Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041214e.jpg" width="353">
The Manpower Employment Outlook Survey indicated continued improvement in U.S. hiring intentions in 1Q05. A seasonally adjusted net 21% of 16,000 employers expect to increase hiring activity and that was the highest level in four years.
Not seasonally adjusted, 24% of employers planned to raise employment versus 20% in 1Q04 while 10% planned to decrease the number of jobs versus 13% a year ago.
Since 1980 there has been a 74% correlation between the Manpower index and the y/y change in non-farm payrolls.
The latest press release from Manpower Inc. covering global employment prospects can be viewed <a href="http://man.client.shareholder.com/ReleaseDetail.cfm?ReleaseID=150464"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@SC/@SC.HTM">Manpower Employment Survey</a></th>
<th scope="col">1Q &#39;05</th>
<th scope="col">4Q &#39;04</th>
<th scope="col">1Q &#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">All Industries - Net Higher (SA)</td>
<td>21</td>
<td>20</td>
<td>14</td>
<td>19</td>
<td>11</td>
<td>11</td>
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The Manpower Employment Outlook Survey indicated continued improvement in U.S. hiring intentions in 1Q05. A seasonally adjusted net 21% of 16,000 employers expect to increase hiring activity and that was the highest level in four [...]

Manpower Index of US Hiring Intentions Remained Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041214a.jpg" width="353">
Chain store sales recovered 1.2% during the first full week of December following two weeks of sharp decline, according to the International Council of Shopping Centers (ICSC)-UBS.
Despite the rise, sales so far in December are 1.9% below November.
The leading indicator of chain store sales from ICSC slipped another 0.2% in the latest week for the fourth decline in the last five.
During the last ten years there has been a 60% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales 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">12/11/04</th>
<th scope="col">12/04/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>430.9</td>
<td>425.6</td>
<td>2.4%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
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Chain store sales recovered 1.2% during the first full week of December following two weeks of sharp decline, according to the International Council of Shopping Centers (ICSC)-UBS. Despite the rise, sales so far in December are 1.9% [...]

The Holiday Spirit Found? Chain Store Sales Recover

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041214c.jpg" width="353">
Industrial production rose 0.3% in November following a downwardly revised 0.6% rise the prior month. Consensus expectations had been for a 0.2% rise.
Production in the factory sector rose 0.3% (4.7% y/y). Slower increases recently pulled the three month gain in factory sector production down to 2.0% (AR) versus this year&#39;s peak of 8.6% in April. And the slowdown has been broad based. Factory sector output excluding motor vehicles &amp; high tech rose 0.3% in November and the three month growth rate fell to 0.8%.
Though November output in the high tech sector rose a firm 1.1%, the three month growth rate fell to 9.0% versus the peak of 38.2% in August 2003. Excluding high tech, factory output rose 0.3% last month and the three month growth rate fell to 1.2% from this year&#39;s peak of 8.2%.
Motor vehicles output fell 0.7% in November but output of appliances, furniture &amp; carpeting rose 1.2% (-0.8% y/y). Clothing output was unchanged m/m and down 2.6% y/y)
Total capacity utilization rose to 77.6% from a downwardly revised October. Capacity grew 1.6% y/y.
&quot;Ringing In the New Year with an Investment Bust?&quot; from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20041201/cover.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">Industrial Production</td>
<td>0.3%</td>
<td>0.6%</td>
<td>4.2%</td>
<td>0.3%</td>
<td>-0.6%</td>
<td>-3.4%</td>
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<td class="firstcol">Capacity Utilization</td>
<td>77.6%</td>
<td>77.5%</td>
<td>75.7% (11/03)</td>
<td>74.8%</td>
<td>75.6%</td>
<td>77.4%</td>
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Industrial production rose 0.3% in November following a downwardly revised 0.6% rise the prior month. Consensus expectations had been for a 0.2% rise. Production in the factory sector rose 0.3% (4.7% y/y). Slower increases recently [...]

Industrial Production Up But Gains Slow

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041214b.jpg" width="353">
The U.S. foreign trade deficit deepened sharply to $55.5B in October, $4.5B deeper than September which was revised slightly shallower. Consensus expectations had been for a deficit of $52.4B. The latest deficit set a new record and was $3.6B deeper than the average in 3Q.
Total exports rose just 0.6% following an upwardly revised 1.3% gain in September. Goods exports inched up 0.3% (13.4% y/y) following a 1.7% September surge. Nonauto consumer goods exports fell 0.1% (+16.1% y/y) on the heels of two sizable monthly gains. Capital goods exports rose 0.3% (10.3% y/y).
Total imports reversed the prior month&#39;s decline and rose 3.4% due to higher petroleum imports, up 16.9% (+66.8% y/y) reflecting an 11.1% m/m rise in crude oil prices to an average $41.79/bbl. Since then crude oil prices have fallen roughly $12/bbl.
Imports of non-petroleum goods jumped 2.5% (12.4% y/y), driven by a 5.4% (10.5% y/y) surge in nonauto consumer goods. Capital goods imports edged 0.3% (16.7% y/y) higher following a 1.6% rise in September.
The US trade deficit with China deepened to another record of $16.8B ($124.1B in 2003). Exports to China rose 3.0% (5.9% y/y) but imports rose 7.3% (19.8% y/y). The US trade deficit with Japan eased to $5.9B ($66.0B in 2003) but the deficit with the Asian NICs deepened to $2.5B ($21.2B in 2003). The US trade deficit with the European Union deepened to $9.3 B ($97.9B in 2003).
&quot;Offshoring in the Service Sector: Economic Impact and Policy Issues&quot; from the Federal Reserve Bank of Kansas City cab be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/Pdf/3Q04garn.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE03/@EE03.HTM">Foreign Trade</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">Trade Deficit</td>
<td>$55.5B</td>
<td>$50.9B</td>
<td>$41.5B (10/03)</td>
<td>$496.5B</td>
<td>$421.7B</td>
<td>$362.7B</td>
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<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>0.6%</td>
<td>1.3%</td>
<td>11.3%</td>
<td>4.6%</td>
<td>-3.1%</td>
<td>-6.0%</td>
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<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>3.4%</td>
<td>-1.1%</td>
<td>18.5%</td>
<td>8.5%</td>
<td>2.1%</td>
<td>-5.5%</td>
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The U.S. foreign trade deficit deepened sharply to $55.5B in October, $4.5B deeper than September which was revised slightly shallower. Consensus expectations had been for a deficit of $52.4B. The latest deficit set a new record and [...]

U.S. Trade Deficit a Deeper Than Expected Record in October

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041214b.jpg" width="353">
The U.S. foreign trade deficit deepened sharply to $55.5B in October, $4.5B deeper than September which was revised slightly shallower. Consensus expectations had been for a deficit of $52.4B. The latest deficit set a new record and was $3.6B deeper than the average in 3Q.
Total exports rose just 0.6% following an upwardly revised 1.3% gain in September. Goods exports inched up 0.3% (13.4% y/y) following a 1.7% September surge. Nonauto consumer goods exports fell 0.1% (+16.1% y/y) on the heels of two sizable monthly gains. Capital goods exports rose 0.3% (10.3% y/y).
Total imports reversed the prior month&#39;s decline and rose 3.4% due to higher petroleum imports, up 16.9% (+66.8% y/y) reflecting an 11.1% m/m rise in crude oil prices to an average $41.79/bbl. Since then crude oil prices have fallen roughly $12/bbl.
Imports of non-petroleum goods jumped 2.5% (12.4% y/y), driven by a 5.4% (10.5% y/y) surge in nonauto consumer goods. Capital goods imports edged 0.3% (16.7% y/y) higher following a 1.6% rise in September.
The US trade deficit with China deepened to another record of $16.8B ($124.1B in 2003). Exports to China rose 3.0% (5.9% y/y) but imports rose 7.3% (19.8% y/y). The US trade deficit with Japan eased to $5.9B ($66.0B in 2003) but the deficit with the Asian NICs deepened to $2.5B ($21.2B in 2003). The US trade deficit with the European Union deepened to $9.3 B ($97.9B in 2003).
&quot;Offshoring in the Service Sector: Economic Impact and Policy Issues&quot; from the Federal Reserve Bank of Kansas City cab be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/Pdf/3Q04garn.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE03/@EE03.HTM">Foreign Trade</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</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">Trade Deficit</td>
<td>$55.5B</td>
<td>$50.9B</td>
<td>$41.5B (10/03)</td>
<td>$496.5B</td>
<td>$421.7B</td>
<td>$362.7B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>0.6%</td>
<td>1.3%</td>
<td>11.3%</td>
<td>4.6%</td>
<td>-3.1%</td>
<td>-6.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>3.4%</td>
<td>-1.1%</td>
<td>18.5%</td>
<td>8.5%</td>
<td>2.1%</td>
<td>-5.5%</td>
</tr>
</tbody>
</table>
Industrial Production Up But Gains Slow 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 14, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041214c.jpg" width="353">
Industrial production rose 0.3% in November following a downwardly revised 0.6% rise the prior month. Consensus expectations had been for a 0.2% rise.
Production in the factory sector rose 0.3% (4.7% y/y). Slower increases recently pulled the three month gain in factory sector production down to 2.0% (AR) versus this year&#39;s peak of 8.6% in April. And the slowdown has been broad based. Factory sector output excluding motor vehicles &amp; high tech rose 0.3% in November and the three month growth rate fell to 0.8%.
Though November output in the high tech sector rose a firm 1.1%, the three month growth rate fell to 9.0% versus the peak of 38.2% in August 2003. Excluding high tech, factory output rose 0.3% last month and the three month growth rate fell to 1.2% from this year&#39;s peak of 8.2%.
Motor vehicles output fell 0.7% in November but output of appliances, furniture &amp; carpeting rose 1.2% (-0.8% y/y). Clothing output was unchanged m/m and down 2.6% y/y)
Total capacity utilization rose to 77.6% from a downwardly revised October. Capacity grew 1.6% y/y.
&quot;Ringing In the New Year with an Investment Bust?&quot; from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20041201/cover.pdf"> here</a>.

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<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Industrial Production</td>
<td>0.3%</td>
<td>0.6%</td>
<td>4.2%</td>
<td>0.3%</td>
<td>-0.6%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>77.6%</td>
<td>77.5%</td>
<td>75.7% (11/03)</td>
<td>74.8%</td>
<td>75.6%</td>
<td>77.4%</td>
</tr>
</tbody>
</table>
The Holiday Spirit Found? Chain Store Sales Recover 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 14, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041214a.jpg" width="353">
Chain store sales recovered 1.2% during the first full week of December following two weeks of sharp decline, according to the International Council of Shopping Centers (ICSC)-UBS.
Despite the rise, sales so far in December are 1.9% below November.
The leading indicator of chain store sales from ICSC slipped another 0.2% in the latest week for the fourth decline in the last five.
During the last ten years there has been a 60% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">12/11/04</th>
<th scope="col">12/04/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>430.9</td>
<td>425.6</td>
<td>2.4%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Manpower Index of US Hiring Intentions Remained Firm 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 14, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041214e.jpg" width="353">
The Manpower Employment Outlook Survey indicated continued improvement in U.S. hiring intentions in 1Q05. A seasonally adjusted net 21% of 16,000 employers expect to increase hiring activity and that was the highest level in four years.
Not seasonally adjusted, 24% of employers planned to raise employment versus 20% in 1Q04 while 10% planned to decrease the number of jobs versus 13% a year ago.
Since 1980 there has been a 74% correlation between the Manpower index and the y/y change in non-farm payrolls.
The latest press release from Manpower Inc. covering global employment prospects can be viewed <a href="http://man.client.shareholder.com/ReleaseDetail.cfm?ReleaseID=150464"> here</a>..

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@SC/@SC.HTM">Manpower Employment Survey</a></th>
<th scope="col">1Q &#39;05</th>
<th scope="col">4Q &#39;04</th>
<th scope="col">1Q &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">All Industries - Net Higher (SA)</td>
<td>21</td>
<td>20</td>
<td>14</td>
<td>19</td>
<td>11</td>
<td>11</td>
</tr>
</tbody>
</table>
Small Business Optimism At 20 Year High 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 14, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041214d.jpg" width="353">
The Small Business Optimism Index for November published by the National Federation of Independent Business (NFIB) surged 3.7% to 107.7 in November, the highest level in twenty years.
During the last ten years there has been a 68% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percentage of firms expecting the economy to improve ballooned to 47%, the highest level since last year and the percent of firms planning to raise employment rose to 19% near last year&#39;s high. During the last ten years there has been a 63% correlation between these hiring plans and the three month growth in nonfarm payrolls.
An elevated 35% of firms expected higher real sales in 6 months. The net of firms expecting higher earnings this quarter was stable at -7 and sustained the recent sharp improvement.
The percentage of firms raising average selling prices fell to 18%, well below the averages for 2Q &amp; 3Q.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

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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">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>107.7</td>
<td>103.9</td>
<td>2.3%</td>
<td>101.3</td>
<td>101.2</td>
<td>98.4</td>
</tr>
</tbody>
</table>
FOMC Raised Funds Rate to 2.25% 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 14, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041214f.jpg" width="353">
The Federal Open Market Committee raised the target rate for federal funds by 25 basis points to 2.25%, as expected. The discount rate also was raised 25 basis points to 3.25%.
The decision was unanimous.
Today&#39;s press release from the Fed continued to contain a comment suggesting that rates could be raised again. &quot;The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity.&quot;
For the complete text of the Fed&#39;s latest press release please <a href="http://www.federalreserve.gov/BoardDocs/Press/monetary/2004/20041214/default.htm"> click</a>.
&quot;Will the U.S. Productivity Resurgence Continue?&quot; from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/current_issues/ci10-13.pdf"> here</a>.

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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041213c.jpg" width="353">
The latest survey of manufacturers in the United Kingdom by the CBI (Confederation of British Industries) shows a drop in the expected volume of output over the next three months. The balance between those firms that expect volume to increase over those that expect it to decrease fell to -6% from a positive 5% in October. This is the lowest balance since June, 2003.
Although pessimists still outweigh optimists with regard to order books, the balance has narrowed. For total order books, the balance fell to -4% in December from -16% in November. The balance on export order books improved from -21% to -15% in December from November in spite of the fact that during the survey period, November 25 to December 8, the pound was rising and reached a peak of $1.9459, not seen since early 1991.
Not only has the balance on the volume of order books improved, but the balance on the outlook for prices on orders over the next three months has also continued to improve. The balance has been in positive territory since March of this year, the first run of positive balances since March of 2001, and suggests that manufacturers are beginning to see some pricing power in the near future. The attached chart shows the recently improved balances on the volume of output and prices.
The fact that the balance of manufacturers expects volume to decline over the next 3 months and, at the same time, sees an improvement in orders, may account for their guarded appraisal of their finished stocks. There was a slight increase of 1 percentage point from November to December in the balance of firms satisfied with the level of their finished stocks but that the balance has deteriorated to 9% in December from 14% in December 2003.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Percent Balance of Firms Expecting Improving over Those Expecting Worsening Conditions</th>
<th scope="col">Dec 04</th>
<th scope="col">Nov&nbsp;04</th>
<th scope="col">Dec 03</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">&nbsp;2003&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2002&nbsp;</th>
<th scope="col">&nbsp; 2001&nbsp; &nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Vol. of output next 3 mo.</td>
<td>-6</td>
<td>5</td>
<td>5</td>
<td>-11</td>
<td>-11</td>
<td>12</td>
<td>-3</td>
<td>5</td>
</tr>
<tr>
<td class="firstcol">Total order book volume</td>
<td>-4</td>
<td>-16</td>
<td>-19</td>
<td>12</td>
<td>15</td>
<td>-9</td>
<td>-29</td>
<td>-27</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Export order book volume</td>
<td>-15</td>
<td>-21</td>
<td>-21</td>
<td>6</td>
<td>6</td>
<td>-13</td>
<td>-33</td>
<td>-34</td>
</tr>
<tr>
<td class="firstcol">Ave prices on domestic orders next 3 mo.&nbsp;</td>
<td>10</td>
<td>8</td>
<td>-3</td>
<td>2</td>
<td>13</td>
<td>4</td>
<td>-12</td>
<td>-13</td>
</tr>
<tr class="odd">
<td class="firstcol">Stocks of finished goods</td>
<td>9</td>
<td>8</td>
<td>14</td>
<td>1</td>
<td>-5</td>
<td>11</td>
<td>17</td>
<td>16</td>
</tr>
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The latest survey of manufacturers in the United Kingdom by the CBI (Confederation of British Industries) shows a drop in the expected volume of output over the next three months. The balance between those firms that expect volume to [...]

British Manufacturers Expect Lower Volume of Output but Order Books and Expected Prices Improve

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041213b.jpg" width="353">
Total business inventories rose 0.2% in October following a downwardly revised, slight decline in September.
Wholesale inventories jumped 1.1%. During the last ten years there has been a 63% correlation between the y/y change in wholesale inventories and the change in imports of merchandise.
Retail inventories fell another 0.6% as motor vehicle inventories fell sharply for the second consecutive month, down 2.3% (+7.9% y/y). Non-auto retail inventories advanced 0.3% but meaningful gains were limited to building materials (+15.7% y/y) and food (2.7% y/y). Elsewhere, inventories of furniture &amp; home furnishings (+2.5% y/y) fell for the second consecutive month. Apparel inventories rose 0.1% (1.3% y/y) and general merchandise inventories fell 0.1% (+3.2% y/y).
Overall business sales surged 1.2% (+11.0% y/y) driven by the 1.2% spike in factory shipments (10.6% y/y).
The ratio of inventories-to-sales fell back to the historic low of 1.30.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</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">Total</td>
<td>0.2%</td>
<td>-0.0%</td>
<td>7.1%</td>
<td>1.9%</td>
<td>1.5%</td>
<td>-4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>-0.6%</td>
<td>-0.5%</td>
<td>5.9%</td>
<td>4.9%</td>
<td>6.0%</td>
<td>-2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.3%</td>
<td>0.1%</td>
<td>4.8%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>1.1%</td>
<td>0.6%</td>
<td>10.6%</td>
<td>2.2%</td>
<td>0.4%</td>
<td>-4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.5%</td>
<td>0.1%</td>
<td>5.9%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
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Total business inventories rose 0.2% in October following a downwardly revised, slight decline in September. Wholesale inventories jumped 1.1%. During the last ten years there has been a 63% correlation between the y/y change in [...]

U.S. Inventories Rose Slightly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041213a.jpg" width="353">
US retail sales rose 0.1% in November versus expectations for a 0.1% decline and October sales were revised higher. In both months, total sales were held back by lower motor vehicle purchases which fell 1.3% in November for the third decline in the last four months.
Sales excluding motor vehicles rose 0.5% following an upwardly revised 1.1% jump in October. Consensus expectations had been for a 0.3% rise. Little of the surprise reflected higher gasoline prices which raised sales at gasoline service stations by 1.0% (24.0% y/y) after a 5.3% spike in October. Nonauto retail sales less gasoline also rose 0.5% (7.0% y/y). Gas prices this month look to be down roughly 5% from last.
Building materials, garden equipment &amp; supply dealers&#39; sales rose 1.1% (12.8% y/y) following an upwardly revised no change in October. Less sales of building materials, nonauto retail sales rose 8.1% during the past year.
Moderate gains were logged in the discretionary spending categories. Sales at general merchandise stores rose 0.4% (6.7% y/y) following an unrevised 0.9% October increase. Sales of furniture/home furnishings &amp; electronics/appliances rose 0.5% (4.6% y/y) after an upwardly revised 0.3% rise the month earlier but clothing &amp; accessory store sales slipped 0.1% (5.0% y/y) following the downwardly revised 2.4% October surge.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>0.1%</td>
<td>0.8%</td>
<td>7.2%</td>
<td>5.3%</td>
<td>2.5%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>0.5%</td>
<td>1.1%</td>
<td>8.6%</td>
<td>5.2%</td>
<td>3.2%</td>
<td>3.1%</td>
</tr>
</tbody>
</table>
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US retail sales rose 0.1% in November versus expectations for a 0.1% decline and October sales were revised higher. In both months, total sales were held back by lower motor vehicle purchases which fell 1.3% in November for the third [...]

U.S. Retail Sales Up

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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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.

260401Z1.jpg

**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.

260401Z2.jpg

**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.

260401Z3.jpg

**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.

260401Z4.jpg

**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.

260401Z5.jpg

**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.

260401Z6.jpg

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

260401V4.jpg

260401W4.jpg

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**.

260401X4.jpg

260401Y4.jpg

- 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

260401J35.jpg

260401K35.jpg

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.

260401L35.jpg

260401M35.jpg

- 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%).

U.S. ADP Private Employment Growth in March Above Forecasts

Kathleen Stephansen, CBE

260401A2.jpg

260401B2.jpg

Mortgage applications dropped 10.4% w/w (+14.2% y/y) in the week ending March 27, after declining 10.5% w/w (+25.5% y/y) in the week ending March 20, and by 10.9% w/w in the week ending March 13, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house declined 2.6% w/w (+0.8% y/y) in the latest week, after dropping 5.4% w/w (+5.0% y/y) in the week ending March 20.  Applications for loan refinancing plunged 17.3% w/w (+33.2% y/y) in the March 27 week, following a drop of 14.6% w/w (+52.2% y/y) in the week ending March 20, and a decline of 18.5% w/w in the week ending March 13.

The effective interest rate on a 30-year fixed-rate loan rose 14bps to 6.76% in the week ending March 27 from 6.62% in the week ending March 20. The rate on the 30-year fixed-rate loan has risen 52bps since the February 27 week. The rate on 15-year fixed-rate mortgages rose 5bps to 6.08% in the latest week from 6.03% in the prior week. The 30-year Jumbo rate rose 10bps to 6.71% in the March 27 week from 6.61% in the week ending March 20. The rate on a 5-year ARM dropped 12bps to 5.88% in the latest week from 6.00% in the week ending March 20.

The share of applications for refinancing an existing loan dropped to 45.3% of total applications in the week of March 27 from 49.6% in the March 20 week. The adjustable-rate mortgage (ARM) share of activity eased to 8.0% in the week ending March 27 from 8.1% in the week ending March 20.

The average size of a mortgage loan declined 1.3% w/w (-1.9% y/y) to $389,200 in the week ending March 27, after declining 2.4% w/w (-0.9% y/y) to $394,500 in the week ending March 20. The average size of a purchase loan edged down 0.8% w/w (+0.4% y/y) to $449,400 in the latest week, after declining 0.5% w/w (+2.3% y/y) to $453,200 in the March 20 week. The average size of a loan to refinance a mortgage declined 5.5% w/w (+0.3% y/y) to $316,600 in the March 27 week following a drop of 6.3% w/w (+1.0% y/y) to $334,900 in the March 20 week. Since the week of February 27, the average size of a loan to refinance a mortgage has declined 21.8%.

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

- Both applications for loans to purchase and for loan refinancing dropped in the latest week.
- Interest rate on 30-year fixed-rate loans rose 14bps to 6.76% 
- Average loan size declined.

U.S. Mortgage Applications Dropped in the March 27 Week

Robert Brusca

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The unemployment rate in the European monetary union picked up to 6.2% in February from 6.1% in January, when it had declined from 6.2% in December. The 6.1% reading is the all-time low, so at 6.2% the unemployment rate remains extremely low in the monetary union.

The number of unemployed in February rose by about 1% in both the EU and the monetary union; however, over broader spans of three months, six months, and 12 months, the number of unemployed is still falling.

February is a low month for the number of reporters on the table showing a decline in the unemployment rate. Among the 12 member reporters listed in the table, only Spain had a lower unemployment rate in February than in January, and Spain continues to show declines in unemployment as it also saw its unemployment rate drop in January and December, as well as on balance over three months, six months, and 12 months. Spain is the only country in the monetary union showing this kind of ongoing progress in reducing unemployment.

For the most part, unemployment rates seem to be stuck at relatively low levels among these 12 monetary union reporters. Four show net declines over 12 months, while six show declines over six months and four show declines over three months. Only three—Austria, Finland, and Luxembourg—report unemployment rates that rank above their respective medians, above a ranking of 50% on data back to 2000.

Although the EMU unemployment rate ticked up in February, it remains exceptionally low. Unemployment in Italy also ticked higher and has the exceptionally low ranking of 0.2%, having just moved up from its all-time low. Country-reported unemployment rates are in the bottom 10 percentile of their range over this period in Spain and Greece. You will remember these as the countries with the structurally highest unemployment rates typically in double digits prior to the formation of the European Union; now the Greek unemployment rate is 8.5% and the Spanish unemployment rate is 9.8%, and they are gradually folding into the community norms.

Despite the uptick in the unemployment rate, it's another excellent unemployment report for the monetary union, with unemployment rates below the medians up and down the line with few exceptions and with both countries brandishing unemployment rates that are substantially below their historic medians. Inflation rate in the monetary union remains broadly controlled, and the progress on the unemployment rate has been spectacular. Despite the other problems that the monetary union has encountered, these are true successes of the formation of the monetary union.

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