Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050208h.jpg" width="353">
The net percentage of banks reporting tighter lending standards to large &amp; medium sized firms dropped to -23.6% versus -20.6% for all of last year and +8.6% during 2003.
Stronger demand for C&amp;I loans by large firms was reported by nearly double the net percentage of banks as in 2004. The net percentage of small firms demanding C&amp;I loans remained high in 1Q near the 2004 net.
The latest Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/boarddocs/SnLoanSurvey/200501/default.htm"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveys/@S5/@S501/@S501.HTM">FRB Sr. Loan Officers Survey</a></th>
<th scope="col">1Q &#39;05</th>
<th scope="col">4Q &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">Tightening Standards For Large &amp; Medium Firms</td>
<td>-23.6%</td>
<td>-21.1%</td>
<td>-20.6%</td>
<td>8.6%</td>
<td>28.0%</td>
</tr>
<tr>
<td class="firstcol">Tightening Standards For Small Firms</td>
<td>-12.9%</td>
<td>-18.2%</td>
<td>-13.1%</td>
<td>7.1%</td>
<td>20.0%</td>
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</tbody>
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The net percentage of banks reporting tighter lending standards to large & medium sized firms dropped to -23.6% versus -20.6% for all of last year and +8.6% during 2003. Stronger demand for C&I loans by large firms was reported by [...]

Banks' Lending Standards Eased

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050208f.jpg" width="353">
Consumer credit outstanding rose $3.1B in December to finish out a year of 4.6% growth, about the same as during the prior two years. Growth in consumer credit has remained well below the double digit peaks of several years ago as individuals shifted borrowing to lower interest rate, home equity lines of credit.
In December, revolving credit outstanding rose $0.9B (4.2% y/y) and usage of nonrevolving credit rose $2.2B (4.8% y/y).Total consumer credit accounts for just 15% of total credit owed by individuals.
According to the Federal Reserve&#39;s broader Flow of Funds Accounts, total credit owed by individuals surged 8.9% y/y through 3Q04. Mortgage debt on nonfarm homes rose 11.7% y/y (55% of individuals&#39; total liabilities) and also by 6.1% growth in mortgage debt excluding homes (12% of individuals&#39; total). &quot;Other liabilities&quot; rose 8.2% y/y and are 16% of individuals&#39; liabilities. 
The ratio of individuals&#39; financial assets ($31 trillion) to liabilities ($14 trillion) was 2.22 in 3Q versus 2.33 in 2003 and a peak of 3.37 in 1999. For the last five years, assets grew 2.1% annual rate while liabilities surged at a 9.1% rate.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050208g.jpg" width="353"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050208e.jpg" width="353">

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E103/@E10308/@E10308.HTM">Consumer Credit Outstanding</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">Total</td>
<td>$3.1B</td>
<td>$2.0B</td>
<td>4.6%</td>
<td>4.6%</td>
<td>4.5%</td>
<td>4.5%</td>
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<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$0.9B</td>
<td>$0.6B</td>
<td>4.2%</td>
<td>4.2%</td>
<td>2.8%</td>
<td>2.2%</td>
</tr>
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<td class="firstcol">&nbsp; Nonrevolving</td>
<td>$2.2B</td>
<td>$1.4B</td>
<td>4.8%</td>
<td>4.8%</td>
<td>5.6%</td>
<td>5.9%</td>
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Consumer credit outstanding rose $3.1B in December to finish out a year of 4.6% growth, about the same as during the prior two years. Growth in consumer credit has remained well below the double digit peaks of several years ago as [...]

Consumer Credit Usage Moderate, Total Liabilities Strong

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050208d.jpg" width="353">
Chain store sales recovered all of the prior week&#39;s sharp decline with a 2.2% jump according to the International Council of Shopping Centers (ICSC)-UBS survey.
The rise placed sales in early February 0.6% ahead of the January average which rose 0.9% from December.
During the last ten years there has been a 58% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department.
The leading indicator of chain store sales from ICSC was unchanged (-0.3% y/y) following two weeks of gain.
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">02/05/05</th>
<th scope="col">01/29/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>445.8</td>
<td>436.0</td>
<td>3.0%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
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Chain store sales recovered all of the prior week's sharp decline with a 2.2% jump according to the International Council of Shopping Centers (ICSC)-UBS survey. The rise placed sales in early February 0.6% ahead of the January average [...]

Chain Store Sales Recovered

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050208c.jpg" width="353">
The January Small Business Optimism Index reported by the National Federation of Independent Business (NFIB) fell another 2.4% on top of the 1.5% decline in December. The percentage of firms expecting the economy to improve fell another twelve points to 25 and that is nearly half the level of last November.
During the last ten years there has been a 71% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percent of firms planning to raise employment fell moderately for the second month to 15%. During the last ten years there has been a 67% correlation between these hiring plans and the three month growth in nonfarm payrolls. The percentage of firms with one or more job openings rose back to 23%, the highest level since 2001.
Capital spending intentions dipped moderately as the percentage of firms planning to raise capital spending fell from the five year high to 34%.
The percentage of firms raising average selling prices rose to 17% but that percentage was well off last year&#39;s high of 29%.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050208a.jpg" width="353"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050208b.jpg" width="353">

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>103.6</td>
<td>106.1</td>
<td>-2.1%</td>
<td>104.6</td>
<td>101.3</td>
<td>101.2</td>
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The January Small Business Optimism Index reported by the National Federation of Independent Business (NFIB) fell another 2.4% on top of the 1.5% decline in December. The percentage of firms expecting the economy to improve fell [...]

Small Business Optimism Fell Again

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050207d.jpg" width="353">
Chile&#39;s monthly seasonally unadjusted economic indicator, IMACEC (Indicator Mensual de Activeda Economica)was 134.2 (1996=100) in December, 7.70% above December, 2003. On a quarterly basis the fourth quarter value of the indicator was 133.1 or 6.83% above the fourth quarter of 2003.
The seasonally unadjusted monthly indicator is an excellent indicator of monthly values of the seasonally unadjusted real gross domestic product. As the first chart and the following table show, the year over year change in real GDP is equal to the year over year change in the monthly indicator, aggregated on a quarterly basis. The two series are perfectly correlated. As a result, we are safe to assume that Chile&#39;s real economy grew 6.83% in the fourth quarter from the fourth quarter of 2003 and will show a 5.89% growth for the year 2004, up from 3.27% in 2003 and 2.21% in 2002.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050207e.jpg" width="353">
The acceleration in Chile&#39;s growth has been due in large part to the rising demand for copper, which has led to increased employment and incomes within the mining industry and through secondary effects stimulated the general economy. The second chart shows the growth in the mining industry and in manufacturing.

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<th scope="col" class="firstcol">Chile</th>
<th scope="col">Dec 05</th>
<th scope="col">Nov&nbsp;04</th>
<th scope="col">Dec 04</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y &nbsp;%</th>
<th scope="col">&nbsp;2004&nbsp; %&nbsp;</th>
<th scope="col">&nbsp;2003 %</th>
<th scope="col">&nbsp; 2002 %&nbsp; &nbsp;</th>
<th scope="col">2001 %&nbsp;</th>
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<td class="firstcol">Economic Indicator&nbsp; (NSA 1996=100)</td>
<td>&nbsp;134.2</td>
<td>132.5</td>
<td>124.6</td>
<td>1.30</td>
<td>7.70</td>
<td>5.89</td>
<td>3.27</td>
<td>2.21</td>
<td>3.39</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</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>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Q4 04</td>
<td>Q3 04</td>
<td>Q2 04</td>
<td>Q1 04</td>
<td>&nbsp;</td>
<td>2004</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Economic Indicator&nbsp;&nbsp; &nbsp;(NSA 1996=100)</td>
<td>&nbsp;133.1</td>
<td>130.9</td>
<td>132.7</td>
<td>130.8</td>
<td>&nbsp;</td>
<td>131.9</td>
<td>124.5</td>
<td>120.6</td>
<td>118.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Y/Y Percent Change</td>
<td>&nbsp;6.83</td>
<td>6.84</td>
<td>5.26</td>
<td>4.65</td>
<td>&nbsp;</td>
<td>5.89</td>
<td>3.27</td>
<td>2.21</td>
<td>3.39</td>
</tr>
<tr>
<td class="firstcol">Real GDP &nbsp;(NSA Billions 1996 Pesos)</td>
<td>&nbsp;</td>
<td>10.231</td>
<td>10.359</td>
<td>10.217</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>38.900</td>
<td>37.670</td>
<td>36.855</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Y/Y Percent Change</td>
<td>&nbsp;</td>
<td>6.84</td>
<td>5.26</td>
<td>4.65</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>3.27&nbsp;</td>
<td>2.21</td>
<td>3.32</td>
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</tbody>
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Chile's monthly seasonally unadjusted economic indicator, IMACEC (Indicator Mensual de Activeda Economica)was 134.2 (1996=100) in December, 7.70% above December, 2003. On a quarterly basis the fourth quarter value of the indicator was [...]

Chile's Monthly Economic Indicator Predicts 5.9% Growth in GDP in 2004

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050207a.jpg" width="353">
Commodity prices as measured by the JoC-ECRI (Journal of Commerce-Economic Cycle Research Institute) index have fallen in recent weeks despite the back up in petroleum prices. Recent trends amongst the components turned mixed versus last year when they were mostly positive.
During the last ten years there has been a 46% correlation between the JoC-ECRI commodity price index and the six month change in factory sector industrial production.
Despite up ticks during the last two weeks, metals prices are down 3.8% from the high in November. Steel scrap prices have fallen 19.6% from those highs but copper scrap prices have continued trending higher (27.3% y/y). Aluminum prices have backpedaled following a spike late last year (12.4% y/y).
Lumber prices have recovered some of their decline last fall when prices dropped one quarter to one third, but prices remain well off last year&#39;s highs. Textile prices also have risen moderately following the decline early in 2004 that pulled prices down 12%.
Petroleum prices fell slightly last week following a recovery in January when prices rose 11%.
The KR-CRB (Knight Ridder-Commodity Research Bureau) commodity price index differs from the JoC-ECRI Index. Roughly half of the index reflects agricultural prices. The index has moved lower since last year as a result of lower livestock prices (-4.3% y/y) and lower foodstuff prices (-8.5% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050207b.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050207c.jpg" width="353">

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<th scope="col" class="firstcol"><a href="http://www.haver.com/COMMENT/www.haverselect.com/dlx/USECON/@E8/@E803/@E80304/@E80304.HTM">JoC-ECRI Industrial Price Index</a></th>
<th scope="col">02/04/05</th>
<th scope="col">12/31/04</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">All Items</td>
<td>110.90</td>
<td>111.60</td>
<td>1.7%</td>
<td>112.78</td>
<td>91.97</td>
<td>79.53</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Textiles</td>
<td>64.90</td>
<td>64.40</td>
<td>-5.4%</td>
<td>65.83</td>
<td>65.09</td>
<td>59.73</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Metals</td>
<td>122.70</td>
<td>124.60</td>
<td>12.5%</td>
<td>118.15</td>
<td>84.57</td>
<td>75.14</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Miscellaneous</td>
<td>99.30</td>
<td>103.90</td>
<td>-15.8%</td>
<td>114.03</td>
<td>102.89</td>
<td>85.81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Petroleum</td>
<td>239.20</td>
<td>216.50</td>
<td>45.3%</td>
<td>207.13</td>
<td>135.26</td>
<td>110.06</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
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<td class="firstcol">KR-CRB Spot Commodity Price Index</td>
<td>02/01/05</td>
<td>12/28/04</td>
<td>Y/Y</td>
<td>2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">All Commodities</td>
<td>289.14</td>
<td>293.42</td>
<td>-0.9%</td>
<td>293.42</td>
<td>282.59</td>
<td>244.31</td>
</tr>
</tbody>
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Commodity prices as measured by the JoC-ECRI (Journal of Commerce-Economic Cycle Research Institute) index have fallen in recent weeks despite the back up in petroleum prices. Recent trends amongst the components turned mixed versus [...]

Commodity Price Trends Mixed

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050204e.jpg" width="353">
Japan&#39;s leading indicators declined in December, falling 1.1% to 101.8 (1000=100) and ending the year 0.6% below the year&#39;s average. Six of the 10 available components dragged down the month&#39;s results, among them new home construction, consumer confidence and the yield curve. Four indicators had positive contributions, including low inventories of finished goods, new job offers, stock prices and small businesses&#39; sales forecast. Of these, only job offers has been up in previous recent months; others turned up from negative readings in November. Several of the negative components, though, do have longer strings of negative moves, including the yield curve, for four months and home construction for three.
Thus, the picture in these leading indicators is mixed, and this is the fourth straight month in which fewer than half of the items have been positive. Nonetheless, it seems premature to alter one&#39;s view of the Japanese outlook. Such a hesitation in the leaders has occurred before, most recently in 1995, without endangering the general pattern of business growth.
The current uptrend in the coincident indicators started at the beginning of 2002. This, interestingly, coincides with the upturn in the yen against the dollar. Conventional wisdom suggests that the strengthening yen should hurt the economy, but this hasn&#39;t had such an impact yet. Notably, in fact, the correlation of the leading indicators with the foreign exchange value of the yen is positive, albeit somewhat erratic over differing spans. Perhaps then, the higher yen is a reflection of the improved condition of the Japanese economy. Recent gains in the stock market and employment indicators, also including the coincident indicator &quot;effective job offer rate&quot;, may help maintain upward momentum in that important economy.

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<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Dec &nbsp;2004</th>
<th scope="col">Nov 2004</th>
<th scope="col">Oct &nbsp;2004</th>
<th scope="col">Dec 2003</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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</thead>
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<td class="firstcol">Leading Indicator Index, 2000=100</td>
<td>101.8</td>
<td>102.9</td>
<td>101.0</td>
<td>100.0</td>
<td>102.4</td>
<td>96.6</td>
<td>93.3</td>
</tr>
<tr>
<td class="firstcol">Yr/Yr % Chg</td>
<td>1.8</td>
<td>4.5</td>
<td>0.1</td>
<td>5.4</td>
<td>6.0</td>
<td>3.6</td>
<td>2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Exchange Rate: Yen/Dollar</td>
<td>104.12</td>
<td>103.18</td>
<td>106.13</td>
<td>107.10</td>
<td>107.79</td>
<td>115.70</td>
<td>124.65</td>
</tr>
<tr>
<td class="firstcol">Yr/Yr % Chg</td>
<td>-2.8</td>
<td>-5.8</td>
<td>-2.4</td>
<td>-10.7</td>
<td>-6.8</td>
<td>-7.2</td>
<td>2.1</td>
</tr>
</tbody>
</table>
</body>
</html>

Japan's leading indicators declined in December, falling 1.1% to 101.8 (1000=100) and ending the year 0.6% below the year's average. Six of the 10 available components dragged down the month's results, among them new home [...]

Japan's Leading Indicators Hesitate, but Strength Remains in Employment, Stock Market Components

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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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

Robert Brusca

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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).

Charts of the Week: Strait Stress

Sandy Batten

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Total retail sales rebounded in February, rising a larger-than-expected 0.6% m/m (+3.7% y/y) following an upwardly revised 0.1% monthly decline in January (previously -0.2% m/m), according to data from the U.S. Census Bureau. The Action Economics Forecast Survey expected a 0.4% monthly increase. Excluding autos, other sales were up 0.5% m/m (+3.6% y/y), the first monthly increase in three months. The Action Economics Forecast Survey looked for a 0.3% m/m increase.

The control group of sales (those categories that the BEA uses to construct PCE in the national accounts) increased 0.5% m/m in February following a 0.2% increase in January. The January/February average for this variable is 2.1% annualized above the Q4 average. In Q4, the control group rose 2.8% saar from Q3. So, today’s figures point to a slight slowdown in PCE growth in the first quarter. Note, however, that the data released today predates the escalation of the conflict between the US/Israel and Iran which has led to a marked rise in gasoline/energy prices. The increase in energy prices to date, if maintained, could stress household finances and thereby significantly slow consumer spending ahead.

Sales of motor vehicles and parts jumped 1.2% m/m in February, their first monthly gain in three months and their largest monthly increase since last July. Furniture sales declined 1.0% m/m in February while sales of electronics and appliances rose 0.5% m/m. Sales of building materials increased 0.4% m/m, their fourth consecutive monthly gain. Sales at health and personal care stores jumped 2.3% m/m, their first monthly gain in five months. Sales at gasoline stations rose 0.9% m/m in February, their third monthly gain in the past four months, ahead of the sharp price increases that occurred in March. Clothing store sales jumped 2.0% m/m, their first monthly increase in three months. Department store sales gained 3.0% m/m, their first monthly increase in four months. Food sales slumped 1.0% m/m in February, their first monthly decline in three months. Sales of nonstore retailers increased 0.7% m/m in February on top of a 1.4% m/m jump in January. Eating out sales rose 0.4% m/m, their first monthly gain in three months.

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

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- Total sales increased 0.6% m/m after a 0.1% m/m decline in January
- Excluding autos, sales increase 0.5% m/m in February after having been unchanged in January.
- Sales of the retail control group that is used to construct PCE rose 0.5% m/m in February.

U.S. Retail Sales Rebounded in February

Winnie Tapasanun

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U.S. nonfarm private sector payrolls rose a larger-than-expected 62,000 (0.3% y/y) in March after increases of 66,000 in February (+63,000 initially) and 11,000 in January (unrevised), according to the ADP National Employment Report. The three-month average change was +46,000 in March, up from +38,000 in February and +41,000 in January. The Action Economics Forecast Survey expected a 40,000 increase in March.

Small business hiring (less than 50 employees) climbed a solid 85,000 (0.7% y/y) in March—the ninth straight m/m increase and the largest since August—after a 61,000 gain in February (+60,000 initially), with employment in very small firms (1-19 employees) surging 112,000, the strongest m/m rise since February 2024, and employment in small firms (20-49 employees) down 27,000. Employment at medium-sized firms (50-499 employees) fell 20,000 (-0.4% y/y) in March following a 6,000 decline in February (-7,000 initially) and two consecutive m/m increases. Large business hiring (500+ employees) slipped 4,000 (+1.0% y/y) after an 11,000 February rebound (+10,000 initially).

Service-producing jobs rose 32,000 (0.5% y/y) in March, the 10th straight m/m gain, on top of a 50,000 advance in February (+47,000 initially). March’s rise was led by education & health services (+58,000), followed by information (+16,000), leisure & hospitality (+7,000), financial activities (+4,000), other services (+4,000), and professional & business services (+1,000). To the downside, m/m employment fell in trade, transportation & utilities (-58,000).

Goods-producing employment advanced 30,000 (-0.4% y/y) in March, the biggest m/m increase since October 2022, after a 16,000 rise in February (unrevised). March’s gain was led by construction (+30,000) and natural resources & mining (+11,000), while manufacturing (-11,000) continued to decline.

By region, nonfarm private payroll employment rose m/m in March in the South (+101,000; +0.5% y/y) and West (+16,000; +0.4% y/y). In contrast, employment fell m/m in the Northeast (-29,000; +0.4% y/y) and Midwest (-26,000; -0.1% y/y).

Wage growth for job changers accelerated to a three-month-high 6.6% y/y in March from 6.3% y/y in February, remaining well below a high of 16.1% in April 2022. Wage growth for job stayers held steady at 4.5% y/y for the third consecutive month in March, holding in a narrow 4.4%-4.5% range since April 2025. Pay growth also remained steady in major industries, including financial activities (5.2% y/y), manufacturing (4.9% y/y), construction (4.7% y/y), leisure & hospitality (4.6% y/y), education & health services (4.3% y/y), and professional & business services (4.3% y/y).

The ADP National Employment Report and Pay Insights data can be found in Haver's **USECON** database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's **AS1REPNA** database.

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- Private payrolls +62K in March, ninth straight m/m gain.
- Hiring increase driven by small businesses (+85K), strongest since August.
- Service-sector jobs up (+32K), led by education & health svs. (+58K) and information (+16K), partly offset by trade, transp. & utilities (-58K).
- Goods-producing jobs up (+30K), driven by construction (+30K).
- Wage growth accelerates y/y for job changers (6.6%, a three-month high) but steady for job stayers (4.5%).

Economy in Brief

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Banks' Lending Standards Eased

Consumer Credit Usage Moderate, Total Liabilities Strong

Chain Store Sales Recovered

Small Business Optimism Fell Again

Chile's Monthly Economic Indicator Predicts 5.9% Growth in GDP in 2004

Commodity Price Trends Mixed

Commodity Price Trends Mixed

Japan's Leading Indicators Hesitate, but Strength Remains in Employment, Stock Market Components