Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041207c.jpg" width="353">
Chain store sales following Thanksgiving week slumped another 1.7% on top of the 1.5% skid during the Holiday period, according to the International Council of Shopping Centers (ICSC)-UBS.
The decline pulled November sales just 0.1% ahead of October and sales began December down 2.5% m/m.
The leading indicator of chain store sales from ICSC fell by 0.5% in the latest week for the third time in the last four periods.
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.

<table border="0" cellspacing="0" width="100%">
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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">12/04/04</th>
<th scope="col">11/27/04</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>425.6</td>
<td>432.9</td>
<td>3.3%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
</body>
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Chain store sales following Thanksgiving week slumped another 1.7% on top of the 1.5% skid during the Holiday period, according to the International Council of Shopping Centers (ICSC)-UBS. The decline pulled November sales just 0.1% [...]

Chain Store Sales Slumped Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041207a.jpg" width="353">
Non-farm labor productivity growth last quarter was little revised at 1.8% and about matched Consensus expectations for 2.0% growth.
Growth in hours worked by all persons (employment times hours) was revised up to 2.4% (1.5% y/y) from 2.1% but output growth also was revised up to 4.2% (4.7% y/y), the same as in 2Q.
Unit labor costs grew 1.8% as compensation growth was left unchanged at 3.6% (4.0% y/y).
Productivity in the manufacturing sector was revised up to 4.6% (4.7% y/y) from 4.3%. Unit labor cost growth in the factory sector was revised down slightly to no change (-1.5% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041207b.jpg" width="353">
In the nonfinancial corporate sector productivity growth accelerated to 4.2% (3.1% y/y) from 3.3% in 2Q. This is the first release of figures for 3Q. Output, a figure derived from the income side of the National Income &amp; Product Accounts, grew at a 5.6% (4.8% y/y) rate versus 4.2% growth in 2Q. Hours worked grew at a 1.3% rate (1.7% y/y).
During the last ten years there has been an 86% (inverse) correlation between y/y growth in unit labor costs in the nonfinancial corporate sector and profit growth.
From The Federal Reserve Bank of Chicago is <a href="http://www.chicagofed.org/publications/economicperspectives/ep_1qtr2004_part4_fernald_ramnath.pdf"> this</a> paper titled &quot;The acceleration in U.S. total factor productivity after 1995: The role of information technology.&quot;

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Non-farm Business Sector</a> (SAAR)</th>
<th scope="col">3Q &#39;04 (Revised)</th>
<th scope="col">3Q &#39;04 (Prelim.)</th>
<th scope="col">2Q &#39;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 class="odd">
<td class="firstcol">Output per Hour</td>
<td>1.8%</td>
<td>1.9%</td>
<td>3.9%</td>
<td>3.1%</td>
<td>4.4%</td>
<td>4.4%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>3.6%</td>
<td>3.6%</td>
<td>5.9%</td>
<td>4.0%</td>
<td>4.1%</td>
<td>3.3%</td>
<td>4.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>1.8%</td>
<td>1.6%</td>
<td>1.9%</td>
<td>0.8%</td>
<td>-0.4%</td>
<td>-1.1%</td>
<td>1.5%</td>
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Non-farm labor productivity growth last quarter was little revised at 1.8% and about matched Consensus expectations for 2.0% growth. Growth in hours worked by all persons (employment times hours) was revised up to 2.4% (1.5% y/y) from [...]

U.S. Productivity Growth Little Revised for 3Q

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041207a.jpg" width="353">
Non-farm labor productivity growth last quarter was little revised at 1.8% and about matched Consensus expectations for 2.0% growth.
Growth in hours worked by all persons (employment times hours) was revised up to 2.4% (1.5% y/y) from 2.1% but output growth also was revised up to 4.2% (4.7% y/y), the same as in 2Q.
Unit labor costs grew 1.8% as compensation growth was left unchanged at 3.6% (4.0% y/y).
Productivity in the manufacturing sector was revised up to 4.6% (4.7% y/y) from 4.3%. Unit labor cost growth in the factory sector was revised down slightly to no change (-1.5% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041207b.jpg" width="353">
In the nonfinancial corporate sector productivity growth accelerated to 4.2% (3.1% y/y) from 3.3% in 2Q. This is the first release of figures for 3Q. Output, a figure derived from the income side of the National Income &amp; Product Accounts, grew at a 5.6% (4.8% y/y) rate versus 4.2% growth in 2Q. Hours worked grew at a 1.3% rate (1.7% y/y).
During the last ten years there has been an 86% (inverse) correlation between y/y growth in unit labor costs in the nonfinancial corporate sector and profit growth.
From The Federal Reserve Bank of Chicago is <a href="http://www.chicagofed.org/publications/economicperspectives/ep_1qtr2004_part4_fernald_ramnath.pdf"> this</a> paper titled &quot;The acceleration in U.S. total factor productivity after 1995: The role of information technology.&quot;

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Non-farm Business Sector</a> (SAAR)</th>
<th scope="col">3Q &#39;04 (Revised)</th>
<th scope="col">3Q &#39;04 (Prelim.)</th>
<th scope="col">2Q &#39;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 class="odd">
<td class="firstcol">Output per Hour</td>
<td>1.8%</td>
<td>1.9%</td>
<td>3.9%</td>
<td>3.1%</td>
<td>4.4%</td>
<td>4.4%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>3.6%</td>
<td>3.6%</td>
<td>5.9%</td>
<td>4.0%</td>
<td>4.1%</td>
<td>3.3%</td>
<td>4.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>1.8%</td>
<td>1.6%</td>
<td>1.9%</td>
<td>0.8%</td>
<td>-0.4%</td>
<td>-1.1%</td>
<td>1.5%</td>
</tr>
</tbody>
</table>
Chain Store Sales Slumped Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 7, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041207c.jpg" width="353">
Chain store sales following Thanksgiving week slumped another 1.7% on top of the 1.5% skid during the Holiday period, according to the International Council of Shopping Centers (ICSC)-UBS.
The decline pulled November sales just 0.1% ahead of October and sales began December down 2.5% m/m.
The leading indicator of chain store sales from ICSC fell by 0.5% in the latest week for the third time in the last four periods.
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.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">12/04/04</th>
<th scope="col">11/27/04</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>425.6</td>
<td>432.9</td>
<td>3.3%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Challenger Layoff Count Rose Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 7, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041207f.jpg" width="353">
Job cut announcements reported in November rose 2.6% from October and 5.1% from a year ago according to Challenger, Gray &amp; Christmas. The monthly tally of 104,530 pulled the three month moving average of job cut announcements to 104,744 (-9.7% y/y), the highest this year.
During the last ten years there has been an 86% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Job cut announcements in the automotive industry more than doubled and rose 10 fold in E-Commerce &amp; Dot com to the highest level since January 2003. Government layoffs also surged and layoffs rose in insurance, electronics, services, telecommunication, transportation and energy.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">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">Announced Job Cuts</td>
<td>104,530</td>
<td>101,840</td>
<td>5.1%</td>
<td>1,236,426</td>
<td>1,431,052</td>
<td>1,956,876</td>
</tr>
</tbody>
</table>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041206b.jpg" width="353">
German data on new orders and sales are reported only in index form. The index of the volume of German new orders for manufacturing increased 1.09% in October from September, after a 0.78% rise in September. A decline of 1.23% in foreign orders, due, no doubt, to the rising euro, was offset by a 3.29% rise in domestic orders. .The order data reported for East and West Germany show that new orders in East Germany continue to show better growth than in West Germany, however, there are no data on the actual levels of orders. It is safe to assume that the levels in East Germany are still well below those in the West.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041206c.jpg" width="353">. Indexes for the volume of total manufacturing sales are available only on a non seasonally adjusted basis. Since month-to-month changes tend to be erratic, year-over-year changes are more meaningful. Total manufacturing sales in October were 1.89% above October 2003. Domestic sales were flat and foreign sales were up 4.46% over a year ago.
The order data suggest an improvement in domestic sales and a weakening in foreign sales as shown in the two attached charts..

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol">2000 Prices, 2000=100 SA except where noted</th>
<th scope="col">Oct 04</th>
<th scope="col">Sep 04</th>
<th scope="col">Oct 03</th>
<th scope="col">M/M %&nbsp;</th>
<th scope="col">Y/Y %&nbsp;</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">Manufacturing New Orders&nbsp;</td>
<td>103.9</td>
<td>102.8</td>
<td>100.1</td>
<td>1.07</td>
<td>3.80</td>
<td>97.8</td>
<td>97.2</td>
<td>97.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Domestic</td>
<td>97.3</td>
<td>94.2</td>
<td>96.0</td>
<td>3.29</td>
<td>1.35</td>
<td>93.4</td>
<td>93.5</td>
<td>96.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Foreign</td>
<td>112.2</td>
<td>113.5</td>
<td>105.3</td>
<td>-1.23</td>
<td>6.56</td>
<td>103.3</td>
<td>101.9</td>
<td>98.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; West Germany</td>
<td>102.1</td>
<td>101.0</td>
<td>98.5</td>
<td>1.09</td>
<td>3.65</td>
<td>96.4</td>
<td>96.3</td>
<td>96.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; East Germany</td>
<td>128.5</td>
<td>127.0</td>
<td>123.3</td>
<td>1.18</td>
<td>4.22</td>
<td>117.0</td>
<td>110.0</td>
<td>104.0</td>
</tr>
<tr>
<td class="firstcol">Manufacturing Sales NSA</td>
<td>107.6</td>
<td>112.1</td>
<td>105.6</td>
<td>-4.01</td>
<td>1.89</td>
<td>98.7</td>
<td>99.1</td>
<td>100.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Domestic NSA</td>
<td>101.8</td>
<td>105.2</td>
<td>101.8</td>
<td>-3.29</td>
<td>0.00</td>
<td>94.8</td>
<td>95.9</td>
<td>99.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Foreign NSA</td>
<td>114.3</td>
<td>123.8</td>
<td>112.1</td>
<td>-5.25</td>
<td>4.46</td>
<td>105.3</td>
<td>104.5</td>
<td>103.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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German data on new orders and sales are reported only in index form. The index of the volume of German new orders for manufacturing increased 1.09% in October from September, after a 0.78% rise in September. A decline of 1.23% in [...]

German New Orders for Manufacturing Increase in October but Sales Lag

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041206a.jpg" width="353">
Commodity prices, as measured by the JoC-ECRI (Journal of Commerce-Economic Cycle Research Institute) index, have risen moderately during the last several weeks following sharp declines from the high in late August.
Metals prices have been quite strong, led higher by steel scrap (+92.9% y/y), copper scrap (36.1% y/y), lead (50.8% y/y) and aluminum (18.9% y/y).
Petroleum prices also have surged with crude oil (52.1% y/y), but strength in benzene (138.1% y/y) has been most notable.
Earlier strength in lumber prices has been eroded by the cooling of the housing market. The miscellaneous prices category has eased as framing lumber prices have fallen nearly one quarter from the summer highs and structural composite prices have fallen nearly in half.
During the last ten years there has been a 52% correlation between the JoC-ECRI commodity price index and the six month change in factory sector industrial production.
The KR-CRB (Knight Ridder-Commodity Research Bureau) commodity price index has firmed as well though its weighting scheme differs from the JoC-ECRI Index, with roughly half reflecting agricultural prices. Livestock prices (4.5% y/y) have been volatile recently as have foodstuff prices (5.8% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="www.haverselect.com/dlx/USECON/@E8/@E803/@E80304/@E80304.HTM">JoC-ECRI Industrial Price Index</a></th>
<th scope="col">12/03/04</th>
<th scope="col">11/04</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 class="odd">
<td class="firstcol">All Items</td>
<td>113.40</td>
<td>112.68</td>
<td>8.8%</td>
<td>91.97</td>
<td>79.53</td>
<td>80.33</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Textiles</td>
<td>64.40</td>
<td>64.05</td>
<td>-6.3%</td>
<td>65.09</td>
<td>59.73</td>
<td>61.36</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Metals</td>
<td>127.40</td>
<td>126.53</td>
<td>31.6%</td>
<td>84.57</td>
<td>75.14</td>
<td>75.44</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Miscellaneous</td>
<td>100.70</td>
<td>99.18</td>
<td>-20.0%</td>
<td>102.89</td>
<td>85.81</td>
<td>87.29</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Petroleum</td>
<td>251.10</td>
<td>254.87</td>
<td>88.5%</td>
<td>135.26</td>
<td>110.06</td>
<td>108.90</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">KR-CRB</td>
<td>11/30/04</td>
<td>11/04</td>
<td>Y/Y</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">All Commodities</td>
<td>303.20</td>
<td>298.60</td>
<td>8.2%</td>
<td>282.59</td>
<td>244.31</td>
<td>212.89</td>
</tr>
</tbody>
</table>
</body>
</html>

Commodity prices, as measured by the JoC-ECRI (Journal of Commerce-Economic Cycle Research Institute) index, have risen moderately during the last several weeks following sharp declines from the high in late August. Metals prices have [...]

Commodity Prices Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041206a.jpg" width="353">
Commodity prices, as measured by the JoC-ECRI (Journal of Commerce-Economic Cycle Research Institute) index, have risen moderately during the last several weeks following sharp declines from the high in late August.
Metals prices have been quite strong, led higher by steel scrap (+92.9% y/y), copper scrap (36.1% y/y), lead (50.8% y/y) and aluminum (18.9% y/y).
Petroleum prices also have surged with crude oil (52.1% y/y), but strength in benzene (138.1% y/y) has been most notable.
Earlier strength in lumber prices has been eroded by the cooling of the housing market. The miscellaneous prices category has eased as framing lumber prices have fallen nearly one quarter from the summer highs and structural composite prices have fallen nearly in half.
During the last ten years there has been a 52% correlation between the JoC-ECRI commodity price index and the six month change in factory sector industrial production.
The KR-CRB (Knight Ridder-Commodity Research Bureau) commodity price index has firmed as well though its weighting scheme differs from the JoC-ECRI Index, with roughly half reflecting agricultural prices. Livestock prices (4.5% y/y) have been volatile recently as have foodstuff prices (5.8% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E803/@E80304/@E80304.HTM">JoC-ECRI Industrial Price Index</a></th>
<th scope="col">12/03/04</th>
<th scope="col">11/04</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 class="odd">
<td class="firstcol">All Items</td>
<td>113.40</td>
<td>112.68</td>
<td>8.8%</td>
<td>91.97</td>
<td>79.53</td>
<td>80.33</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Textiles</td>
<td>64.40</td>
<td>64.05</td>
<td>-6.3%</td>
<td>65.09</td>
<td>59.73</td>
<td>61.36</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Metals</td>
<td>127.40</td>
<td>126.53</td>
<td>31.6%</td>
<td>84.57</td>
<td>75.14</td>
<td>75.44</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Miscellaneous</td>
<td>100.70</td>
<td>99.18</td>
<td>-20.0%</td>
<td>102.89</td>
<td>85.81</td>
<td>87.29</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Petroleum</td>
<td>251.10</td>
<td>254.87</td>
<td>88.5%</td>
<td>135.26</td>
<td>110.06</td>
<td>108.90</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">KR-CRB</td>
<td>11/30/04</td>
<td>11/04</td>
<td>Y/Y</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">All Commodities</td>
<td>303.20</td>
<td>298.60</td>
<td>8.2%</td>
<td>282.59</td>
<td>244.31</td>
<td>212.89</td>
</tr>
</tbody>
</table>
</body>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041206a.jpg" width="353">
Commodity prices, as measured by the JoC-ECRI (Journal of Commerce-Economic Cycle Research Institute) index, have risen moderately during the last several weeks following sharp declines from the high in late August.
Metals prices have been quite strong, led higher by steel scrap (+92.9% y/y), copper scrap (36.1% y/y), lead (50.8% y/y) and aluminum (18.9% y/y).
Petroleum prices also have surged with crude oil (52.1% y/y), but strength in benzene (138.1% y/y) has been most notable.
Earlier strength in lumber prices has been eroded by the cooling of the housing market. The miscellaneous prices category has eased as framing lumber prices have fallen nearly one quarter from the summer highs and structural composite prices have fallen nearly in half.
During the last ten years there has been a 52% correlation between the JoC-ECRI commodity price index and the six month change in factory sector industrial production.
The KR-CRB (Knight Ridder-Commodity Research Bureau) commodity price index has firmed as well though its weighting scheme differs from the JoC-ECRI Index, with roughly half reflecting agricultural prices. Livestock prices (4.5% y/y) have been volatile recently as have foodstuff prices (5.8% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">JoC-ECRI Industrial Price Index</a></th>
<th scope="col">12/03/04</th>
<th scope="col">11/04</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 class="odd">
<td class="firstcol">All Items</td>
<td>113.40</td>
<td>112.68</td>
<td>8.8%</td>
<td>91.97</td>
<td>79.53</td>
<td>80.33</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Textiles</td>
<td>64.40</td>
<td>64.05</td>
<td>-6.3%</td>
<td>65.09</td>
<td>59.73</td>
<td>61.36</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Metals</td>
<td>127.40</td>
<td>126.53</td>
<td>31.6%</td>
<td>84.57</td>
<td>75.14</td>
<td>75.44</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Miscellaneous</td>
<td>100.70</td>
<td>99.18</td>
<td>-20.0%</td>
<td>102.89</td>
<td>85.81</td>
<td>87.29</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Petroleum</td>
<td>251.10</td>
<td>254.87</td>
<td>88.5%</td>
<td>135.26</td>
<td>110.06</td>
<td>108.90</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">KR-CRB</td>
<td>11/30/04</td>
<td>11/04</td>
<td>Y/Y</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">All Commodities</td>
<td>303.20</td>
<td>298.60</td>
<td>8.2%</td>
<td>282.59</td>
<td>244.31</td>
<td>212.89</td>
</tr>
</tbody>
</table>
</body>
</html>

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

Kathleen Stephansen, CBE

260402A5.jpg

260402B5.jpg

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.

260402C5.jpg

260402D5.jpg

- 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

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

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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.

260401L35.jpg

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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%).

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

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.

Economy in Brief

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