW survey became decidedly more pessimistic in April. The excess of optimists over pessimists dropped to 20.1% in April from 36.3% in March and from 59.1% a year ago.
The same but more pessimistic trend is apparent in the respondents&#39; view of current conditions in Germany. In April, the percentage of respondents who considered current conditions bad was 73% greater than those who considered them good. The -73% figure compares with -66% in March and -72.5% in April of last year. In general, pessimistic appraisals of current conditions tend to outweigh the optimistic appraisals, while optimistic appraisals of expectations of future conditions tend to outweigh the pessimistic appraisals, as can be seen in the attached chart. (&quot;Hope springs eternal in the human breast./ Man never is, but always to be, blest.&quot;) <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050419e.jpg" width="353">
The ZEW survey also covers opinions on current conditions and expectations in the Euro zone as a whole. Since Germany represents such a large part of the Euro zone, it is not surprising that appraisals of current conditions and expectations in the Euro Zone tend to be similar to those of Germany. Expectations of economic conditions in Germany and in the Euro Zone are shown in the second chart.
With their pessimistic outlook for the economy, the institutional investors and analysts see little to cheer about in the profit outlook. There are only three industries, banking, telecommunications and information technology, in which the optimists outweigh the pessimists by more than 50%. The profit expectations for selected industries are shown in the table below.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/GERMANY.HTM">GERMANY %</a></th>
<th scope="col">Apr 05</th>
<th scope="col">Mar 05</th>
<th scope="col">Mar 04</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp; 2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Expectations</td>
<td>20.1</td>
<td>36.3</td>
<td>49.7</td>
<td>-16.2</td>
<td>-29.6</td>
<td>49.6</td>
<td>38.4</td>
<td>45.3</td>
</tr>
<tr>
<td class="firstcol">Current conditions</td>
<td>-73.0</td>
<td>-66.0</td>
<td>-42.5</td>
<td>-7.0</td>
<td>-0.5</td>
<td>-67.7</td>
<td>-92.6</td>
<td>-83.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Profit expectations</td>
<td>&nbsp;</td>
<td>&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; Banking</td>
<td>52.4</td>
<td>55.5</td>
<td>67.2</td>
<td>-3.1</td>
<td>-14.8</td>
<td>59.6</td>
<td>30.5</td>
<td>-8.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Telecommunications</td>
<td>51.1</td>
<td>56.5</td>
<td>69.2</td>
<td>-5.4</td>
<td>-18.1</td>
<td>62.5</td>
<td>49.7</td>
<td>9.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Information technology</td>
<td>52.5</td>
<td>59.4</td>
<td>71.9</td>
<td>-6.9</td>
<td>-19.4</td>
<td>63.0</td>
<td>45.2</td>
<td>17.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer/trade</td>
<td>-26.9</td>
<td>-22.6</td>
<td>-13.7</td>
<td>-4.3</td>
<td>-13.2</td>
<td>-18.2</td>
<td>-33.7</td>
<td>-28.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Machinery</td>
<td>37.3</td>
<td>45.6</td>
<td>52.4</td>
<td>-8.3</td>
<td>-15.1</td>
<td>53.4</td>
<td>7.0</td>
<td>5.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;Vehicle/automotive&nbsp;</td>
<td>-19.0</td>
<td>-2.9</td>
<td>5.9</td>
<td>-16.1</td>
<td>-24.9</td>
<td>-0.1</td>
<td>-8.2</td>
<td>-6.0</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/GERMANY.HTM">EURO ZONE %</a></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations</td>
<td>24.6</td>
<td>37.3</td>
<td>59.1</td>
<td>-12.7</td>
<td>-34.5</td>
<td>52.1</td>
<td>48.9</td>
<td>53.1</td>
</tr>
<tr>
<td class="firstcol">Current conditions</td>
<td>-32.8</td>
<td>-24.8</td>
<td>-55.4</td>
<td>-5.0</td>
<td>21.6</td>
<td>-41.4</td>
<td>-78.5</td>
<td>67.5</td>
</tr>
</tbody>
</table>
</body>
</html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050418e.jpg" width="353">
On Wednesday, April 20, the central bank of Romania will issue new banknotes and coins of the new leu, which will become the legal currency as of July 1. One new leu is equal to 1,000 old lei.
Romania is one of a number of countries that have redenominated there currencies after they have tamed the inflation that had eroded the value of their currencies. Romania experienced three bouts of hyper inflation in the nineties--the first, producing an inflation rate as measured by the year-to-year percent increase in the consumer price index of 350% reached in March 1992, the second with a monthly peak of 309.7% in December 1993 and the third, with a monthly peak of 177.4% in June , 1997. The high rates of inflation led to continuing declines in the currency. The attached chart shows inflation, measured by the year-to-year percent increase in the consumer price index and the monthly exchange rate, Leu/US$, with the latter plotted on an inverted scale. Inflation in Romania has been declining slowly since early 2000 and has now reached 8.6% in March of this year.
A decline in the leu/US$ means that the dollar has depreciated against the leu or that the leu has appreciated against the dollar. (In the Haver data bases when the exchange rate is listed in terms of the foreign currency to the dollar, the percentage changes calculated are the percentage changes in the dollar relative to the foreign currency. In order to calculate the percent change in the foreign currency relative to the dollar, one takes the reciprocal of (1+the change in the dollar) and subtracts 1. For example the change in the leu/US$ from March 2004 to March 2005 was -14.99%, meaning that the dollar depreciated 14.99% against the leu or that the leu appreciated {(1/85.01)-1} or 17.6%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGECW/@E3/@E3.htm">Romania</a></th>
<th scope="col">Mar 05</th>
<th scope="col">Feb 05</th>
<th scope="col">Mar 04</th>
<th scope="col">M/M</th>
<th scope="col">Y/Y</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp; 2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Price Index (%Y/Y)</td>
<td>8.63</td>
<td>8.92</td>
<td>13.09</td>
<td>-0.19</td>
<td>-4.46</td>
<td>11.86</td>
<td>15.36</td>
<td>22.51</td>
</tr>
<tr>
<td class="firstcol">Lei/US$ (EOP)</td>
<td>28429</td>
<td>27473</td>
<td>33440</td>
<td>3.48</td>
<td>-14.99</td>
<td>-1082</td>
<td>-2.70</td>
<td>6.02</td>
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</tbody>
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On Wednesday, April 20, the central bank of Romania will issue new banknotes and coins of the new leu, which will become the legal currency as of July 1. One new leu is equal to 1,000 old lei. Romania is one of a number of countries [...]

Romania to Redenominate the Leu in July: 1 New Leu = 1,000 Old Leu

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050418a.jpg" width="353">
Revenues from Tax Day (April 15th) for 2005 won&#39;t be tallied for another month, but the figures for the first half of FY 2005 indicate the U.S. Federal government&#39;s budget deficit lessened just $6.8B versus the first half of FY 2004. The scant improvement is off the pace needed to meet the latest CBO projection of a $365B deficit for FY 2005.
Growth in net receipts for the first six months of FY05 improved to 10.4%, more than triple the growth during the first six months of FY04. Individual tax receipts grew 8.5% versus a 1.2% decline in the first six months of FY04 and corporate tax receipts remained on a pace which doubled the year earlier level. Reflecting the improved job market, employment taxes grew 6.5% versus 1.3% growth last year.
Offsetting the improvement in revenue growth was steady, strong growth in federal outlays, about stable at 7.1% versus the first six months of 2005. Growth in Medicare outlays picked up to 9.5% versus 6.6% and social security outlays grew 5.4%, up from 4.2% in 2004. Veterans benefits grew 17.4%. These gains offset deceleration in defense spending which grew 7.3%, less than the year earlier rate but interest expense, up 9.1, started to grow again with higher rates.
An Analysis of the President&#39;s Budgetary Proposals for Fiscal Year 2006 from the Congressional Budget Office is available <a href="http://www.cbo.gov/showdoc.cfm?index=6146&amp;sequence=0"> here</a>.

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<colgroup><col><col><col><col><col><col></colgroup>
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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E10602.HTM">US Government Finance</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">FY &#39;05 - YTD</th>
<th scope="col">FY2004</th>
<th scope="col">FY2003</th>
<th scope="col">FY2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$-71.2B</td>
<td>$-113.9B</td>
<td>$-294.6B</td>
<td>$-412.1B</td>
<td>$-377.6B</td>
<td>$-157.8B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Net Revenues</td>
<td>$148.7B</td>
<td>$100.9B</td>
<td>10.4%</td>
<td>5.5%</td>
<td>-3.8%</td>
<td>-6.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Outlays</td>
<td>$220.0B</td>
<td>$214.8B</td>
<td>7.1%</td>
<td>6.1%</td>
<td>7.4%</td>
<td>7.9%</td>
</tr>
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Revenues from Tax Day (April 15th) for 2005 won't be tallied for another month, but the figures for the first half of FY 2005 indicate the U.S. Federal government's budget deficit lessened just $6.8B versus the first half of FY 2004. [...]

U.S. Budget Deficit - Tax Day 2005

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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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.

Payroll Employment: Another Surprise in March, The Third Consecutive

Robert Brusca

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French manufacturing industrial production was flat in February after a January rebound; output rose by 0.2% following a 0.8% decline in December.

The components of industrial production in February showed 2.6% increase in consumer durables, a 0.4% increase in consumer nondurables, flat output from capital goods, and a 0.7% month to month decline in intermediate output.

Sequentially, French output had been growing at a slow, steady pace of 0.8% at an annual rate over both 12 months and six months, but then slipped to a 6.1% contraction at an annual rate over three months. Consumer durable goods output on this span shows consistent increases, but there are no trends to clear acceleration or deceleration. Consumer nondurables trace an accelerating path of moderate means from -1.8% over 12 months, to -0.4% over six months, and then rising at a 5.5% annual rate over three months. Capital goods output is moving in the opposite direction, growing by 3.4% over 12 months, slowing to a 0.7% annual pace over six months, and then contracting at a 9.5% annual rate over three months. Intermediate goods output is falling at 0.8% pace over 12 months, but then it switches to an expansion rate of 0.8% over six months and 0.6% and over three months. There's nothing remarkable about these patterns, except there's some acceleration, some deceleration, and a lot of mulling about at low growth rates.

As a separate item, French auto production is slipping and decelerating, falling by 7.1% at an annual rate over 12 months, falling at a 7.9% pace over six months, and then plunging at a 19.3% annual rate over three months. On these same horizons, motor vehicle registrations fall by 14.7% over 12 months; the weakness pares back to an 11.2% annual rate decline over six months, and then it steps up to a 22.1% decline at an annual rate over three months. French demand for autos is not in good shape.

In the quarter to date—now two months into the first quarter—manufacturing industrial production is falling at a 0.8% annual rate. That pace is boosted by 9.4% annual rate gain in consumer durables output but restrained by just a 0.2% annual rate increase in consumer nondurable goods. Capital goods output is falling at a 1.9% annual rate, while intermediate goods output is falling at a 1% annual rate. Also in the quarter to date, automobile production is plunging at a 24.3% annual rate, while on the demand side, motor vehicle registrations are falling at a 15% annual rate.

French manufacturing data are somewhat confusing. The chart shows that the industrial production trend has been showing consistent increases over 12 months, but it has recently been pulling back relatively sharply. On the other hand, the manufacturing PMI for France has been consistently negative going back to mid-2022 and only in early 2026 has the manufacturing PMI been posting some values above the 50% mark, indicating that output was starting to actually expand. In March, the PMI reading for manufacturing has slipped back by the thinnest margin below the 50% mark.

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Of course, events in the Middle East make everything more speculative, with the war effectively closing the Strait of Hormuz and no certainty about how or when that is going to be sorted out. In the meantime, the potential threat of ongoing oil price pressures has put both the ECB and the Bank of England in a position to be more wary with policy, and they warned markets about the potential for rate hikes as soon as their next meetings are engaged. That also raises questions about the outlook for growth. But we continue to track and chronicle trends in the data. It's also quite clear that we could have events that will play out that could completely undermine these trends before they get a chance to run to conclusion. It's an important time to be wary and watch all developments—a lot is in play.

France

French IP Waffles

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance declined by 9,000 to 202,000 in the week ending March 28, from 211,000 in the week ending March 21, revised from 210,000. The four-week average declined 3,000 to 207,750 in the week ending March 28, from 210,750 the March 21 week, revised from 210,500. The Forecast Survey looked for 212,000 claims to have been filed.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—rose by 25,000 to 1.841 million in the week ending March 21, from 1.816 million in the week ending March 14. The four-week moving average declined to 1.839 million in the latest week from 1.846 million in the March 14 week. This is the lowest level for this average since September 28, 2024 when it was 1.834 million. The insured unemployment rate remained at 1.2% in the week of March 21. It has remained at that level since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending March 14, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.73%), Massachusetts (2.66%), Washington (2.39%), Minnesota (2.31%), California (2.17%), and New York (2.01%). The lowest rates were in Florida (0.31%), Louisiana (0.32%), Arkansas (0.36%), Alabama (0.38%), and North Carolina (0.40%). Rates in other notable states include Illinois (1.99%), Connecticut (1.82%), Pennsylvania (1.72%), and Texas (1.07%). These state data are not seasonally adjusted.

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

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- New claims declined by 9,000 to 202,000.
- Continuing claims rose by 25,000 to 1.841 million.
- The insured unemployment rate remained at 1.2%.

U.S. Initial Unemployment Claims Edged Down in the Week of March 28

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The S&P manufacturing PMIs for March showed improvements in 44.4% of the 18 reporters. The median reading for the month was at 50.9, indicating that expanding output was the median reading through the period. The median change showed a small step back of 0.1 diffusion points month-to-month.

Sequentially, looking at average yearly activity compared to a year ago, six months compared to 12 months, and three months compared to six months, we see progress in train. For three months compared to six months, the proportion of reporters showing improvement is 72.2%. For these reporters, over six months compared to 12 months, there is a 61.1% improvement proportion, while for 12 months compared to 12 months ago, there is only a 27.8% improvement.

The median reading over three months on average is 50.7, while the median reading over six months is 50.0 and the median reading over 12 months is 49.4. These readings show a very slow but steady improvement in manufacturing over this horizon.

In addition, we calculate the queue percentile standings for each reporter—that is, the level of the current diffusion index compared to all of the observations back to January 2022, expressing the final number as the percentile standing for the current month in that queue. On that basis, the median percentile standing for this group of reporters is 76.5%. It tells us that the median standing is in the top 25 percentile of all the readings since January 2022 to date. That's a reasonably good result. For the euro area, the queue percentile standing is at the 89.8 percentile, while for Germany it's at its 91.8 percentile. For the Monetary Union and for Germany, the current numbers are some of the best we've seen during this period. However, that doesn't mean that they're necessarily stellar readings.

**PMI diffusion vs. PMI rank standings**
German diffusion in manufacturing is 52.2 in March; for the EMU it is 51.6. Germany posts the fourth-highest PMI rank standing and the fifth highest raw standing in March. The highest standing among all reporters is 52.6 from South Korea. This is a period in which no country was posting very strong manufacturing results. In fact, the United States, with a manufacturing PMI rank standing of 79.6, has a diffusion reading in March just a tick below Germany’s whose queue standing at 91.8 seems miles ahead of the U.S.—but it isn’t. Remember that the queue standings are about relative positioning.

Looking at the details, we see that below-median rank readings were logged by Mexico, Russia, India, Brazil, Indonesia, and Turkey. The Asian markets and developing economies seem to have a harder time working up to the standards achieved by other countries.

We also have averages by certain groups of countries. For example, the U.S., the U.K., the Monetary Union, Canada, and Japan—an expanded G10 groping—had an average reading of 51.3 in March, and for that group of countries, the improvements have been steady from 12 months to six months to three months. For the BRIC countries in March, the average standing was 50.4, and for that group there has been a very slight ongoing erosion. For the Asian group, on average, the March reading is 51.2, and there has been a progression to stronger readings from 49.9 over 12 months to 50.5 over six months and to 50.8 over three months.

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On balance, manufacturing was quite uneven in March; however, there's a progression of improvement that is still in place. But with rising oil prices, war in Iran, and lots of knock-on effects to supply trains, it's likely that these readings are going to fall on harder times in the months ahead—unless the Iran war can be wrapped up in very, very, short order. According to the Baltic Dry index, there hasn't been much reduction in global shipping of dry goods. That index excludes oil and other wet goods shipments that clearly have been impeded. However, giving it more time, we may see that the dry index begins to show some difficulties.

Global Manufacturing PMIs Stall—Will It Get Worse?

Andrew Cates

**Global shipping costs**
The Baltic Dirty Tanker Index has surged to multi-year highs, reflecting a sharp tightening in global oil shipping markets. The primary driver is the escalation in Middle East tensions, particularly the effective disruption to flows through the Strait of Hormuz—a critical artery for roughly a fifth of global oil trade. Heightened security risks, including missile and drone attacks on vessels and port infrastructure, have forced rerouting, increased insurance premia and reduced effective tanker supply. At the same time, longer voyage distances—especially for Gulf exports diverted around the Cape—are tying up capacity and amplifying rate pressures. The result is a classic squeeze: constrained supply of available ships meeting elevated demand for transport, pushing freight costs sharply higher.

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**Supply Chain Bottlenecks**
Flash PMI data point to a renewed build-up of supply chain pressures across the major economies. Supplier delivery times—where readings below 50 indicate slower deliveries—have deteriorated in both the US and UK, with the latter showing a particularly sharp decline. The euro area, while more stable, is also drifting in the same direction. This broad-based softening suggests that the disruptions visible in energy and shipping markets are now feeding into the real economy. Longer delivery times are typically an early indicator of tightening supply conditions, rising input costs and, ultimately, renewed pipeline inflation pressures. While not yet at the extremes seen during the pandemic, the direction of travel is clear: supply chains are becoming less efficient just as geopolitical risks intensify.

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**Policy Uncertainty Versus Market Volatility**
A striking divergence is emerging between policy uncertainty and financial market volatility. The US Economic Policy Uncertainty Index has risen sharply, reflecting the intensifying geopolitical backdrop, trade disruptions and an increasingly complex policy environment. By contrast, the VIX—while off its lows—remains relatively contained by historical standards. This gap suggests that financial markets may be underpricing the scale and persistence of current risks. Either uncertainty begins to recede, or market volatility has further to rise. For now, the message is clear: policymakers are operating in a far more uncertain world than markets appear to be discounting.

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**Oil Prices and Monetary Policy** 
The sharp rise in oil prices is once again feeding directly into short-term interest rate expectations, with a strong positive correlation evident between WTI and US 2-year Treasury yields. As energy prices surge, markets are reassessing the near-term inflation outlook and the likely policy response, pushing yields higher. This reflects a familiar dynamic: energy shocks tighten financial conditions not just directly, but via expectations of more restrictive monetary policy. That said, there are important caveats. Medium-term market-based inflation expectations remain relatively well contained, suggesting credibility in central banks’ ability to anchor inflation over time. Moreover, recent communication from Fed Chair Powell indicates that the Federal Reserve is in no immediate hurry to raise rates, pointing instead to a more cautious, data-dependent approach in the face of heightened uncertainty.

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**Loose Labour Markets**
Wage growth across the US, UK and euro area continues to moderate, pointing to a gradual loosening in labour market conditions. The sharp post-pandemic surge in wage pressures—particularly pronounced in the US—has clearly faded, with all three regions now on a downward trajectory. This matters in the current context: while the oil shock is pushing headline inflation higher and complicating the near-term outlook, easing wage dynamics reduce the risk of persistent second-round effects. In turn, this lessens the urgency for central banks to respond aggressively with tighter policy. The result is a more nuanced policy backdrop—one where energy-driven inflation pressures are rising, but underlying domestic cost pressures are moving in the opposite direction.

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**Headline Inflation in Advanced Economies**
Despite the recent energy shock, broader inflation dynamics across advanced economies remain relatively well behaved. The euro area HICP flash estimate rose from 1.9% in February to 2.5% in March, driven largely by higher energy prices. However, core inflation edged down to 2.3% from 2.4%, suggesting that pass-through into underlying price pressures remains limited for now. More generally, inflation across many advanced economies continues to hover close to central bank targets—a marked contrast to the peaks seen in 2022. While higher oil prices will almost certainly continue to lift headline inflation in the near term, and the risk is clearly tilted toward further upside, the broader picture for now remains one of relatively contained underlying pressures. This suggests the current shock is more likely to complicate the disinflation process—potentially slowing or interrupting it—rather than decisively reversing it, though the balance of risks has become less favourable.

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Amid tentative signs of de-escalation from the US administration over the past 48 hours—including suggestions that the conflict with Iran could conclude relatively quickly—financial markets have begun to retrace some of last week’s sharp repricing of Middle East risk. Oil prices have come off their highs, while equities and bonds have rallied as risk premia ease. That said, the earlier phase of the week saw a decisive adjustment: oil surged, front-end yields moved higher, and uncertainty rose as investors grappled with the implications of disrupted energy flows. Even now, the overall adjustment has been uneven—volatility has picked up, but not to levels typically associated with sustained geopolitical stress—raising questions about how fully markets are internalising both the risks and the rapidly shifting outlook. Our charts this week capture these cross-currents. Tanker rates have spiked as shipping routes are disrupted and capacity tightens (chart 1), while PMI delivery times point to early signs of supply chain strain feeding into the real economy (chart 2). At the same time, the divergence between elevated policy uncertainty and relatively contained market volatility suggests there could have been a degree of complacency (chart 3). The rise in oil prices is already feeding into higher short-term yields, though this is being tempered by cooling labour markets, anchored inflation expectations and more cautious central bank signalling (charts 4 and 5). Meanwhile, euro area flash CPI has picked up, but core inflation remains relatively benign, suggesting underlying price pressures are still contained for now (chart 6).

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CPI Boosted by Energy & Services

More Gloom from Germany

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Housing Starts Off Sharply

PPI Again Boosted by Petroleum

PPI Again Boosted by Petroleum

Romania to Redenominate the Leu in July: 1 New Leu = 1,000 Old Leu

U.S. Budget Deficit - Tax Day 2005