Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040323a.jpg" width="353">
Chain store sales added 0.2% last week to the 0.5% gain the prior period, according to the ICSC-UBS survey.
Sales so far in March are 0.3% ahead of the February average.
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.
During the last ten years there has been a 51% correlation between the year-to-year percent change in the ICSC-UBS measure of chain store sales and consumer sentiment.
&quot;Why Does Consumer Sentiment Predict Household Spending?&quot; from the Federal Reserve Bank of Richmond can be found <a href="http://www.rich.frb.org/pubs/eq/pdfs/fall2003/mehra.pdf"> here</a>.

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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">03/20/04</th>
<th scope="col">03/13/04</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>
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<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>439.5</td>
<td>438.6</td>
<td>7.1%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
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Chain store sales added 0.2% last week to the 0.5% gain the prior period, according to the ICSC-UBS survey. Sales so far in March are 0.3% ahead of the February average. The ICSC-UBS retail chain-store sales index is constructed using [...]

Chain Store Sales Rose Further

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040322b.jpg" width="353">
The rental and property markets in Hong Kong are beginning to show signs of revival. Prices in these markets had reached peaks in October, 1997 and had declined steeply until the past few months.
The index of rental prices, which had declined by 49% from its high, held steady in January after having rising for the previous three months. The improvement in property prices has been more marked as the index of property prices has risen in each of the past six months. However, that index had fallen by some 70% from its October, 1997 high.
Prices in both the rental and property markets are still well below even the pre peak levels.

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<th scope="col" class="firstcol">Rental and Property Prices in&nbsp; Hong Kong (1999=100)</th>
<th scope="col">Jan 04</th>
<th scope="col">Dec 03</th>
<th scope="col">Jan 03</th>
<th scope="col">M/M&nbsp; %</th>
<th scope="col">Y/Y&nbsp; %</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">Rental</td>
<td>72.4</td>
<td>71.4</td>
<td>77.4</td>
<td>0.0</td>
<td>-6.46</td>
<td>73.5</td>
<td>83.4</td>
<td>95.3</td>
</tr>
<tr>
<td class="firstcol">Property</td>
<td>67.8</td>
<td>65.0</td>
<td>63.7</td>
<td>4.31</td>
<td>6.44</td>
<td>61.4</td>
<td>69.9</td>
<td>78.7</td>
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The rental and property markets in Hong Kong are beginning to show signs of revival. Prices in these markets had reached peaks in October, 1997 and had declined steeply until the past few months. The index of rental prices, which had [...]

Hong Kong Property Markets Show Signs of Revival

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040322a.jpg" width="353">
Prices for industrial materials have surged 13.4% since yearend, as measured by the JoC-ECRI index.
Higher prices for metals have led the gain with a 15.5% jump that reflects a 27.5% jump in steel scrap prices and a 32.2% rise in copper prices. Price gains for these metals have eased in recent weeks but zinc (11.0% YTD), tin (19.9%) and lead (15.1%) prices continue up.Aluminum prices are 7.9% higher this year.
Gains in metals prices have accompanied a 4.2% rise in factory sector production since its trough last Spring. During the last ten years there has been a 57% correlation between the level of industrial materials prices and the 6-month change in factory sector industrial production.
Textile prices were lower last week than at yearend led down a 5.3% drop in cotton prices.
Gold prices recently retraced some of the gain through early January which lifted the Handy &amp; Harman base price to $425.50. At $412.00, gold prices recently were up 23.5% y/y.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/daily/@D3/@D304/@D304.HTM"> Commodity Prices</a></th>
<th scope="col">3/19/04</th>
<th scope="col">12/31/03</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">Gold: Handy &amp; Harman Base Price ($/oz.)</td>
<td>$412.00</td>
<td>$416.70</td>
<td>23.5%</td>
<td>$363.13</td>
<td>$310.05</td>
<td>$271.06</td>
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<td class="firstcol">Stainless Steel Scrap ($/gross ton)</td>
<td>$1,613.00</td>
<td>$1,265.00</td>
<td>77.6%</td>
<td>$953.75</td>
<td>$717.10</td>
<td>$650.52</td>
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<td class="firstcol">Copper: High Grade (COMEX, $/Lb.)</td>
<td>$1.38</td>
<td>$1.04</td>
<td>77.8%</td>
<td>$0.81</td>
<td>$0.72</td>
<td>$0.73</td>
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Prices for industrial materials have surged 13.4% since yearend, as measured by the JoC-ECRI index. Higher prices for metals have led the gain with a 15.5% jump that reflects a 27.5% jump in steel scrap prices and a 32.2% rise in [...]

Industrial Materials Prices Surge With Output

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/040319b.jpg" width="353">
International trade in Italy has shifted back into deficit in recent months after maintaining a surplus for nearly all of 2001 and 2002. Declines in exports are responsible, while imports have been sluggish. Further, the weakening of exports is broad-based, with trends turning soft in all three major categories: consumer, investment and intermediate goods. Imports, both in total and in each major type, have sustained a basically flat pattern for about two years.
The strong euro might be seen as an easy culprit in Italy&#39;s export slowdown. Indeed, exports to non-EU countries have decreased noticeably in a possible reaction to the surge in the Euro. At the same time, this is not the sole force; exports to other European countries have also weakened, and in fact for 2003 as a whole, were off by a larger amount than those to other nations. Further, imports, rather than increasing from non-EU areas, as might be expected with the strong currency, have been flat to down. So, if the Euro is really to blame for Italy&#39;s eroding trade accounts, it would seem more due to its impact in slowing growth across Europe. Germany&#39;s economy, Italy&#39;s largest trading partner, had virtually no growth last year. Neighboring France showed a mere 0.2%. Italy itself did make a 3.3% gain in 2003, but that was the slowest in four years. The Euro-Zone as a whole eked out just 0.4%. Thus, weakness in Italy&#39;s exports can well be explained by the lackluster performance of its neighbors, and that effect in turn is holding down Italy&#39;s own import demand.

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<th scope="col" class="firstcol">Billions of &#128;</th>
Seasonally Adjusted
<th scope="col">12-Month % Change</th>
Year/Year % Changes
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<tbody>
<tr class="odd">
<td class="firstcol">Jan 2004</td>
<td>Dec 2003</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
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<td class="firstcol">Trade Balance</td>
<td>-&#128;0.6</td>
<td>-&#128;0.4</td>
<td>&nbsp;</td>
<td>+&#128;1.6</td>
<td>+&#128;8.8</td>
<td>+&#128;10.0</td>
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<td class="firstcol">Exports, fob</td>
<td>&#128;20.2</td>
<td>&#128;20.3</td>
<td>-9.9%</td>
<td>-4.0%</td>
<td>-1.5%</td>
<td>+5.1%</td>
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<td class="firstcol">Imports, cif</td>
<td>2&#128;0.8</td>
<td>&#128;20.7</td>
<td>-7.2%</td>
<td>-1.3%</td>
<td>-1.1%</td>
<td>+2.1%</td>
</tr>
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<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
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<td class="firstcol">EU Trade Balance</td>
<td>-&#128;0.7</td>
<td>-&#128;0.8</td>
<td>&nbsp;</td>
<td>-&#128;7.6</td>
<td>-&#128;4.6</td>
<td>-&#128;1.6</td>
</tr>
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<td class="firstcol">Exports</td>
<td>&#128;11.1</td>
<td>&#128;10.9</td>
<td>-5.8%</td>
<td>-4.6%</td>
<td>-2.2%</td>
<td>+3.0%</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>&#128;11.7</td>
<td>&#128;11.7</td>
<td>-6.0%</td>
<td>-2.3%</td>
<td>-0.1%</td>
<td>+2.7%</td>
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<td class="firstcol">&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">Non-EU Trade Balance</td>
<td>+&#128;0.1</td>
<td>+&#128;0.4</td>
<td>&nbsp;</td>
<td>+&#128;9.2</td>
<td>+&#128;13.4</td>
<td>+&#128;11.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>&#128;9.1</td>
<td>&#128;9.4</td>
<td>-14.7%</td>
<td>-3.4%</td>
<td>-0.6%</td>
<td>+7.7%</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>&#128;9.0</td>
<td>&#128;9.0</td>
<td>-8.4%</td>
<td>0.0%</td>
<td>-2.3%</td>
<td>+1.3%</td>
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International trade in Italy has shifted back into deficit in recent months after maintaining a surplus for nearly all of 2001 and 2002. Declines in exports are responsible, while imports have been sluggish. Further, the weakening of [...]

Sluggish Demand Pushes Italy Trade into Deficit

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040319a.jpg" width="353">
The Weekly Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) moved higher through early March. The move was accompanied by an uptick in ECRI&#39;s Future Inflation Gauge but that followed a 7.1% decline from March &#39;03 to December &#39;03.
The Weekly Leading Index level stretched to a record high and the six-month growth rate of 11.1% is consistent with above-trend growth in real GDP.
The Future Inflation Gauge (FIG) rose 2.6% during January and February. However, since these increases followed sharp declines through most of last year the FIG&#39;s six month growth rate remained low at -2.1% versus the highs above 20% a year ago. The monthly FIG has a mean lead of 11 months and a median lead of 9 months at inflation cycle turns.
During the last ten years there has been a 68% correlation between the six-month growth in the leading index of the US economy and the two quarter growth in real GDP.
Construction of the ECRI Leading Index differs from the Index of Leading Economic Indicators published by the Conference Board. Nevertheless there has been a 75% correlation between the y/y percent change in the two series over the last 20 years.
The components of the ECRI weekly leading index are money supply plus stock &amp; bond mutual funds, the JOC-ECRI industrial materials price index, mortgage applications, bond quality spreads, stock prices, bond yields, and initial jobless insurance claims.
The median lead of the ECRI index at business cycle peaks has been 10.5 months and at cycle troughs 3.0 months. The sideways movement of the leading index in 2002 may or may not signal something about the economy&#39;s growth rate.
For more on ECRI and the Weekly Leading Index go to this <a href="http://businesscycle.com">link</a>.

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/weekly/@W8/@W801/@W801.HTM"> ECRI Leading Index</a></th>
<th scope="col"> 03/05/04</th>
<th scope="col"> 02/27/04</th>
<th scope="col"> Growth Rate</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">Weekly</td>
<td>134.2</td>
<td>133.6</td>
<td>11.1%</td>
<td>6.6%</td>
<td>1.1%</td>
<td>-5.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td> Feb</td>
<td> Jan</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<td class="firstcol">Monthly</td>
<td>133.0</td>
<td>132.0</td>
<td>10.7%</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<td class="firstcol">ECRI Future Inflation Gauge</td>
<td>116.0</td>
<td>114.8</td>
<td>-2.1%</td>
<td>10.4%</td>
<td>2.9%</td>
<td>-14.0%</td>
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The Weekly Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) moved higher through early March. The move was accompanied by an uptick in ECRI's Future Inflation Gauge but that followed a 7.1% [...]

ECRI Leading Indicators: Economic Growth Prospects Strong & Inflation Pressure Low

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040318d.jpg">
 Eurostat today published hourly labor cost data for the Euro-Zone for Q4 2003. Total labor costs are seen to have moderated last year after a pick-up in 2001 and 2002. This pattern was exhibited in both wage costs and &quot;other&quot; costs, i.e. benefits. All of the major economies in Europe - Germany, France, Italy and Spain - participated in the slowing trend during 2003, although changes for individual quarters do vary.
It is comforting that ongoing labor cost pressures in Europe look so temperate. A particular aspect of this trend seems somewhat unexpected: these labor costs in Europe are running more slowly than those in the US. Eurostat includes a calculation of comparable hourly labor cost and wage data for the US, and as shown in the Table below, they rose considerably more last year, 4%, than the 2.5% in Europe. While the rates of advance were similar in 2002, the US also saw larger increases in the prior two years. This spread is sometimes due to wage cost differentials, but much more consistently, it is benefits where the US outstrips Europe. These data very much resemble the US&#39;s ECI information. Over the past four years the ECI benefits measure has far outrun the &quot;other&quot; component in the European data, and unpublished BLS data on health insurance suggest that item may well be the culprit. As that cost has accelerated into a double-digit pace in the last several years, it looks that the US practice of financing health care through employment arrangements is weighing on the competitive structure of private US labor costs.

<table border="0" cellspacing="0" width="100%">
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<thead>
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<th scope="col" class="firstcol">% Changes</th>
Seasonally Adjusted &nbsp;Annual Rate
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
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<td class="firstcol">Q4-2003</td>
<td>Q3-2003</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
<td>2000</td>
</tr>
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<td class="firstcol">Euro-Zone: Total Labor Costs</td>
<td>2.2</td>
<td>2.6</td>
<td>2.5</td>
<td>3.4</td>
<td>3.4</td>
<td>2.6</td>
</tr>
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<td class="firstcol">Wages &amp; Salaries</td>
<td>2.6</td>
<td>2.2</td>
<td>2.5</td>
<td>3.3</td>
<td>3.5</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">Other Labor Costs</td>
<td>2.6</td>
<td>2.6</td>
<td>2.8</td>
<td>3.8</td>
<td>3.2</td>
<td>1.6</td>
</tr>
<tr class="odd">
<td class="firstcol">US: Total Labor Costs</td>
<td>3.2</td>
<td>4.4</td>
<td>4.0</td>
<td>3.2</td>
<td>4.1</td>
<td>4.4</td>
</tr>
<tr>
<td class="firstcol">Wages &amp; Salaries</td>
<td>2.6</td>
<td>3.2</td>
<td>3.1</td>
<td>2.8</td>
<td>3.8</td>
<td>3.9</td>
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<tr class="odd">
<td class="firstcol">Memo: ECI Benefits</td>
<td>4.9</td>
<td>5.6</td>
<td>6.4</td>
<td>4.7</td>
<td>5.1</td>
<td>5.6</td>
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Eurostat today published hourly labor cost data for the Euro-Zone for Q4 2003. Total labor costs are seen to have moderated last year after a pick-up in 2001 and 2002. This pattern was exhibited in both wage costs and "other" costs, [...]

Euro-Zone Labor Costs Slower than in US

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040318b.jpg" width="353">
Finished producer prices surged 0.6% in January. The increase was the largest since October of last year. The core PPI rose 0.3% following two months of flat-to-down prices.
Release of the figures was delayed due to the conversion to the 2002 North American Industry Classification System (NAICS) from the 1987 Standard Industrial Classification (SIC). The change affects industry breakdowns. The product-type breakdowns which are the usual focus of attention should not be meaningfully impacted. Seasonal adjustment factors also were recalculated.
Finished consumer goods prices rose 0.7% in January (4.0% y/y). Less food &amp; energy finished consumer goods prices rose 0.3% (+0.9% y/y). Consumer durable prices rose 0.4% (1.1% y/y) and reversed a December decline. Core non-durable prices jumped 0.7% (0.7% y/y).
Finished capital goods prices rose 0.3% (+1.1% y/y).
Finished energy prices rose 4.7% (11.3% y/y) on the strength of higher gasoline (13.0% y/y) and fuel oil (10.9% y/y) prices. These energy product price series are NSA.
Intermediate goods prices jumped 0.9% as energy prices rose. Core intermediate prices, up 0.6%, also rose the most for any month since February 2003. 
Crude goods prices surged 2.8% as energy prices jumped 12.5% (11.8% y/y). Core crude prices also rose 3.3%, strong for the seventh consecutive month.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM"> Producer Price Index</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</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">Finished Goods</td>
<td>0.6%</td>
<td>0.2%</td>
<td>3.3%</td>
<td>3.2%</td>
<td>-1.3%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.3%</td>
<td>-0.1%</td>
<td>0.9%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.8%</td>
<td>0.4%</td>
<td>3.7%</td>
<td>4.7%</td>
<td>-1.5%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.6%</td>
<td>0.1%</td>
<td>2.3%</td>
<td>2.0%</td>
<td>-0.5%</td>
<td>-0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>2.8%</td>
<td>2.2%</td>
<td>13.6%</td>
<td>25.1%</td>
<td>-10.6%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>3.3%</td>
<td>3.0%</td>
<td>23.9%</td>
<td>12.2%</td>
<td>3.8%</td>
<td>-10.0%</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Lower 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 18, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040318a.jpg" width="353">
Initial claims for jobless insurance fell another 6,000 to 336,000 last week. The Consensus expectation was for 340,000 claims. The prior week was revised up slightly.
The latest figure covers the survey period for March nonfarm payrolls. Claims fell 8,000 (2.3%) from the February period.
During the last ten years there has been a 77% (negative) correlation between the level of initial claims and the three-month change in non-farm payrolls.
The four-week moving average of initial claims fell to 344,000 (-18.9% y/y).
Continuing claims for unemployment insurance rose 47,000 from the prior week&#39;s level that was revised to show a 55,000 decline.
The insured rate of unemployment was unchanged at 2.4% for the fourth week.

<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">3/13/04</th>
<th scope="col">3/06/04</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>336.0</td>
<td>342.0</td>
<td>-21.5%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,064</td>
<td>-13.3%</td>
<td>3,535</td>
<td>3,575</td>
<td>3,022</td>
</tr>
</tbody>
</table>
Leading Indicators Unchanged 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 18, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040318c.jpg" width="353">
The Composite Index of Leading Economic Indicators reported by the Conference Board was unchanged in February, about as expected. January&#39;s 0.5% gain was revised down slightly.
The soft one-month reading was dominated by lower consumer expectations which subtracted 0.2 percentage points. The breadth-of-gain amongst the leaders&#39; component series improved slightly to 60% from a downwardly revised 50% in January. Over a six-month span 80% of the leading series rose.
The Leading index is based on eight previously reported economic data series and two that are estimated.
The coincident indicators rose 0.3%, the strongest gain since November.
The ratio of coincident-to-lagging indicators rose to another record level. The ratio is an indicator of excess relative to actual economic performance.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<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/BCI/BCI.HTM"> Business Cycle Indicators</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</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">Leading</td>
<td>0.0%</td>
<td>0.4%</td>
<td>4.1%</td>
<td>1.3%</td>
<td>2.2%</td>
<td>-0.8%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.3%</td>
<td>0.1%</td>
<td>1.7%</td>
<td>0.4%</td>
<td>-0.5%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.0%</td>
<td>0.1%</td>
<td>-3.0%</td>
<td>-2.2%</td>
<td>-2.8%</td>
<td>-1.4%</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Fell Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 18, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040318e.jpg" width="353">
The Philadelphia Fed&#146;s March index of general business conditions in the manufacturing sector fell to 24.2 versus 31.4 last month. Consensus expectations had been for less of a decline to 29.0.
During the last twenty years there has been a 62% correlation between the level of the Philadelphia Fed Business Conditions Index and quarterly growth in real GDP. The correlation with quarterly growth in factory sector industrial production has been 76%.
Amongst the sub indexes, new orders fell sharply to 21.9 versus a high of 37.9 in December. Shipments improved slightly to 22.3 and the employment index was roughly stable at 12.3, a level consistent with expanding factory sector employment.
The business conditions index reflects a separate survey question, not the sub indexes.
A separate survey of expected business conditions in six months fell sharply to 36.7, the lowest level since February 2003.
The prices paid index surged again to 53.4, the highest level since January 1995.
The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0304.html">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/SURVEYS/@S5/@S504/@S504.HTM"> Philadelphia Fed Business Outlook</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#39;03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>24.2</td>
<td>31.4</td>
<td>-6.8</td>
<td>10.6</td>
<td>7.7</td>
<td>-17.2</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>53.4</td>
<td>43.7</td>
<td>21.2</td>
<td>16.7</td>
<td>12.2</td>
<td>-0.9</td>
</tr>
</tbody>
</table>
</body>
</html>

Finished producer prices surged 0.6% in January. The increase was the largest since October of last year. The core PPI rose 0.3% following two months of flat-to-down prices. Release of the figures was delayed due to the conversion to [...]

Producer Prices Surged in January

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040317c.jpg" width="353">
Trade in Singapore remains in comfortable surplus through February as exports continue to grow more rapidly than imports. Growth rates of both are erratic from month to month, but uptrends show the signs of world-wide economic revival following the recession in 2001.
Singapore is widely known as a trading hub in Southeast Asia. And its trade data reflect this status quite clearly. In a distinctive (although not unique) breakdown of its exports, Singapore reports that only some 55% of its exports over the past four years have been produced locally. Of its S$251.1 billion in exports last year, S$112.2 billion represent re-exports, goods imported into the area, possibly graded and/or broken into lots and repackaged and then sent on to a final destination. Much of the Singapore economy is located on its docks.
Among those exports, both domestic and re-exports, is a substantial portion consisting of &quot;machinery and transport equipment&quot;. For Singapore, this largely means semiconductors and other electronic components and parts. The value of this line item fell nearly S$19 billion between 2000 and 2001, and through last year (December is latest available), while those exports have recovered markedly, they remained below the 2000 peak.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Singapore Dollars (except where noted)</th>
Seasonally Adj.
<th scope="col">Year/ Year</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Feb 2004</td>
<td>Jan 2004</td>
</tr>
<tr>
<td class="firstcol">Trade Balance</td>
<td>2.8</td>
<td>2.4</td>
<td>&nbsp;</td>
<td>28.3</td>
<td>15.6</td>
<td>10.3</td>
<td>5.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Exports</td>
<td>24.6</td>
<td>23.2</td>
<td>24.1%</td>
<td>251.1</td>
<td>223.9</td>
<td>218.0</td>
<td>237.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Exports</td>
<td>13.6</td>
<td>12.4</td>
<td>22.6%</td>
<td>138.9</td>
<td>119.4</td>
<td>118.4</td>
<td>135.9</td>
</tr>
<tr>
<td class="firstcol">Re-Exports</td>
<td>11.1</td>
<td>10.2</td>
<td>26.0%</td>
<td>112.2</td>
<td>104.5</td>
<td>99.6</td>
<td>101.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>21.8</td>
<td>20.8</td>
<td>19.8%</td>
<td>222.8</td>
<td>208.3</td>
<td>207.7</td>
<td>232.2</td>
</tr>
</tbody>
</table>
</body>
</html>

Trade in Singapore remains in comfortable surplus through February as exports continue to grow more rapidly than imports. Growth rates of both are erratic from month to month, but uptrends show the signs of world-wide economic revival [...]

Singapore Exports Lift Trade Surplus

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Winnie Tapasanun

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New orders for durable goods fell a more-than-expected 1.4% m/m in February, the fourth monthly fall in five months, after decreases of 0.5% in January (0.0% initially) and 0.9% in December (unrevised), according to today’s advance report by the U.S. Census Bureau. The Action Economics Forecast Survey had expected a 1.0% m/m February decline. The year-on-year rate eased to 7.3% in February, the lowest since October, from 9.9% in January, though remaining positive since January 2025. Durable goods orders excluding the transportation sector rose 0.8% (6.0% y/y) in February, the 10th straight m/m rise, after a 0.3% increase in January. Durable goods orders excluding defense fell 1.2% (+7.3% y/y) following a 0.2% January rebound.

The m/m fall in February durable goods orders was led by a 28.6% m/m plunge in orders for nondefense aircraft & parts following decreases of 1.7% in January and 22.7% in December. Orders for defense aircraft & parts fell 3.8% after a 27.2% January slump and an 11.8% December jump. Orders excluding aircraft rose 1.2% (6.6% y/y), the seventh m/m rise in eight months, after a 0.3% January increase.

Durable goods orders for transportation generally fell 5.4% (+10.1% y/y) in February, the fourth m/m fall in five months, after a 1.9% decline in January. In addition to the drops in nondefense and defense aircraft orders, orders for motor vehicles & parts rose 3.1% (7.6% y/y), the third consecutive m/m rise, after a 0.7% January increase. Orders for electrical equipment, appliances & components slipped 0.1% (+5.0% y/y) following a 1.0% January decline, while orders for primary metals advanced 2.2% (10.2% y/y), the third successive m/m increase, after a 1.1% January rise. Machinery orders climbed 1.5% (9.2% y/y), the 10th straight m/m gain, on top of a 0.6% January increase. Orders for fabricated metal products rose 0.5% (5.4% y/y), the seventh m/m rise in eight months, following a flat January reading. Orders for all other durable goods rose 0.5% (1.3% y/y), up for the sixth consecutive month, after a 0.3% January increase. Meanwhile, orders for computers & electronic products were essentially unchanged (+7.5% y/y) after five straight m/m gains.

Capital goods orders fell 6.6% (+11.5% y/y) in February, the fourth m/m fall in five months, after a 3.0% drop in January. Nondefense capital goods orders slid 7.4% (+9.5% y/y), the fifth m/m slide in six months, after a 1.0% January decrease. Core capital goods orders (i.e., nondefense capital goods orders excluding aircraft) rebounded 0.6% (5.1% y/y), the seventh m/m rise in eight months, following a 0.4% January decline. Defense capital goods orders fell 1.1% (+25.1% y/y), down for the fourth time in five months, after a 14.2% January drop. Notably, core capital goods shipments (core capex shipments)—a reliable coincident indicator of business spending on equipment in the national accounts—rose 0.9% (5.7% y/y), the fifth m/m increase in six months, after no change in January.

Shipments of all manufactured goods advanced 1.4% (3.5% y/y) in February, the fourth m/m gain in five months, after a 0.7% increase in January. Durable goods shipments rose 1.3% (6.8% y/y), up for the fifth time in six months, after a 0.9% January gain. Nondurable goods shipments climbed 1.4% (0.1% y/y), the third straight m/m rise, after a 0.5% January increase.

Unfilled orders of durable goods edged up 0.1% (11.1% y/y) in February, the seventh straight m/m gain, after a 0.6% rise in January. Excluding transportation, unfilled orders increased 0.2% (1.9% y/y), also up for the seventh consecutive month, following a 0.3% January rise.

Manufacturing inventories inched up 0.1% (0.8% y/y) in February, the fourth straight m/m increase, after a 0.1% uptick in December. Durable goods inventories edged up 0.1% (1.8% y/y) in February, the fifth consecutive m/m increase, after a 0.2% rise in January, while nondurable goods inventories were virtually unchanged (-0.8% y/y) following two successive m/m declines.

Manufacturers’ orders and shipments of durable and nondurable goods, along with unfilled orders and inventories, are compiled by the U.S. Census Bureau. They are available in Haver’s **USECON** database. The Action Economics forecast data are in the **AS1REPNA** database.

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- Headline orders -1.4% (+7.3% y/y) in Feb., fourth m/m decline in five mths.
- Nondefense aircraft & parts -28.6% m/m following January’s -1.7%.
- Transportation orders -5.4%, down for the fourth time in five mths.; orders ex transportation +0.8%, 10th straight m/m rise.
- Core capital goods shipments +0.9%, fifth m/m gain in six mths.
- Durable goods shipments +1.3%; unfilled orders +0.1%; inventories +0.1%.

U.S. Durable Goods Orders Fall in February, Led by a Plunge in Nondefense Aircraft Orders

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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 and at the lowest level since December 2023. 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.