Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040629e.jpg" width="353">
INSEE&#39;s (Institute Nationale de la Statistiques et les Etudes Economique) composite indicator of French business confidence for June rose to April&#39;s three year high of 105 after having declined to 104 in May.
Although the overall measure of confidence has risen almost steadily since June of 2003, expectations of improving production trends for business in general and business in manufacturing in particular faltered in February, March and April of this year and have only improved in May and June. Even with the improvement, the balance of those expecting improved production trends is still negative, although only slightly so.
Expectations regarding the inflation outlook have changed significantly . Those expecting prices to decline outweighed those expecting prices to increase for much of 2003. The reverse has been true since December of last year. In June, the balance of businessmen in manufacturing expecting prices to rise over those expecting a decline was up to 23, compared with -3 in December.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Indicators of Business Confidence and Expectations</th>
<th scope="col">Jun 04</th>
<th scope="col">May 04</th>
<th scope="col">Jun&nbsp; 03</th>
<th scope="col">M/M &nbsp;Point Chg.</th>
<th scope="col">Y/Y&nbsp; Point Chg.&nbsp;</th>
<th scope="col">2003&nbsp;</th>
<th scope="col">2002&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2001&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite</td>
<td>105</td>
<td>104</td>
<td>90</td>
<td>1</td>
<td>15</td>
<td>95</td>
<td>97</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">Percent Balance</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Industry</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Production Trend</td>
<td>-2</td>
<td>-5</td>
<td>-34</td>
<td>3</td>
<td>32</td>
<td>-29</td>
<td>-22</td>
<td>-23</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Price Trend</td>
<td>22</td>
<td>19</td>
<td>-17</td>
<td>3</td>
<td>39</td>
<td>-7</td>
<td>3</td>
<td>12</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Production Trend</td>
<td>-3</td>
<td>-5</td>
<td>-35</td>
<td>2</td>
<td>38</td>
<td>-29</td>
<td>-24</td>
<td>-24</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Price Trend</td>
<td>23</td>
<td>19</td>
<td>-5</td>
<td>4</td>
<td>41</td>
<td>-8</td>
<td>2</td>
<td>11</td>
</tr>
</tbody>
</table>
</body>
</html>

INSEE's (Institute Nationale de la Statistiques et les Etudes Economique) composite indicator of French business confidence for June rose to April's three year high of 105 after having declined to 104 in May. Although the overall [...]

French Business Turns More Confident on Production Trends, but a Growing Proportion Predict Rising Prices

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040629b.jpg" width="353">
Chain store sales fell a huge 1.2% last week, the largest one week decline since late March, according to the International Council of Shopping Centers (ICSC)-UBS.
The decline in this the last full week of June pulled month-to-date sales 0.7% below the May average.
During the last ten years there has been a 59% 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. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040629a.jpg" width="353">
Improvement in sales may be portended by the recent slide in petroleum prices. Brent crude oil dropped yesterday to $33.25 on news of the Iraq power handover. Crude prices are down further today, off 15% from the May peak of $39.07.

<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">06/26/04</th>
<th scope="col">06/19/04</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 Retail Chain Store Sales</td>
<td>434.7</td>
<td>439.8</td>
<td>4.2%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Consumer Confidence Rose to 2-Year High in June 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 29, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040629c.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence for June rose 9.5% to 101.9 versus Consensus expectations for a slight rise to 95.0. June was the highest confidence level since June 2002. May was little revised.
During the last ten years there has been a 55% correlation between consumer confidence and the y/y change in nonfarm payrolls.
The present situation index surged 15.8% to 104.8 (+63.2% y/y). The index of consumer expectations also was firm, up 5.5% to 100.0 (+3.7% y/y).
Jobs were viewed as hard to get by 26.5% of respondents. That was down from 30.3% the prior month and was the lowest level since September 2002.
Expectations for business conditions in six months rose further in June following increases in the prior two months.
The June Confidence reading was firmer than the June reading of Consumer Sentiment reported by the University of Michigan.
During the last ten years there has been a 67% correlation between the level of consumer confidence and the y/y % change in real PCE.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM"> Conference Board</a></th>
<th scope="col">June</th>
<th scope="col">May</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">Consumer Confidence</td>
<td>101.9</td>
<td>93.1</td>
<td>22.0%</td>
<td>79.8</td>
<td>96.6</td>
<td>106.6</td>
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Chain store sales fell a huge 1.2% last week, the largest one week decline since late March, according to the International Council of Shopping Centers (ICSC)-UBS. The decline in this the last full week of June pulled month-to-date [...]

Chain Store Sales Slide Big

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040629d.jpg" width="353">
The latest report on retail sales in Japan suggests that the rise in household consumption in the first quarter Gross Domestic Product may not be sustained in the second quarter. May retail sales were -2.47% below sales of a year ago and April sales were almost 1% below year ago sales. In the first quarter of this year retail sales averaged 0.22% above the average for the first quarter of 2003.
It is important to remember, however, that retail sales are volatile and they are probably affected much more than total consumption by deflation. In the comparison between retail sales and household expenditures in current yen, such expenditures as household maintenance, education, and health, are much less likely to be affected by deflation than items such as food and clothing that make up much of the retail sales series. Chart 2 shows retail sales as a percentage of total household expenditures. Over the past 5 years, the ratio has declined from about 51% to 46%. Thus a decline in retail sales need not portend a similar decline in total consumption.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Retail Sales</th>
<th scope="col">May 04</th>
<th scope="col">Apr 04</th>
<th scope="col">Mar&nbsp; 04</th>
<th scope="col">Feb&nbsp; 04</th>
<th scope="col">Jan&nbsp;04</th>
<th scope="col">2003 %</th>
<th scope="col">2002&nbsp; %</th>
<th scope="col">&nbsp;2001 %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Year over year %</td>
<td>-2.79</td>
<td>-0.98</td>
<td>-1.70</td>
<td>1.76</td>
<td>0.92</td>
<td>-194</td>
<td>-394</td>
<td>-1.88</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Household Consumption</td>
<td>Q1 04</td>
<td>&nbsp; Q4 03</td>
<td>&nbsp; Q3 03</td>
<td>Q2 03</td>
<td>&nbsp;Q1 03</td>
<td>2003 %</td>
<td>&nbsp; 2002 %</td>
<td>&nbsp; 2001 %</td>
</tr>
<tr>
<td class="firstcol">Year over year %</td>
<td>1.77</td>
<td>0.18</td>
<td>-1.61</td>
<td>-.072</td>
<td>-.026</td>
<td>-0.60</td>
<td>-0.33</td>
<td>0.44</td>
</tr>
</tbody>
</table>
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The latest report on retail sales in Japan suggests that the rise in household consumption in the first quarter Gross Domestic Product may not be sustained in the second quarter. May retail sales were -2.47% below sales of a year ago [...]

Retail Sales in Japan Decline in May. Does This Mean a Decline in Second Quarter Total Household Spending?

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040628a.jpg" width="353">
Personal income rose the same 0.6% (+5.8% y/y) last month as in April. Consensus expectations had been for a 0.5% gain.
For the second month the upside surprise was slight. Wages &amp; salaries, however, have been notably firm rising 0.7% (5.1% y/y) in May and 0.6% in April reflecting the recent improvement in jobs growth. Firm wage gains were logged across industries but service industries rose a notable 1.0% (5.8% y/y).
Personal disposable income rose 0.6% for the second consecutive month (6.4% y/y). After accounting for a 2.5% y/y rise in prices, real disposable income rose 3.8%, down some from the recent peaks in the 4-6% range.
Consumer spending surged 1.0% in May as unit light vehicle sales jumped 8.7% m/m. A 0.8% gain in PCE had been expected. Nondurable goods spending also rose a strong 1.2% (9.9% y/y) as gasoline prices jumped and services rose 0.7% (5.5% y/y). 
The PCE chain price index rose 0.5% following an upwardly revised 0.2% April gain. Less food &amp; energy, prices rose 0.2% (1.6% y/y) for the sixth month in the last eight.
The savings rate fell to 2.2% from the upwardly revised 2.6% in April. 

<table border="0" cellspacing="0" width="100%">
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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">May</th>
<th scope="col">April</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">Personal Income</td>
<td>0.6%</td>
<td>0.6%</td>
<td>5.8%</td>
<td>3.3%</td>
<td>2.3%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>1.0%</td>
<td>0.2%</td>
<td>6.7%</td>
<td>5.0%</td>
<td>4.8%</td>
<td>4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>2.2%</td>
<td>2.6%</td>
<td>2.4%</td>
<td>2.1%</td>
<td>2.3%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.5%</td>
<td>0.2%</td>
<td>2.5%</td>
<td>1.8%</td>
<td>1.4%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
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Personal income rose the same 0.6% (+5.8% y/y) last month as in April. Consensus expectations had been for a 0.5% gain. For the second month the upside surprise was slight. Wages & salaries, however, have been notably firm rising 0.7% [...]

U.S. Personal Income Firm

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/040625d.jpg" width="353">
Analysts had projected that Japan&#39;s core CPI for Tokyo would finally stop falling in June. But it did not. It was down, just a little, but still down by 0.1% from a year ago. On the heels of this report, which also included widespread deflation in the national CPI for May, the monetary policy committee of the Bank of Japan voted unanimously to maintain their zero-interest rate policy. It had been thought that some subtle move away from the potentially limitless provision of liquidity that accompanies that rate target might have been forthcoming if the CPI finally stabilized. Such was not the case. And unlike most of the other major economies of the world, Japan is not yet facing a sudden new burden of inflationary pressure.
The deflation in Japan does seem to be dissipating. Clothing prices, for instance, rose sharply in Tokyo and several sectors are experiencing much less downward price pressure than they have been. Press reports indicated that some of the softness in the Tokyo numbers reflected sales promotions in electronics, ahead of the introduction of new models. This could well be just a transitory force, then, with recently firmer demand possibly allowing net price gains to show through &quot;soon&quot;.
The last year-on-year rise in the national &quot;general CPI&quot; was in August 1999. In the headline series, the core rate in the Tokyo area, the last such increase was in August 1998. In the Japanese array of CPI data, the core is defined as the general CPI less fresh food.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol">% Changes</th>
<th scope="col">June 2004</th>
<th scope="col">May 2004</th>
<th scope="col">Apr 2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">General CPI, SA, mo/mo</td>
<td>N.A.</td>
<td>-0.2</td>
<td>-0.3</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; NSA, yr/yr</td>
<td>N.A.</td>
<td>-0.5</td>
<td>-0.4</td>
<td>-0.4</td>
<td>-0.3</td>
<td>-1.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Core CPI, SA, mo/mo</td>
<td>N.A.</td>
<td>-0.2</td>
<td>-0.1</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; NSA, yr/yr</td>
<td>N.A.</td>
<td>-0.3</td>
<td>-0.2</td>
<td>0.0</td>
<td>-0.7</td>
<td>-0.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Tokyo CPI, SA, mo/mo</td>
<td>+0.2</td>
<td>-0.1</td>
<td>-0.1</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; NSA, yr/yr</td>
<td>-0.1</td>
<td>-0.3</td>
<td>-0.3</td>
<td>-0.4</td>
<td>-0.3</td>
<td>-1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Tokyo Core CPI, SA, mo/mo</td>
<td>-0.1</td>
<td>0.0</td>
<td>-0.1</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; NSA, yr/yr</td>
<td>-0.1</td>
<td>-0.1</td>
<td>-0.1</td>
<td>-0.1</td>
<td>-0.7</td>
<td>-1.0</td>
</tr>
</tbody>
</table>
</body>
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Analysts had projected that Japan's core CPI for Tokyo would finally stop falling in June. But it did not. It was down, just a little, but still down by 0.1% from a year ago. On the heels of this report, which also included widespread [...]

Consumer Prices Still Weak in Japan

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040625a.jpg" width="353">
US real GDP growth in 1Q was revised down to 3.9% (AR) from the preliminary report of 4.4% growth. The Consensus expectation was for little revision. Next month, the GDP figures back to 1Q 2001 will undergo the regular annual revision.
The trade sector is now estimated to have subtracted 0.7 percentage points from 1Q GDP growth. Import growth was revised up to 10.4% (AR, 9.0% y/y) from 5.9%. Export growth of 7.5% (8.9% y/y) also was revised up.
Growth in domestic final demand was little revised as personal consumption expenditures grew 3.8% (AR, 4.3% y/y), though growth in nonresidential fixed investment growth was reduced to 5.3% (AR, 8.9% y/y). Investment in equipment &amp; software was lowered to 9.2% (12.4% y/y) from 9.8%. Residential investment growth was revised up to 4.6% (9.5% y/y).
Growth in before tax corporate profits with inventory valuation adjustment (IVA) &amp; capital consumption adjustment (CCA) was revised slightly higher to 7.1% from 4.9% (AR, 32.3% y/y). Growth in operating profits for nonfinancial corporations grew 6.9% (AR, 38.8% y/y) and was revised up from 3.6%, though profit margins were unrevised. They still show no expansion versus 4Q but are about two thirds higher than in 2001.
Inflation was revised up slightly to 2.8% as the gain in the PCE chain price index was revised up to 3.2% (1.6% y/y). Business equipment &amp; software prices were revised down to a 0.3% decline (0.0% y/y).Less food &amp; energy the GDP chain price index rose 2.4% after the 1.4% rise in 4Q.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
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<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"> 1Q &#39;04 (Final)</th>
<th scope="col"> 1Q &#39;04 (Prelim.)</th>
<th scope="col"> 4Q &#39;03 &nbsp; &nbsp;(Final)</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>3.9%</td>
<td>4.4%</td>
<td>4.1%</td>
<td>&nbsp;4.8%</td>
<td>3.1%</td>
<td>2.2%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.7%</td>
<td>0.8%</td>
<td>0.7%</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>0.4%</td>
<td>-0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>3.2%</td>
<td>3.7%</td>
<td>3.4%</td>
<td>4.6%</td>
<td>3.2%</td>
<td>1.8%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>-0.7%</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-0.6%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>3.8%</td>
<td>3.9%</td>
<td>3.6%</td>
<td>4.8%</td>
<td>3.4%</td>
<td>2.4%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.8%</td>
<td>2.6%</td>
<td>1.5%</td>
<td>1.8%</td>
<td>1.7%</td>
<td>1.5%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 25, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040625c.jpg" width="353">
The University of Michigan&#146;s consumer sentiment index for June improved to95.6, up slightly from the mid-month read of 95.2. Consensus expectations had been for 95.0.
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.
Improvement in the expectations sub-index versus the mid-month reading as well as versus May drove the rise in overall consumer sentiment. The index of current economic conditions actually fell versus the mid-month read but was still up 3.0% versus May.
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"> June</th>
<th scope="col"> May</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>95.6</td>
<td>90.2</td>
<td>6.1%</td>
<td>87.6</td>
<td>89.6</td>
<td>89.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>106.7</td>
<td>103.6</td>
<td>14.1%</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>88.5</td>
<td>81.6</td>
<td>0.6%</td>
<td>81.4</td>
<td>84.6</td>
<td>82.3</td>
</tr>
</tbody>
</table>
Existing Home Sales Rose To Record High 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 25, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040625b.jpg" width="353">
The National Association of Realtors reported that sales of existing single family homes in May rose 2.6% to a record high of 6.80M. Consensus expectations had been for sales 6.50M. April sales were revised down slightly.
Sales were mixed across the nation. In the South they rose 3.8% (+19.0% y/y) and in the West sales rose 5.5% (22.9% y/y). However in the Northeast sales fell 1.4% (+7.5% y/y), unchanged since February, and in the Midwest sales fell 0.7% (+6.1% y/y).
The median price of an existing home rose 3.7% m/m to $183,600 (+10.3% y/y).
The figures reflect closings of home sales in earlier months.
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/publicaffairsweb.nsf/Pages/MayEHS04?OpenDocument"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM"> Existing Home Sales (000, AR)</a></th>
<th scope="col">May</th>
<th scope="col">April</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">Existing Single-Family</td>
<td>&nbsp;6,800</td>
<td>&nbsp;6,630</td>
<td>15.8%</td>
<td>6,098</td>
<td>5,593</td>
<td>5,290</td>
</tr>
</tbody>
</table>
Mass Layoffs Down Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 25, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040625e.jpg" width="353">
Mass layoffs in the US as reported to the Bureau of Labor Statistics fell sharply in May, continuing a downtrend begun in 2001.
The number of firms reporting mass layoffs in May fell to 988 from 1,458 in April and from a monthly average of 1,580 last year.
These layoffs generated 87,501 initial claims for unemployment insurance in May. That was down from 157,410 initial claims generated each month last year.
Since the series inception in 1995 there has been a (negative) 47% correlation between the number of initial claims generated by mass layoffs and the one month change in non-farm payrolls.
The Mass Layoff Statistics (MLS) program collects reports on mass layoff actions that result in workers being separated from their jobs. Monthly mass layoff numbers are from establishments which have at least 50 initial claims for unemployment insurance (UI) filed against them during a 5-week period. Extended mass layoff numbers (issued quarterly) are from a subset of such establishments--where private sector non-farm employers indicate that 50 or more workers were separated from their jobs for at least 31 days.

<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/@EF10/@EF1001/@EF1001.HTM"> Mass Layoffs</a></th>
<th scope="col"> May</th>
<th scope="col"> April</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">Number of Events: All Industries</td>
<td>988</td>
<td>1,458</td>
<td>-42.0%</td>
<td>18,963</td>
<td>20,277</td>
<td>21,467</td>
</tr>
<tr>
<td class="firstcol">Numbers of Persons Filing Initial Unemployment Insurance Claim: All Industries</td>
<td>87,501</td>
<td>157,314</td>
<td>-49.8%</td>
<td>1,888,926</td>
<td>2,245,051</td>
<td>2,514,862</td>
</tr>
</tbody>
</table>
</body>
</html>

US real GDP growth in 1Q was revised down to 3.9% (AR) from the preliminary report of 4.4% growth. The Consensus expectation was for little revision. Next month, the GDP figures back to 1Q 2001 will undergo the regular annual [...]

Higher Imports Reduced Estimate of 1Q GDP Growth

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040624a.jpg" width="353">
The CBI Industrial Trends Survey for the UK shows some moderation in orders and expected output in June from May. Orders, after turning briefly positive in May at +1, slipped back to negative territory with a -6 reading for June. Output planned over the next three months has been positive all year long, but it eased from +22 to +15 in this latest report. More companies do anticipate, however, that they will be able to charge higher prices for orders booked in the coming three months.
At the same time, all three of these major components of the monthly survey of the Confederation of British Industry, even the order books that are still decreasing, are showing distinct improvements from their generally weak performance over the past four to six years. Price expectations, for instance, have been positive for the last three months, their strongest showing since early 1998. Similarly, the May figure for orders was the first positive one since February 1998; as recently as last October, the reading was -40.
Thus, British industry is working hard toward outright recovery. And this survey suggests that positive trends may emerge in actual numerical data on industrial output. As seen in the accompanying graph, planned output closely traces overall movements in data on industrial production (IP). The monthly data are very jagged, but on a quarterly basis, the year-on-year change in IP tends to follow the planned output reading by about a quarter. Correlation between the coincident figures has been a notable 76% over the last 25 years. The entire first half of 2004 includes firmly positive readings in anticipated production, which, according to this historical pattern, would lead to outright growth in actual production in just the next few months. Indeed, that measure has already improved to basically flat from a protracted deeply negative period since the middle of 2001.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Diffusion Indexes for Volume &amp; Prices</th>
<th scope="col">June 2004</th>
<th scope="col">May 2004</th>
<th scope="col">Apr 2004</th>
<th scope="col">June 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">Total Order Book</td>
<td>-6</td>
<td>+1</td>
<td>-14</td>
<td>-27</td>
<td>-29</td>
<td>-27</td>
<td>-26</td>
</tr>
<tr>
<td class="firstcol">Output over Next 3 Months</td>
<td>15</td>
<td>22</td>
<td>12</td>
<td>-6</td>
<td>-3</td>
<td>5</td>
<td>-6</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices of Orders Booked over Next 3 Months</td>
<td>5</td>
<td>3</td>
<td>2</td>
<td>-15</td>
<td>-12</td>
<td>-13</td>
<td>-16</td>
</tr>
</tbody>
</table>
</body>
</html>

The CBI Industrial Trends Survey for the UK shows some moderation in orders and expected output in June from May. Orders, after turning briefly positive in May at +1, slipped back to negative territory with a -6 reading for June. [...]

British Industry Survey Suggests Recovery Near

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040624e.jpg" width="353">
Initial claims for jobless insurance rose 13,000 last week to 349,000. The prior week&#39;s decline of 15,000, which may have been influenced by the Reagan Funeral, was unrevised. Consensus expectations had been for 340,000 claims.
The 4-week moving average of initial claims ticked up to 344,250 (-18.3% y/y).
Continuing claims for unemployment insurance rose 75,000 following a 28,000 increase the prior week which was revised down slightly.
The insured rate of unemployment rose slightly to 2.4%.

<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/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col">6/19/04</th>
<th scope="col">6/12/04</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">Initial Claims</td>
<td>&nbsp;&nbsp; 349</td>
<td>336</td>
<td>-13.8%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>2,967</td>
<td>-18.8%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
U.S. Durable Goods Orders Fell Unexpectedly 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 24, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040624d.jpg" width="353">
Durable goods orders fell 1.6% last month versus Consensus expectations for a 1.5% increase. April orders were little revised, down 2.6%.
Weakness in transportation sector orders, down 4.1% in May and 4.6% in April, accounts for much of the slide in total orders. But orders still fell excluding the transportation sector, down 0.7% (+15.7% y/y) in May and down 1.7% in April.
Non-defense capital goods orders also were weak, off 2.6% in May and 1.2% in April. Excluding aircraft and parts orders dropped 3.0% (+10.5% y/y) following a 2.0% April skid.
During the last ten years there has been a 74% correlation between the y/y change in orders for non-defense capital goods less aircraft and the change in industrial production of capital goods.
Motor vehicle orders fell 4.0% (+8.2% y/y) following a 3.0% decline in April. That was offset by a 7.8% (-3.7% y/y) May jump in orders for aircraft &amp; parts.
Orders for computers &amp; electronic products slid 1.8% (+12.7% y/y) for the second month, though the April decline was revised from the -4.1% advance report. Orders for computers fell 3.6% (8.7% y/y) and orders for communications equipment dropped 12.5% (9.9% y/y).
Machinery orders also were lower, down 0.6% (+20.4% y/y), and orders for electrical equipment, appliances &amp; components slid 3.7% (+9.9% y/y).
Shipments of durable goods fell for the second month, down 0.7% (11.7% y/y). Shipments excluding the transportation sector fell 0.9% (+13.2% y/y).
Durable inventories rose 0.4% (-0.1% y/y) for the seventh gain in the last eight months.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM"> NAICS Classification</a></th>
<th scope="col">May</th>
<th scope="col">April</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">Durable Goods Orders</td>
<td>-1.6%</td>
<td>-2.6%</td>
<td>12.6%</td>
<td>2.6%</td>
<td>-1.7%</td>
<td>-10.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non-defense Capital Goods</td>
<td>-2.6%</td>
<td>-1.2%</td>
<td>12.4%</td>
<td>5.6%</td>
<td>-7.2%</td>
<td>-15.5%</td>
</tr>
</tbody>
</table>
Lower Prices (?) Spurred May New Home Sales To Record High 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 24, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040624c.jpg" width="353">
The median price of a new single family home dropped 9.0% in May to $198,400 (+1.5% y/y). It was the second m/m price decline in the last three months.
Perhaps in response, sales of new one-family homes surged 14.8% m/m in May to a new record of 1.369M. Consensus estimates had been for a lesser increase to 1.115 million. April sales were revised up.
These new home sales data from the US Census Department reflect current sales. The existing home sales figures, to be reported tomorrow, reflect closings on past sales. 
Sales gains spread across the country&#39;s regions but were strongest in the Northeast where they rebounded 53.2% from a few months of softness (+63.5% y/y). Sales in the South also rose a strong 20.3% (+25.3% y/y) and sales rose 6.5% (16.3% y/y) in the West.
&quot;Monetary Policy Transmission to Residential Investment&quot; from this 2002 study done by the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/epr/02v08n1/0205mcca.pdf"> here</a> .
&quot;How Money Matters&quot; from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/mt/20040601/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E904/@E90401/@E90401.HTM"> Homes Sales (000s, AR)</a></th>
<th scope="col">May</th>
<th scope="col">April</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">New Single-Family</td>
<td>1,369</td>
<td>1,192</td>
<td>25.3%</td>
<td>1,088</td>
<td>977</td>
<td>907</td>
</tr>
</tbody>
</table>
Help-Wanted Advertising Up A Bit 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 24, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040624b.jpg" width="353">
The Conference Board&#146;s National Index of Help-Wanted Advertising rose slightly last month to 39 from 38 in April.
During the last ten years there has been a 92% correlation between the level of help-wanted advertising and the year-to-year change in non-farm payrolls.
The proportion of labor markets with rising want-ad volume improved to 69% versus 30% averaged during the prior two months.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col"> May</th>
<th scope="col">April</th>
<th scope="col">May &#39;03</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>39</td>
<td>38</td>
<td>36</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for jobless insurance rose 13,000 last week to 349,000. The prior week's decline of 15,000, which may have been influenced by the Reagan Funeral, was unrevised. Consensus expectations had been for 340,000 claims. The [...]

Initial Claims for Unemployment Insurance Rebound

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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The U.S. ISM Services PMI decreased to 54.0 in March following a 2.3-point rise to 56.1 in February (the highest reading since July 2022), according to today’s report by the Institute for Supply Management, indicating expansion in the services sector for the 21st consecutive month but at a slower pace. The March index, while above 50.8 in March 2025 and a low of 49.4 in June 2024, remained below a high of 55.5 in October 2024 and a record-high 67.5 in November 2021. The 12-month average was 52.3, pointing to continued growth in the U.S. services sector. The Action Economics Forecast Survey had expected 54.9 for March.

Haver Analytics constructs a composite index combining the services index and the manufacturing reading. This index fell to 53.8 in March after a 2.0-point increase to 55.7 in February, signaling expansion for the 10th straight month, albeit at a slower rate. The latest reading was above 50.6 in March 2025 and a low of 49.3 in June 2024, while remaining below a record-high 66.7 in November 2021. These series date back to July 1997.

In the latest services survey, the business activity index declined to 53.9 in March after rising to 59.9 in February, indicating continued expansion in business activity for 21 consecutive months, though at the slowest pace since September. The index was above a low of 50.0 in June 2024 but below a record-high 70.9 in November 2021. In March, 22.8% of respondents (NSA) reported higher activity while 14.6% reported an activity decline. The new orders index rose to 60.6 in March after increasing to 58.6 in February, reflecting expansion in new orders for the 10th straight month and the highest level since February 2023. The index was above its recent low of 47.2 in May 2025 but below a high of 61.0 in February 2023 and a record-high 69.2 in October 2021. In March, 32.0% of respondents (NSA) reported higher new orders while a lessened 12.6% reported declines. Meanwhile, the supplier deliveries index (NSA) increased to 56.2 in March from 53.9 in February, indicating slower supplier delivery performance for the 16th straight month after one month in faster territory in November 2024.

On the labor front, the employment index fell to 45.2 in March after rising to 51.8 in February, showing employment activity in the services sector contracted for the first time since November. The latest reading was above a low of 43.5 in December 2023 but below a high of 54.1 in June 2023 and a high of 58.9 in April 2021. A reduced 10.7% of respondents (NSA) indicated higher employment in March while an increased 18.4% reported declines.

On the inflation front, the prices index jumped to 70.7 in March from 63.0 in February, indicating prices paid by services organizations for materials and services had risen (i.e., above 50) since June 2017 and at the fastest pace since October 2022. The index was above a low of 53.9 in March 2024 and a low of 55.1 in June 2023 but significantly below a peak of 83.7 in March 2022. An increased 45.7% of respondents (NSA) reported higher prices in March while only 1.2% reported price declines.

Additionally, the new export orders index dropped to 50.7 in March from 57.2 in February, showing new export orders expanded for the third time in four months but at a slower rate. The imports index rose to 55.2 in March from 51.8 in February, registering the third expansion in four months and the highest level since January 2024. The inventories index declined to 54.8 in March from 56.4 in February, indicating inventories expanded for the fourth time in five months but at a slower pace. The inventory sentiment index slipped to 54.3 in March from 55.3 in February, showing continued expansion since May 2023. The backlog of orders index fell to 53.6 in March from 55.9 in February, marking the second successive month of expansion following 11 straight months of contraction. These series are not seasonally adjusted and not included in the ISM Services PMI total.

The ISM Services PMI is a composite index consisting of four equally weighted diffusion indexes: Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector; below 50 suggests contraction. Supplier Deliveries is the only ISM index that is inversed; a reading above 50 indicates slower deliveries. The ISM figures are available in Haver's **USECON** database, with additional detail in the **SURVEYS** database. The expectations figure from Action Economics is in the **AS1REPNA** database.

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- ISM Services PMI at 54.0 in Mar., down 2.1 pts. from Feb.; below forecasts but above the 12-month avg. of 52.3.
- Business Activity (53.9, 21st straight month of expansion); New Orders (60.6, 10th consecutive month of expansion and fastest since Feb. ’23); Employment (45.2, first contraction since Nov.); Supplier Deliveries (56.2 vs. 53.9).
- Prices Index (70.7) indicates prices rising since June ’17, the fastest pace since Oct. ’22.

U.S. ISM Services PMI Slips in March, Still Indicating Expansion for the 21st Straight Month

Tian Yong Woon

In this week’s Letter, we examine the first-round price impacts of the surge in oil prices stemming from the ongoing Middle East conflict in Asia. Despite recent rhetoric and reports suggesting a potentially swift resolution, the conflict continues to unfold, with a ceasefire hanging in the balance, and with some measures of shipping volumes through the Strait of Hormuz still reduced to a trickle. At the same time, crude oil prices have been whipsawing amid shifting market perceptions about the persistence of the current supply shock (chart 1). The initial effects of higher oil prices are already showing up in hard data, particularly in energy- and fuel-related inflation across Indonesia, South Korea, and Vietnam (chart 2). In response, several governments have rolled out sizeable subsidy programmes to cushion rising energy costs, though these measures come with significant fiscal strain.

We also assess recent consumer inflation expectations in South Korea and Taiwan, which show early signs of edging higher (chart 3), although there is as yet no clear evidence of a meaningful unanchoring. To add further nuance, our latest Blue Chip survey suggests that most panellists expect only a limited and temporary pass-through from higher energy prices to core inflation, though a non-trivial minority anticipate a more persistent effect (chart 4). On the policy front, respondents broadly expect central banks to delay easing while avoiding outright tightening, with outcomes likely to diverge across regions (chart 5). In the near term, upcoming policy decisions in India, New Zealand, and South Korea—alongside other key data releases—will provide a useful test of these expectations (chart 6).

**The Middle East conflict**
The Middle East conflict continues to rage, with IMF-tracked shipping volumes through the Strait of Hormuz still reduced to a trickle. Meanwhile, crude oil prices remain volatile, gyrating alongside shifting perceptions over how soon normal oil flows might resume. In reality, there is still little sign of a substantive resolution, and no agreement to fully reopen the strait appears imminent, suggesting that oil flows are likely to remain constrained at low levels in the near term. That said, some investors are closely monitoring developments following reports of discussions around a potential 45-day ceasefire, which could pave the way toward a more lasting resolution. Until then, and absent any meaningful supply relief, crude oil prices—and by extension, energy-related inflation—are likely to face continued upward pressure, particularly for oil-dependent, importing economies.

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**Initial price impacts**
The initial inflation concerns among policymakers and investors stemming from the surge in oil prices are now beginning to show up in the data, as illustrated in chart 2. The latest March readings—capturing the period after the onset of the Middle East conflict—already point to a sharp acceleration in energy-related prices on a year-ago basis. Indonesia’s energy CPI basket has risen by around 9%, while diesel prices in South Korea have jumped 17%. Vietnam’s retail gasoline prices have seen an even more pronounced increase, at roughly 25.6%. Given the scale of these price surges, and their direct impact on everyday essentials—particularly fuel for daily commutes and broader economic activity—governments across Asia have begun rolling out sizeable subsidy programmes. These measures, often implemented at significant fiscal cost, aim to cushion the burden on households and firms. For instance, South Korea’s finance ministry proposed a supplementary budget of around $17.3 billion in late March to support low-income households, youth, and businesses amid higher oil prices, with approval expected by April 10. Meanwhile, Indonesia has allocated approximately $22.4 billion toward energy subsidies and support for selected energy and utilities firms to help keep prices affordable.

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**Consumer inflation expectations**
What policymakers are likely to focus on—beyond the immediate price impacts—is how the recent surge in oil prices feeds into inflation expectations. If left unanchored, these expectations could pose a far greater challenge than the supply-driven price shock itself, including reduced monetary policy effectiveness in reining in inflation and the risk of a self-fulfilling inflation cycle—though it is worth noting that such dynamics are not yet close to materialising. So far, there are some early, albeit inconclusive, signs that near-term consumer inflation expectations are beginning to drift higher in certain economies. As shown in chart 3, one-year-ahead inflation expectations edged up to 2.7% in March, while in Taiwan, consumer sentiment regarding domestic price trends over the next six months has turned notably more pessimistic relative to overall confidence.

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**The latest Blue Chip survey**
Turning to investor perspectives on how higher energy prices may feed into inflation, our special questions in the latest Blue Chip Financial Forecasts (BCFF) survey offer some useful nuance. As shown in chart 4, around two-thirds of panellists expect only a limited and temporary pass-through from higher oil prices to core inflation. That said, a non-trivial minority (31%) anticipate a more moderate and persistent pass-through. This is notable given the focus on core inflation, and underscores how energy prices can generate second-round effects even in typically non-energy components, reflecting the pervasive role of energy in everyday economic activity—from manufacturing to the upkeep of a wide range of goods and services.

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Delving deeper, we also asked panellists about their views on the prospective path of central bank policy should energy-driven inflation prove persistent. As shown in chart 5, responses broadly coalesce around two themes: central banks are likely to delay easing rather than tighten, and policy responses will vary meaningfully across regions. The former is already playing out to some extent in recent central bank decisions across Asia, with several explicitly citing the ongoing Middle East conflict as a reason to remain vigilant on inflation and refrain from easing policy prematurely. As for the latter, there are already signs of divergence in how different central banks are approaching the situation.

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**The week ahead**
Looking to the week ahead, there will be ample opportunities to assess whether investor expectations for central bank policy moves play out across Asia, with several rate decisions due—most notably in India, New Zealand, and South Korea. Also on the docket are China’s March CPI print and a range of Japan-related releases. Policymakers are likely to remain focused on balancing inflation control with supporting growth and maintaining currency stability. For now, and absent offsetting domestic factors, expectations for further near-term easing have been tempered by rising inflation risks. In China, recent CPI readings point to a modest pickup, while producer price deflation has begun to ease after a prolonged period of weak or negative inflation.

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Asia

Economic Letter from Asia: First-Round Effects

Michael J. Moran

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The report on payroll employment for March was impressive when viewed in isolation. Job growth was strong at 178,000, and the advance was broadly based. The construction and manufacturing sectors both posted solid gains, and the service-producing sector registered its firmest performance in more than a year. However, the gain might be viewed as a continuation of an unusual bout of random volatility. The March advance followed a notable drop in February (-133,000, revised down from -92,000), which followed an upside surprise in January (160,000, revised up from 126,000).

To be sure, statistical noise has been a factor in the past three months, but the results also represent an encouraging shift in job growth from that in the second half of last year, when employment rose only marginally in the third quarter and fell in the fourth. The net change in the past three months seems to signal that job growth is not drying up. The net advance so far this year is far from brisk, but it is clearly in the plus column and noticeably better than results in late 2025.

The unemployment rate also might be viewed as favorable, as it dipped 0.1 percentage point to 4.3%, although it was a “soft” decline. That is, employment as measured by the household survey declined 64,000, but the size of the labor force fell by a larger amount (off 396,000). Still, the jobless rate has climbed only modestly higher since the labor market started to ease in 2023, and it has inched lower in the past few months.

Unemployment has been contained despite modest hiring because layoffs also have been light. Initial claims for unemployment benefits have moved sideways in the past few years, indicating no change in the pace of layoffs. This pattern is confirmed by terminations data in the report on job openings and labor turnover (JOLTs) from the Bureau of Labor Statistics.

A supply-side shift in the labor market also has helped to contain the unemployment rate. Growth in the size of the labor force has slowed, and with fewer individuals seeking employment, those searching are more easily absorbed. Measures of the size of the labor force can be difficult to assess because there are breaks in the series every year. The Bureau of Labor Statistics adjusts the population controls used in its estimating procedure every January without revising past data to align with the new estimates. Thus, every January involves a discontinuity in the series, which will distort year-over-year changes.

However, Haver Analytics maintains a smoothed series originally developed by BLS to eliminate the breaks in the labor force data. As shown in the chart below, the smoothed series on the size of the labor force had been growing at a pace centered on 1.2% through 2022, but it has slowed irregularly since then (an observation for October is not available because of limited data collection during the government shutdown). The overall labor force is still growing, but the slower pace means fewer individuals looking for work, which most likely results in fewer being counted as unemployed.

The BLS collects data every month on both native-born and foreign-born individuals in the labor force. The breaks in these series are an issue, and Haver does not maintain smoothed series. However, the use of moving averages achieves enough smoothing to provide a sense of underlying changes. The native-born labor force has moved erratically in the past couple of years, but it has continued to advance. The foreign-born labor force, in contrast, seems to have peaked in mid-2025 and has generally declined since then.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- The jump of 178,000 in payroll employment in March easily exceeded the expected gain of 51,000.
- Following a net gain in January and February, the employment setting seems to have brightened slightly.
- A dip in the unemployment rate continued the recent pattern of marginal changes.

Payroll Employment: Another Surprise in March, The Third Consecutive

Robert Brusca

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

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

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

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

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

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

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

France

French IP Waffles

Kathleen Stephansen, CBE

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

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

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

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

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