Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041101b.jpg" width="353">
Personal income grew just 0.2% In September following a downwardly revised 0.1% rise in August. Consensus expectations had been for a 0.3% September increase.
A third consecutive monthly decline in proprietors&#39; income, down 0.4% (+4.9% y/y), generated the disappointment in total personal income growth. Wages &amp; salaries rose 0.4% (+4.6% y/y), the third firm consecutive monthly gain. Manufacturing wages rose 0.3% (2.0% y/y) and wages in private service producing industries rose 0.4% (5.4% y/y).
Personal disposable income rose a scant 0.1% (4.6% y/y) following downwardly revised gains in months prior that have been weak since June. Adjusted for inflation disposable income was unchanged (2.5% y/y). Personal taxes rose 0.6% (5.3% y/y).
&quot;Public Officials and Job Creation&quot; from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20040901/cover.pdf"> here</a>.
Consumer spending rose 0.6% following a slight dip in August that was initially reported as unchanged. Durables purchases recovered most of the prior month&#39;s drop with a 1.6% jump as light vehicle sales jumped 5.5% to the second highest level of the year. Purchases of non-durable goods rose 0.5% (7.3% y/y) and services spending rose 0.4% (5.6% y/y). 
The PCE chain price index ticked up 0.1% as did prices less food &amp; energy (+1.5% y/y).
A recent speech by Fed Vice Chairman Roger W. Ferguson, Jr. titled &quot;Equilibrium Real Interest Rate: Theory and Application&quot; is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2004/20041029/default.htm"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM"> Disposition of Personal Income</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</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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</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.2%</td>
<td>0.3%</td>
<td>4.6%</td>
<td>3.2%</td>
<td>1.8%</td>
<td>3.5%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.6%</td>
<td>-0.1%</td>
<td>5.9%</td>
<td>5.2%</td>
<td>4.6%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>0.2%</td>
<td>0.7%</td>
<td>1.4%</td>
<td>1.4%</td>
<td>2.0%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1%</td>
<td>0.0%</td>
<td>2.0%</td>
<td>1.9%</td>
<td>1.4%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
ISM Factory Index Slipped Unexpectedly 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 1, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041101a.jpg" width="353">
The Institute of Supply Management reported that its Purchasing Managers&#146; Composite Index (PMI) fell in October to 56.8 versus Consensus expectations for no change at 58.5.
During the last twenty years there has been a 70% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
The Composite Index reflected declines in each of the components except new orders. The employment index (54.8) dropped to the lowest since January and production cratered to the lowest in over a year.
The separate index of export orders rose sharply to 56.6, the highest level since June.
The prices paid index recouped much of the prior month&#39;s decline and rose to 78.5.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM"> ISM Manufacturing Survey</a></th>
<th scope="col"> Oct</th>
<th scope="col">Sept</th>
<th scope="col">Oct &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">Composite Index</td>
<td>56.8</td>
<td>58.5</td>
<td>57.1</td>
<td>53.3</td>
<td>52.4</td>
<td>43.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>58.3</td>
<td>58.1</td>
<td>64.6</td>
<td>58.1</td>
<td>56.6</td>
<td>46.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>78.5</td>
<td>76.0</td>
<td>58.5</td>
<td>59.6</td>
<td>57.6</td>
<td>42.9</td>
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</tbody>
</table>
U.S. Construction Spending Down in September 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 1, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041101c.jpg" width="353">
The total value of construction put in place dipped slightly in September as residential building fell for the first month since February 2003. The Consensus expectation for a 0.4% gain.
As hurricanes hit Florida, private residential building activity fell 0.2%. New single family building slid 0.8% (+17.3% y/y) after a 2.3% spurt in August.
Nonresidential building rose 0.2% (+5.7% y/y) as construction activity on shopping malls ballooned 30.7% (6.4% y/y).
Public construction rose 0.3% though spending on highways &amp; streets, nearly one third of the value of public construction spending, fell for the fifth consecutive month (-1.3% y/y).
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM"> Construction Put-in-place</a></th>
<th scope="col"> Sept</th>
<th scope="col">Aug</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</td>
<td>-0.0%</td>
<td>0.9%</td>
<td>8.9%</td>
<td>5.1%</td>
<td>1.5%</td>
<td>3.5%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-0.1%</td>
<td>1.5%</td>
<td>10.9%</td>
<td>6.0%</td>
<td>-0.2%</td>
<td>1.4%</td>
</tr>
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<td class="firstcol">&nbsp; Residential</td>
<td>-0.2%</td>
<td>1.8%</td>
<td>13.1%</td>
<td>13.1%</td>
<td>8.4%</td>
<td>3.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>0.2%</td>
<td>0.7%</td>
<td>5.7%</td>
<td>-7.1%</td>
<td>-12.8%</td>
<td>-1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>0.3%</td>
<td>-1.0%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>7.0%</td>
<td>10.7%</td>
</tr>
</tbody>
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Personal income grew just 0.2% In September following a downwardly revised 0.1% rise in August. Consensus expectations had been for a 0.3% September increase. A third consecutive monthly decline in proprietors' income, down 0.4% [...]

U.S. Personal Income Gain Light

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041029f.jpg" width="353">
The People&#39;s Bank of China surprised world markets yesterday with a hike in its prime lending rate to 5.58% from 5.31%. The former level had been in place since February 2002. The move concludes an 8-1/2 year span of rate cuts. While a surprise in terms of exact timing, the Bank&#39;s action was not totally unexpected. In the spring it had used moral suasion to talk commercial banks into restraining their own loan growth; several Asian economists were forecasting a rate hike to make the attitude of restraint more concrete. (The Bank also raised its companion &quot;deposit rate&quot; to 2.25% from 1.98%.)
Further, in an additional step, the central bank removed a cap on rates commercial banks may charge their own customers. Previously, they were limited to rates no higher than 1.7 times the central bank lending rate. For the last couple of years this was equivalent to 9.03%. But in the face of the recent policy of qualitative restraint on lending, companies are said to have been resorting to &quot;underground&quot; channels for financing, and according to press sources, have been paying 15% to 20% for loans. Now, a more active and open bank credit market should develop.
Undesirably high inflation is prompting these actions, as well as a desire, bank officials indicated, to encourage behavior in the Chinese banking system that more closely resembles practices in international banking markets. Perhaps this evolutionary and philosophical move toward freer markets is the real surprise in this monetary policy action.
Meantime, inflation has indeed risen. The 12-month change in the consumer price index has been above 5% since June and was 5.2% in September. These last four months have seen the strongest pace since early 1997. Producer prices and corporate goods prices suggest continuing cost pressures, with the PPI up 7.9% for the 12 months ending September, the highest rate in the nearly eight-year history of the data. Corporate goods prices, another wholesale price measure, show strong gains in most types of products, with the total up 9.6%. 

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<th scope="col" class="firstcol">12-Month % Changes, NSA</th>
<th scope="col">Sept 2004</th>
<th scope="col">Aug 2004</th>
<th scope="col">Jul 2004</th>
December/December
</tr>
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<tbody>
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<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
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<td class="firstcol">Consumer Price Index</td>
<td>5.2</td>
<td>5.3</td>
<td>5.3</td>
<td>3.2</td>
<td>-0.4</td>
<td>-0.3</td>
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<td class="firstcol">Producer Price Index</td>
<td>7.9</td>
<td>6.8</td>
<td>6.4</td>
<td>3.0</td>
<td>0.4</td>
<td>-4.0</td>
</tr>
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<td class="firstcol">Corporate Goods Price Index</td>
<td>9.6</td>
<td>9.5</td>
<td>9.4</td>
<td>6.3</td>
<td>-0.5</td>
<td>-2.5</td>
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The People's Bank of China surprised world markets yesterday with a hike in its prime lending rate to 5.58% from 5.31%. The former level had been in place since February 2002. The move concludes an 8-1/2 year span of rate cuts. While [...]

People's Bank of China Raises Lending Rate; Removes Cap on Bank Rates in Major Monetary Policy Shift

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041029c.jpg" width="353">
The October Chicago Purchasing Managers Business Barometer jumped 6.6 points from September to 68.5, just nosed out the prior high and was at the highest level since July 1988. Consensus expectations had been for a slight decline to 59.0.
During the last ten years there has been a 73% correlation between the level of the Chicago Business Barometer and the three month change in factory sector industrial output. That correlation has risen to 86% during the last five years.
The new orders index jumped to 79.4, the highest since 1983. The employment index rose slightly to 54.1, a five month high. During the last twenty years there has been an 80% correlation between the level of this employment index and the three month change in factory sector employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041029d.jpg" width="353">
The index of prices paid remained firm at 84.1. During the last ten years there has been an 88% correlation between the Chicago price index and the three month change in the &quot;core&quot; intermediate goods PPI.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF05/@EF05.HTM"> Chicago Purchasing Managers Index, SA</a></th>
<th scope="col"> Oct</th>
<th scope="col">Sept</th>
<th scope="col">Oct&nbsp;&#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
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<td class="firstcol">Business Barometer</td>
<td>68.5</td>
<td>61.9</td>
<td>55.8</td>
<td>54.7</td>
<td>52.7</td>
<td>41.4</td>
</tr>
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<td class="firstcol">&nbsp; New Orders</td>
<td>79.4</td>
<td>69.7</td>
<td>61.6</td>
<td>58.0</td>
<td>56.2</td>
<td>42.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>84.1</td>
<td>85.9</td>
<td>59.8</td>
<td>55.8</td>
<td>56.9</td>
<td>50.4</td>
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The October Chicago Purchasing Managers Business Barometer jumped 6.6 points from September to 68.5, just nosed out the prior high and was at the highest level since July 1988. Consensus expectations had been for a slight decline to [...]

Chicago Purchasing Agents' Index Highest Since 1988

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041029b.jpg" width="353">
The reading of consumer sentiment for the full month of October from the University of Michigan did fall 2.7% m/m to 91.7, but that reflected a sharp improvement from the mid-month read of a 7.1% plunge to 87.5. Consensus expectations for a reading of 88.0.
The continuing decline in claims for unemployment insurance may have bolstered confidence following earlier concerns over the War in Iraq, the rising price of gasoline and several hurricanes which hit Florida.
During the last ten years there has been a 75% correlation between the level of consumer sentiment and the y/y change in real PCE.
The reading of current economic conditions improved 0.3% m/m versus the mid-month read of a 4.0% slump. Consumer expectations shaved the mid-month decline in half and fell 4.8% m/m.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM"> University of Michigan</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">Consumer Sentiment</td>
<td>91.7</td>
<td>94.2</td>
<td>2.3%</td>
<td>87.6</td>
<td>89.6</td>
<td>89.2</td>
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<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>104.0</td>
<td>103.7</td>
<td>4.1%</td>
<td>97.2</td>
<td>97.5</td>
<td>100.1</td>
</tr>
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<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>83.8</td>
<td>88.0</td>
<td>1.0%</td>
<td>81.4</td>
<td>84.6</td>
<td>82.3</td>
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The reading of consumer sentiment for the full month of October from the University of Michigan did fall 2.7% m/m to 91.7, but that reflected a sharp improvement from the mid-month read of a 7.1% plunge to 87.5. Consensus expectations [...]

U.S. Consumer Sentiment Recovered After Early October Slump

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041029e.jpg" width="353">
The employment cost index for private industry workers rose 0.9% last quarter, in line with Consensus expectations for a 1.0% gain.
Wages and salaries, which account for roughly 70% of the compensation index, accelerated from 2Q and rose 0.9%.
Benefit cost inflation in 3Q decelerated to 1.0% as the y/y cost of health benefits eased to 7.3%, the slowest since late 1999.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB08/@EB08.HTM"> ECI- Private Industry Workers</a></th>
<th scope="col"> 3Q&#39;04</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>
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</thead>
<tbody>
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<td class="firstcol">Compensation</td>
<td>0.9%</td>
<td>1.0%</td>
<td>3.7%</td>
<td>4.0%</td>
<td>3.2%</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp; Salaries</td>
<td>0.9%</td>
<td>0.6%</td>
<td>2.6%</td>
<td>3.0%</td>
<td>2.7%</td>
<td>3.8%</td>
</tr>
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<td class="firstcol">&nbsp; Benefit Costs</td>
<td>1.0%</td>
<td>1.7%</td>
<td>6.8%</td>
<td>6.4%</td>
<td>4.7%</td>
<td>5.1%</td>
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The employment cost index for private industry workers rose 0.9% last quarter, in line with Consensus expectations for a 1.0% gain. Wages and salaries, which account for roughly 70% of the compensation index, accelerated from 2Q and [...]

3Q'04 Employment Cost Index Up 0.9%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041029a.jpg" width="353">
US real GDP grew 3.7% (AR) last quarter versus the Consensus expectation for growth of 4.5%. Nevertheless, 3Q growth was a slight acceleration from 3.3% in 2Q.
The shortfall in GDP growth relative to expectations reflected meager contributions from residential investment (0.2 percentage points versus 0.9 points in 2Q) and from government spending (0.3 percentage points versus 0.4 points in 2Q).
Weakness in these categories limited growth in domestic final demand to 4.6% versus 3.5% in 2Q. Personal consumption growth sped up to 4.4% versus 1.6% in 2Q with spending on motor vehicles up 27.2% after a slight 2Q decline. Spending on apparel also recovered after a 2Q decline and furniture spending continued to boom at a 10.3% rate (9.7% y/y).
Business investment growth also continued strong at an 11.7% rate (9.8% y/y) with spending on equipment &amp; software up 14.9% (12.2% y/y). Spending on information processing equipment &amp; software rose only 4.4% (12.7% y/y), however, spending on industrial equipment rose 30.1% and transportation rose 27.0%.
Slower accumulation of inventories subtracted 0.5 percentage points from GDP growth, the first negative contribution since 2Q03 though it was dominated by a huge drawdown of motor vehicle inventories. (Real motor vehicle output rose 10.0% (1.1% y/y) last quarter, the net of the boom in vehicle sales and the drawdown of inventories.)
Foreign trade again subtracted from GDP growth as a 5.1% (9.2% y/y) rise in exports was outpaced by a 7.7% (11.9% y/y) gain in imports.
Expanded detail indicated that GDP less motor vehicles rose 3.5% (4.0% y/y) and that GDP less computers rose 3.7% (3.9% y/y).
Price inflation was quite tame at 1.3%, about as expected. Lower prices for consumer durables and for business investment in equipment &amp; software as well as a light 1.6% increase in prices paid by the federal government held back the increase.

<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/@E7/@E701/@E701.HTM"> Chained 2000$, % AR</a></th>
<th scope="col"> 3Q &#39;04 (Advance)</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">GDP</td>
<td>3.7%</td>
<td>3.3%</td>
<td>3.9%</td>
<td>3.0%</td>
<td>1.9%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-0.5%</td>
<td>0.8%</td>
<td>0.5%</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>-0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>4.2%</td>
<td>2.5%</td>
<td>3.4%</td>
<td>3.1%</td>
<td>1.4%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>-0.6%</td>
<td>-1.1%</td>
<td>-0.7%</td>
<td>-0.3%</td>
<td>-0.7%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>4.6%</td>
<td>3.5%</td>
<td>4.1%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>1.3%</td>
<td>3.2%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.7%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

US real GDP grew 3.7% (AR) last quarter versus the Consensus expectation for growth of 4.5%. Nevertheless, 3Q growth was a slight acceleration from 3.3% in 2Q. The shortfall in GDP growth relative to expectations reflected meager [...]

3Q US GDP Light at 3.7%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041029a.jpg" width="353">
US real GDP grew 3.7% (AR) last quarter versus the Consensus expectation for growth of 4.5%. Nevertheless, 3Q growth was a slight acceleration from 3.3% in 2Q.
The shortfall in GDP growth relative to expectations reflected meager contributions from residential investment (0.2 percentage points versus 0.9 points in 2Q) and from government spending (0.3 percentage points versus 0.4 points in 2Q).
Weakness in these categories limited growth in domestic final demand to 4.6% versus 3.5% in 2Q. Personal consumption growth sped up to 4.4% versus 1.6% in 2Q with spending on motor vehicles up 27.2% after a slight 2Q decline. Spending on apparel also recovered after a 2Q decline and furniture spending continued to boom at a 10.3% rate (9.7% y/y).
Business investment growth also continued strong at an 11.7% rate (9.8% y/y) with spending on equipment &amp; software up 14.9% (12.2% y/y). Spending on information processing equipment &amp; software rose only 4.4% (12.7% y/y), however, spending on industrial equipment rose 30.1% and transportation rose 27.0%.
Slower accumulation of inventories subtracted 0.5 percentage points from GDP growth, the first negative contribution since 2Q03 though it was dominated by a huge drawdown of motor vehicle inventories. (Real motor vehicle output rose 10.0% (1.1% y/y) last quarter, the net of the boom in vehicle sales and the drawdown of inventories.)
Foreign trade again subtracted from GDP growth as a 5.1% (9.2% y/y) rise in exports was outpaced by a 7.7% (11.9% y/y) gain in imports.
Expanded detail indicated that GDP less motor vehicles rose 3.5% (4.0% y/y) and that GDP less computers rose 3.7% (3.9% y/y).
Price inflation was quite tame at 1.3%, about as expected. Lower prices for consumer durables and for business investment in equipment &amp; software as well as a light 1.6% increase in prices paid by the federal government held back the increase.

<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/@E7/@E701/@E701.HTM"> Chained 2000$, % AR</a></th>
<th scope="col"> 3Q &#39;04 (Advance)</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">GDP</td>
<td>3.7%</td>
<td>3.3%</td>
<td>3.9%</td>
<td>3.0%</td>
<td>1.9%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-0.5%</td>
<td>0.8%</td>
<td>0.5%</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>-0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>4.2%</td>
<td>2.5%</td>
<td>3.4%</td>
<td>3.1%</td>
<td>1.4%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>-0.6%</td>
<td>-1.1%</td>
<td>-0.7%</td>
<td>-0.3%</td>
<td>-0.7%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>4.6%</td>
<td>3.5%</td>
<td>4.1%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>1.3%</td>
<td>3.2%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.7%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>
3Q'04 Employment Cost Index Up 0.9% 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 29, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041029e.jpg" width="353">
The employment cost index for private industry workers rose 0.9% last quarter, in line with Consensus expectations for a 1.0% gain.
Wages and salaries, which account for roughly 70% of the compensation index, accelerated from 2Q and rose 0.9%.
Benefit cost inflation in 3Q decelerated to 1.0% as the y/y cost of health benefits eased to 7.3%, the slowest since late 1999.

<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/@EB/@EB08/@EB08.HTM"> ECI- Private Industry Workers</a></th>
<th scope="col"> 3Q&#39;04</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">Compensation</td>
<td>0.9%</td>
<td>1.0%</td>
<td>3.7%</td>
<td>4.0%</td>
<td>3.2%</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp; Salaries</td>
<td>0.9%</td>
<td>0.6%</td>
<td>2.6%</td>
<td>3.0%</td>
<td>2.7%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>1.0%</td>
<td>1.7%</td>
<td>6.8%</td>
<td>6.4%</td>
<td>4.7%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Recovered After Early October Slump 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 29, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041029b.jpg" width="353">
The reading of consumer sentiment for the full month of October from the University of Michigan did fall 2.7% m/m to 91.7, but that reflected a sharp improvement from the mid-month read of a 7.1% plunge to 87.5. Consensus expectations for a reading of 88.0.
The continuing decline in claims for unemployment insurance may have bolstered confidence following earlier concerns over the War in Iraq, the rising price of gasoline and several hurricanes which hit Florida.
During the last ten years there has been a 75% correlation between the level of consumer sentiment and the y/y change in real PCE.
The reading of current economic conditions improved 0.3% m/m versus the mid-month read of a 4.0% slump. Consumer expectations shaved the mid-month decline in half and fell 4.8% m/m.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<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/@EF14/@EF1402/@EF1402.HTM"> University of Michigan</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">Consumer Sentiment</td>
<td>91.7</td>
<td>94.2</td>
<td>2.3%</td>
<td>87.6</td>
<td>89.6</td>
<td>89.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>104.0</td>
<td>103.7</td>
<td>4.1%</td>
<td>97.2</td>
<td>97.5</td>
<td>100.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>83.8</td>
<td>88.0</td>
<td>1.0%</td>
<td>81.4</td>
<td>84.6</td>
<td>82.3</td>
</tr>
</tbody>
</table>
Chicago Purchasing Agents' Index Highest Since 1988 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 29, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041029c.jpg" width="353">
The October Chicago Purchasing Managers Business Barometer jumped 6.6 points from September to 68.5, just nosed out the prior high and was at the highest level since July 1988. Consensus expectations had been for a slight decline to 59.0.
During the last ten years there has been a 73% correlation between the level of the Chicago Business Barometer and the three month change in factory sector industrial output. That correlation has risen to 86% during the last five years.
The new orders index jumped to 79.4, the highest since 1983. The employment index rose slightly to 54.1, a five month high. During the last twenty years there has been an 80% correlation between the level of this employment index and the three month change in factory sector employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041029d.jpg" width="353">
The index of prices paid remained firm at 84.1. During the last ten years there has been an 88% correlation between the Chicago price index and the three month change in the &quot;core&quot; intermediate goods PPI.

<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/@EF05/@EF05.HTM"> Chicago Purchasing Managers Index, SA</a></th>
<th scope="col"> Oct</th>
<th scope="col">Sept</th>
<th scope="col">Oct&nbsp;&#39;03</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">Business Barometer</td>
<td>68.5</td>
<td>61.9</td>
<td>55.8</td>
<td>54.7</td>
<td>52.7</td>
<td>41.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>79.4</td>
<td>69.7</td>
<td>61.6</td>
<td>58.0</td>
<td>56.2</td>
<td>42.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>84.1</td>
<td>85.9</td>
<td>59.8</td>
<td>55.8</td>
<td>56.9</td>
<td>50.4</td>
</tr>
</tbody>
</table>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041028d.jpg" width="353">
Unlike other major European countries discussed here in the last few days, industry leaders in France are increasingly optimistic. The overall Business Climate Index, a composite of their assessment of trends in production and orders, reached 108 in October, its highest since March 2001. Similarly, expectations for the trend in production going forward had a positive/negative balance of +16 for October, the most favorable reading since February 2001.
Several market segments are participating in the apparent business improvement. Markets for consumer goods have gained the most in the most recent months, as the percent balance indicator has jumped from -2 in July to +17 in October. However, this sector tends to be volatile, so such a pattern may not be sustained. Intermediate materials have moved less dramatically in the short-run, but generally experience smoother, longer-lasting swings. Currently, that segment&#39;s balance indicator stands at +16, unchanged in the month, but in a generally favorable position since the middle of last year. Mechanical business equipment actually eased a bit in October to +23 from September&#39;s +26, but it had improved more and stayed higher in previous months.
We find this good performance a bit perplexing. The two major macroeconomic forces today, the euro exchange rate and oil prices are international in scope, affecting every major economy. Possibly French industry is experiencing the evolution of a favorable push due to the flattening of the euro that began in March. One of the industries showing a pick-up is mineral products, suggesting that France may be able to benefit more than its neighbors from rising petroleum prices. These suggestions are just conjecture, however, and it remains to be seen how long this attractive business sentiment will be sustained. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Seasonally Adjusted, % Balance (except as noted)</th>
<th scope="col">Oct 2004</th>
<th scope="col">Sept 2004</th>
<th scope="col">Aug 2004</th>
<th scope="col">Oct&nbsp; 2003</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">Business Climate Index</td>
<td>108</td>
<td>106</td>
<td>105</td>
<td>96</td>
<td>95</td>
<td>97</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">Likely Production Trend</td>
<td>16</td>
<td>14</td>
<td>11</td>
<td>5</td>
<td>1</td>
<td>5</td>
<td>5</td>
</tr>
<tr class="odd">
<td class="firstcol">Selected Type of Goods:</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>17</td>
<td>6</td>
<td>2</td>
<td>-6</td>
<td>1</td>
<td>5</td>
<td>13</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Intermediate Goods</td>
<td>16</td>
<td>16</td>
<td>11</td>
<td>7</td>
<td>-4</td>
<td>2</td>
<td>-5</td>
</tr>
<tr>
<td class="firstcol">Mechanical Investment Goods</td>
<td>23</td>
<td>26</td>
<td>21</td>
<td>3</td>
<td>-1</td>
<td>-4</td>
<td>-1</td>
</tr>
<tr class="odd">
<td class="firstcol">Electronic Investment Goods</td>
<td>5</td>
<td>2</td>
<td>10</td>
<td>0</td>
<td>5</td>
<td>-9</td>
<td>4</td>
</tr>
</tbody>
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Unlike other major European countries discussed here in the last few days, industry leaders in France are increasingly optimistic. The overall Business Climate Index, a composite of their assessment of trends in production and orders, [...]

French Industry Noticeably More Optimistic, Unlike Neighbors

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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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

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

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

Robert Brusca

260402E.jpg

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

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

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

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

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

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

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

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

Global Manufacturing PMIs Stall—Will It Get Worse?

Andrew Cates

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

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

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

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

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

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

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

Charts of the Week: Strait Stress

Sandy Batten

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

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

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

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

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

U.S. Retail Sales Rebounded in February

Winnie Tapasanun

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

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

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

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

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

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

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

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

Economy in Brief

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