Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040302c.jpg" width="353">
Total retail sales in Germany rose 2.32% in January from December, the first rise in three months. Sales of staples such as food, beverages and tobacco that have generally been in a rising trend, rose 3.62%. In addition, there were significant increases in sales of some of the more discretionary types of spending. Sales of clothing, footwear and leather rose 3.16% and sales of furniture and related items rose 3.77%. Sales of motor vehicles, however, probably declined in January. While actual data on sales of motor vehicles are not available, the fact that total sales were up 2.32% and sales excluding autos were up 2.36%, suggests that auto sales were lower in January.
The increase in spending in January suggests that the reduction in consumer income taxes of some 15 billion euros that became effective on January 1, 2004 may have outweighed the dampening effect of increased medical costs that also became effective on January 1, 2004. As part of a number of reform measures taken over the past year to increase German competitiveness, consumers have to bear a larger cost of doctor visits, hospital stays and medical equipment, such as wheel chairs.

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<tr>
<th scope="col" class="firstcol">German Retail Sales (2000 =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>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total (2000 Prices)</td>
<td>98.9</td>
<td>97.4</td>
<td>99.9</td>
<td>1.54</td>
<td>-1.00</td>
<td>99.9</td>
<td>100.1</td>
<td>101.5</td>
</tr>
<tr>
<td class="firstcol">Total (Current Prices</td>
<td>101.3</td>
<td>99.0</td>
<td>101.5</td>
<td>2.32</td>
<td>-0.20</td>
<td>101.5</td>
<td>101.4</td>
<td>102.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Food</td>
<td>111.5</td>
<td>107.6</td>
<td>108.2</td>
<td>3.62</td>
<td>3.05</td>
<td>109.5</td>
<td>107.5</td>
<td>104.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Clothing</td>
<td>88.1</td>
<td>85.4</td>
<td>93.0</td>
<td>3.16</td>
<td>-5.27</td>
<td>90.3</td>
<td>95.0</td>
<td>99.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Furniture</td>
<td>88.0</td>
<td>84.8</td>
<td>88.3</td>
<td>3.77</td>
<td>-0.34</td>
<td>87.9</td>
<td>88.9</td>
<td>96.6R</td>
</tr>
<tr>
<td class="firstcol">Total Sales (Excl Autos)</td>
<td>99.7</td>
<td>97.4</td>
<td>100.2</td>
<td>2.36</td>
<td>-0.50</td>
<td>99.8</td>
<td>100.4</td>
<td>101.9</td>
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Total retail sales in Germany rose 2.32% in January from December, the first rise in three months. Sales of staples such as food, beverages and tobacco that have generally been in a rising trend, rose 3.62%. In addition, there were [...]

Retail Sales in Germany Rise in January, the First Rise in Three Months

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040302b.jpg" width="353">
Announced job cuts fell 34.3% m/m in February to the lowest level since last September, according to Challenger, Gray &amp; Christmas.
The three month moving average of job cut announcements fell to 95,942 (-20.8% y/y). During the last ten years there has been an 83% (inverse) correlation between the three month average level of announced job cuts and the y/y percent change payroll employment.
The decline in layoffs was widespread across industries. However, large m/m increases in job cut announcements were tallied in the automotive (-35.6% y/y), electronics (-67.4% y/y), health care (+628.4% y/y) and insurance (+171.1% y/y) industries.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM"> Challenger, Gray &amp; Christmas</a></th>
<th scope="col">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>
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</thead>
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<td class="firstcol">Announced Job Cuts</td>
<td>77,250</td>
<td>117,556</td>
<td>-44.1%</td>
<td>1,236,426</td>
<td>1,431,052</td>
<td>1,956,876</td>
</tr>
</tbody>
</table>
Chain Store Sales Nudge Higher 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 2, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040302a.jpg" width="353">
Chain store sales rose fractionally last week. That pulled sales for the near-completed month of February 2.0% above January, according to the ICSC-UBS survey.
During the last ten years there has been a 58% correlation between the year-to-year percent change in the ICSC-UBS measure of chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. 

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM"> ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">02/28/04</th>
<th scope="col">02/21/04</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>438.1</td>
<td>437.9</td>
<td>7.9%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
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Announced job cuts fell 34.3% m/m in February to the lowest level since last September, according to Challenger, Gray & Christmas. The three month moving average of job cut announcements fell to 95,942 (-20.8% y/y). During the last [...]

Challenger Layoffs Plunge

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040301a.jpg" width="353">
Personal income rose just 0.2% (+4.1% y/y) in January versus Consensus expectations for a 0.4% gain. The increase was held back by declines in proprietors&#39; income and rental income which had been quite strong. 
Personal disposable income jumped 0.8% (5.2% y/y), goosed by 4.9% drop in tax payments which are down 5.1% y/y. 
Wages &amp; salaries rose a strong 0.5% (+3.0% y/y) and the decline in December was lessened to -0.1%. The January gain was spread evenly across industries. 
Proprietors&#39; income fell 0.6% (+8.0% y/y) and rental income dropped 1.9% (+17.9% y/y). 
Consumer spending rose a moderate 0.4%, the gain held back by a 3.3% decline in durable goods spending. Unit sales of light vehicles fell 9.0% m/m to 16.09M. Spending on nondurables jumped 1.5% (6.7% y/y) as higher gasoline prices, up 6.3% m/m, lifted the price deflator for nondurables by 0.7%. Services spending rose 0.7% (4.7% y/y). 
The PCE price deflator rose 0.3%. Less food and energy prices rose 0.1% in January (0.8% y/y). 
The savings rate ticked up to 1.8%. 

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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">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>
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</thead>
<tbody>
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<td class="firstcol">Personal Income</td>
<td>0.2%</td>
<td>0.3%</td>
<td>4.1%</td>
<td>3.2%</td>
<td>2.3%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.4%</td>
<td>0.5%</td>
<td>5.3%</td>
<td>5.0%</td>
<td>4.8%</td>
<td>4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>1.8%</td>
<td>1.4%</td>
<td>1.7%</td>
<td>2.0%</td>
<td>2.3%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">PCE Price Deflator</td>
<td>0.3%</td>
<td>0.2%</td>
<td>1.5%</td>
<td>1.8%</td>
<td>1.4%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
ISM Factory Index Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 1, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040301b.jpg" width="353">
The Purchasing Managers&#146; Composite Index (PMI) released by the Institute of Supply Management fell to 61.4 in February from 63.6 in January. Consensus expectations were for a lesser decline to 62.0.
During the last twenty years there has been a 71% correlation between the level of the Composite Index and the three month growth in factory sector industrial production. There has been a 58% correlation between the level of the Composite Index and quarterly growth in real GDP.
The new orders index dropped to 66.4 from 71.1. The series&#39; high was in December at 73.1. The production index fell to 63.9 from 71.1.
The employment index rose sharply to 56.3, the highest level since December 1987. There has been a 65% correlation during the last twenty years between the ISM employment index and the one-month change in factory sector payrolls.
The inventory index improved to 49.4. The Jan-Feb average of 49.2 is versus 44.5 during all of last year and a low of 39.6 during 2001.
The prices paid index jumped further to 81.5, the highest level since January 1995.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM"> ISM Manufacturing Survey</a></th>
<th scope="col"> Feb</th>
<th scope="col">Jan</th>
<th scope="col">Feb &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
<tbody>
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<td class="firstcol">Composite Index</td>
<td>61.4</td>
<td>63.6</td>
<td>49.4</td>
<td>53.3</td>
<td>52.4</td>
<td>43.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>66.4</td>
<td>71.1</td>
<td>51.9</td>
<td>58.1</td>
<td>56.6</td>
<td>46.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>81.5</td>
<td>75.5</td>
<td>65.5</td>
<td>59.6</td>
<td>57.6</td>
<td>42.9</td>
</tr>
</tbody>
</table>
U.S. Construction Spending Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 1, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040301c.jpg" width="353">
The value of total construction put in place fell 0.3% in January (+5.4% y/y). December activity was revised up due to a raised figure for nonresidential building. A 0.2% gain was expected for January.
Private residential building activity was unchanged following six months of strong gain (11.4% y/y). Single family home building fell a slight 0.2% (16.1% y/y).
Nonresidential building fell 1.7% following an upwardly revised December. Office building slumped 5.2% (-5.0% y/y) and commercial construction dropped 2.6% (-1.9% y/y). Education spending fell for the fifth month in the last seven (+1.0% y/y).
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM"> Construction Put-in-place</a></th>
<th scope="col"> 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">Total</td>
<td>-0.3%</td>
<td>0.6%</td>
<td>5.4%</td>
<td>4.0%</td>
<td>1.1%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-0.5%</td>
<td>0.9%</td>
<td>7.2%</td>
<td>4.6%</td>
<td>-0.2%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>0.0%</td>
<td>0.9%</td>
<td>11.4%</td>
<td>10.1%</td>
<td>8.6%</td>
<td>3.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-1.7%</td>
<td>1.1%</td>
<td>-1.5%</td>
<td>-5.5%</td>
<td>-13.0%</td>
<td>-1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>0.2%</td>
<td>-0.4%</td>
<td>-0.1%</td>
<td>2.2%</td>
<td>5.3%</td>
<td>7.4%</td>
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</tbody>
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Personal income rose just 0.2% (+4.1% y/y) in January versus Consensus expectations for a 0.4% gain. The increase was held back by declines in proprietors' income and rental income which had been quite strong. Personal disposable [...]

U.S. Personal Income Up

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/040227d.jpg" width="353">
A recovery in Japan looks to be not only continuing, but spreading. Data for January that were published February 27 show gains in production, household spending and employment. Perhaps most notably, employment appears to be stabilizing after its cyclical decline that began in December 2000. The increase in January was a modest 70,000 but that followed December&#39;s 280,000. Although the unemployment rate edged up in January to 5.0%, it had fallen in December to 4.9%, the lowest since April 2001.
Workers&#39; household spending, possibly bolstered by the improved employment conditions, had a sizable gain in January, 4.2%. These spending data are erratic and could easily retreat in the very next report, but even so, January had the strongest year-on-year performance since the autumn of 2002. Workers&#39; real incomes showed the first year-on-year increase since March 2002.
Industrial production was up 3.2% in the month and 5.0% over the last 12 months. At 101.2 (2000=100), it was the highest since December 2000. Gains were widespread across industries.
All these reports come on the heels of the strong GDP report for the fourth quarter 2003, suggesting a broad-based recovery could be developing. Indeed, the important consumer sector might become more significant, as more stable employment conditions and less unemployment boost their spending.<table border="1" cellpadding="0" cellspacing="0"><tbody></tbody></table>

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Selected Indicators for Japan </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">Workers&#39; Household Spending (2000=100)</td>
<td>101.2</td>
<td>97.9</td>
<td>95.2</td>
<td>95.1</td>
<td>92.0</td>
<td>93.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>4.2</td>
<td>-1.0</td>
<td>3.3</td>
<td>0.9</td>
<td>-3.1</td>
<td>-4.8</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Employment (millions)&nbsp;</td>
<td>63.22</td>
<td>63.15</td>
<td>63.03</td>
<td>63.17</td>
<td>63.30</td>
<td>64.10</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; % Change</td>
<td>0.1</td>
<td>0.4</td>
<td>0.3</td>
<td>0.3</td>
<td>-1.1</td>
<td>-1.2</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>5.0</td>
<td>4.9</td>
<td>5.5</td>
<td>5.3</td>
<td>5.4</td>
<td>5.0</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Industrial Production (2000=100)&nbsp;</td>
<td>101.2</td>
<td>97.9</td>
<td>95.2</td>
<td>95.1</td>
<td>92.0</td>
<td>93.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; % Change</td>
<td>+3.4</td>
<td>-0.8</td>
<td>5.0</td>
<td>5.9</td>
<td>7.0</td>
<td>-14.8</td>
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A recovery in Japan looks to be not only continuing, but spreading. Data for January that were published February 27 show gains in production, household spending and employment. Perhaps most notably, employment appears to be [...]

Japan Sees Gains in Production, Jobs and Spending

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040227a.jpg" width="353">
US economic growth last quarter was unexpectedly revised higher to 4.1% versus expectations for a slight downward revision.
Inventories contributed a greater 0.9 percentage points to 4Q GDP growth versus the advance estimate of a 0.6 point contribution.
Growth in nonresidential fixed investment also was revised higher to 9.6% (7.1% y/y) from 9.0% reported initially. Investment in equipment &amp; software was revised up to 15.1% versus the advance report of an 11.5% surge.
Overall, domestic final demand growth was revised to 3.3% from 3.1%. Growth in real PCE was about unchanged at 2.7% versus 6.9% in 3Q. Residential investment grew 8.6% (AR).
Offsetting these upward revisions was the foreign trade sector which subtracted 0.3 percentage points instead of adding 0.2 points to GDP growth. Export growth of 21.0% was slightly faster than originally estimated, but import growth was revised up to 16.4% from 11.3%.
Inflation was revised slightly higher to a tame 1.2%.
Analysis titled &quot;Globalization and Global Disinflation&quot; from the Federal Reserve Bank of Kansas City is available <a href="http:/www.kc.frb.org/Publicat/econrev/Pdf/4q03rogo.pdf">here</a>. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM"> Chained 2000$, % AR</a></th>
<th scope="col"> 4Q &#39;03 &nbsp;(Prelim)</th>
<th scope="col"> 4Q &#39;03 &nbsp;(Advance)</th>
<th scope="col"> 3Q&#39;03</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>4.1%</td>
<td>4.0%</td>
<td>8.2%</td>
<td>&nbsp;4.3%</td>
<td>3.1%</td>
<td>2.2%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.9%</td>
<td>0.6%</td>
<td>-0.1%</td>
<td>-0.1%</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>3.4%</td>
<td>8.3%</td>
<td>4.4%</td>
<td>3.1%</td>
<td>1.8%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>-0.3%</td>
<td>0.2%</td>
<td>0.8%</td>
<td>0.3%</td>
<td>-0.1%</td>
<td>-0.6%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>3.3%</td>
<td>3.1%</td>
<td>7.2%</td>
<td>4.2%</td>
<td>3.4%</td>
<td>2.4%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>1.2%</td>
<td>1.1%</td>
<td>1.6%</td>
<td>1.5%</td>
<td>1.7%</td>
<td>1.5%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Improved Late in February 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 27, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040227b.jpg" width="353">
The University of Michigan&#146;s consumer sentiment index for the full month of February came in at 94.4 versus the mid-month read of 93.1. Nevertheless, sentiment still fell 9.1% from January. Consensus expectations had been for a February reading of 94.0.
During the last ten years there has been an 75% correlation between the level of consumer sentiment and the y/y change in real PCE. That correlation has risen to 84% during the last five years.
Perceptions of current economic conditions improved as the full month index came in at 103.6 versus 100.4 mid-month. The 5.4% m/m slide followed a 12.9% rise in January.
The expectations index dropped 11.6% m/m, about the same as the mid-month reading.
The University of Michigan survey is not seasonally adjusted.It 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"> 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">Consumer Sentiment</td>
<td>94.4</td>
<td>103.8</td>
<td>18.1%</td>
<td>87.6</td>
<td>89.6</td>
<td>89.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>103.6</td>
<td>109.5</td>
<td>8.6%</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>100.1</td>
<td>26.6%</td>
<td>81.4</td>
<td>84.6</td>
<td>82.3</td>
</tr>
</tbody>
</table>
Chicago Purchasing Agents' Index Firm 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 27, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040227c.jpg" width="353">
The February Chicago Purchasing Managers Business Barometer fell slightly to 63.6 from the near-ten year high of 65.9 in January. That matched Consensus expectations for a reading of 63.5.
During the last twenty years there has been a 52% correlation between the level of the Chicago PMI and quarterly growth in real GDP.
The new orders index fell to 67.5 from 69.7 in January. The Jan-Feb average of 68.6 is versus a 4Q average of 65.4.
Production fell to 73.0 from 76.5 in January. The 74.7 average is versus 68.9 in 4Q.
Employment surged to 54.8, the highest level since April 1998. During the last ten years there has been a 69% correlation between the level of the employment index and the y/y change in payroll employment.
The index of prices paid fell slightly to a still-high 66.9.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF05/@EF05.HTM"> Chicago Purchasing Managers Index, SA</a></th>
<th scope="col"> Feb 04</th>
<th scope="col">Jan 04</th>
<th scope="col">Feb 03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Barometer</td>
<td>63.6</td>
<td>65.9</td>
<td>53.6</td>
<td>54.7</td>
<td>52.7</td>
<td>41.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>67.5</td>
<td>69.7</td>
<td>57.1</td>
<td>58.0</td>
<td>56.2</td>
<td>42.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>66.9</td>
<td>67.8</td>
<td>54.8</td>
<td>55.8</td>
<td>56.9</td>
<td>50.4</td>
</tr>
</tbody>
</table>
</body>
</html>

US economic growth last quarter was unexpectedly revised higher to 4.1% versus expectations for a slight downward revision. Inventories contributed a greater 0.9 percentage points to 4Q GDP growth versus the advance estimate of a 0.6 [...]

4Q U.S. GDP Growth Revised Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040226e.jpg" width="353">
In four countries&#39; surveys of business confidence issued today for February, firms appear to be gaining confidence or, in the case of the UK, at least feeling less pessimistic. At the same time, consumers in two of those nations still view economic conditions as deteriorating.
In the UK, France and Slovakia, the various business climate or industrial trend gauges not only improved from January, but had their best readings since early 2001. The comparable gauge for the Czech Republic edged up in the month from +3 to +5, but that level has been quite common since the spring of 2002.
Despite the better industry positions in the Czech Republic and Slovakia, consumer confidence in those countries is deteriorating markedly. As shown in the graph, the decline in consumers&#39; views in the Czech Republic corresponds to a continuing reduction in employment. Indeed, on a quarterly basis, even over the brief 3-1/2 year history of the confidence data, its correlation with employment data is 63%. In Slovakia, by contrast, there is virtually no relationship between the confidence data and employment, but the unemployment rate has a 72% negative correlation with confidence. The recent unemployment rate of 15.3% is lower than an early 2000 peak of 19.0%, but it has risen from a mid-2003 level of 14.6%, not a promising development. At the same time, GDP in both countries is growing: steadily in a range of 2.5% to 3.5% recently in the Czech Republic and more vigorously at and above 5% in Slovakia. Thus, in both countries, consumers appear more concerned about labor market conditions and less sensitive to overall growth measures. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Measures of Confidence</th>
<th scope="col">Feb 04</th>
<th scope="col">Jan 04</th>
<th scope="col">Dec 03</th>
<th scope="col">Feb 03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">UK CBI Industry Trend (Balance)</td>
<td>-15</td>
<td>-18</td>
<td>-19</td>
<td>-31</td>
<td>-29</td>
<td>-27</td>
<td>-26</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">France Composite Business Climate Indicator (100=neutral)</td>
<td>103</td>
<td>102</td>
<td>101</td>
<td>98</td>
<td>95</td>
<td>97</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></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">Czech Republic (Balances)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Indicator</td>
<td>5</td>
<td>3</td>
<td>5</td>
<td>5</td>
<td>5</td>
<td>4</td>
<td>2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Confidence Indicator</td>
<td>-26</td>
<td>-20</td>
<td>-21</td>
<td>-13</td>
<td>-15</td>
<td>-7</td>
<td>-5</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Slovakia (Balances)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Industry Confidence</td>
<td>16.0</td>
<td>4.0</td>
<td>1.3</td>
<td>0.7</td>
<td>4.6</td>
<td>4.6</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Confidence</td>
<td>-35.9</td>
<td>-32.5</td>
<td>-38.9</td>
<td>-36.7</td>
<td>-34.8</td>
<td>-30.2</td>
<td>-32.7</td>
</tr>
</tbody>
</table>
</body>
</html>

In four countries' surveys of business confidence issued today for February, firms appear to be gaining confidence or, in the case of the UK, at least feeling less pessimistic. At the same time, consumers in two of those nations still [...]

Industry Outlook Improves in 4 Countries, but Some Consumers More Pessimistic

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040226a.jpg" width="353">
Initial claims for jobless insurance rose by 6,000 (1.7%) to 350,000 last week, spot on Consensus expectations. The prior week&#39;s level was unrevised.
During the last ten years there has been a 79% (negative) correlation between the level of initial claims and the y/y change in non-farm payrolls.
The four-week moving average of initial claims rose slightly 354,750 (-11.1% y/y).
Continuing claims for unemployment insurance fell 62,000 w/w and the prior week&#39;s level was revised lower.
The insured rate of unemployment was unchanged at 2.5%.

<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">2/21/04</th>
<th scope="col">2/14/04</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>350.0</td>
<td>344.0</td>
<td>-15.0%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,102</td>
<td>-7.9%</td>
<td>3,535</td>
<td>3,575</td>
<td>3,022</td>
</tr>
</tbody>
</table>
U.S. Durable Goods Orders Fell, Revisions Positive 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 26, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040226b.jpg" width="353">
Durable goods orders fell last month by 1.8%, but orders in December were revised to a 1.6% increase from the previously reported unchanged reading. Consensus expectations had been for a 1.4% rise in January orders.
Nondefense capital goods orders excluding aircraft and parts jumped 3.6% (+11.1% y/y) and the prior month&#39;s previously reported slight decline was revised to a 3.8% surge .
Orders for computers &amp; electronic products jumped 7.1% and the prior month was revised to a slight rise from the 2.7% drop reported initially.
Orders for electrical equipment, appliances &amp; components jumped 3.7% (1.0% y/y) following two months of decline. Machinery orders fell 1.9% (+13.6% y/y) after four months of strong gain.
Excluding the volatile transportation sector durable goods orders rose 2.0% (8.9% y/y) to the highest level since early 2001. Transportation equipment orders fell 10.4% (+0.8% y/y) as aircraft orders slumped 30.2%.
Shipments of durable goods fell slightly m/m (+6.1% y/y) following four months of gain. Excluding transportation shipments rose 1.1% (8.3% y/y).
Durable inventories rose 0.1% for the third gain in four months.
&quot;What Accounts for the Postwar Decline in Economic Volatility&quot; from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.phil.frb.org/files/br/brq104ks.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/@ED/@ED01/@ED0101/@ED0101.HTM"> NAICS Classification</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>
<td class="firstcol">Durable Goods Orders</td>
<td>-1.8%</td>
<td>1.6%</td>
<td>6.6%</td>
<td>2.5%</td>
<td>-1.7%</td>
<td>-10.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nondefense Capital Goods</td>
<td>1.5%</td>
<td>4.0%</td>
<td>10.6%</td>
<td>5.6%</td>
<td>-7.2%</td>
<td>-15.5%</td>
</tr>
</tbody>
</table>
New Home Sales Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 26, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040226d.jpg" width="353">
Sales of new single family homes fell a slight 1.7% to 1.106M in January but sales in December were revised up. Since the peak last June sales have fallen 7.8%. Consensus estimates were for sales of 1.100M in January.
Sales fell in each of the country&#39;s regions except the Midwest.
The median price of a new home rose a slight 0.6% m/m to $197,000 (8.4% y/y).
These new home sales data from the US Census Department reflect current sales versus the existing home sale figures which reflect closings on past sales.

<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">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>
<td class="firstcol">New Single-Family</td>
<td>1,106</td>
<td>1,125</td>
<td>9.6%</td>
<td>1,091</td>
<td>977</td>
<td>907</td>
</tr>
</tbody>
</table>
Help-Wanted Advertising Flat 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 26, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040226c.jpg" width="353">
The Conference Board&#146;s National Index of Help-Wanted Advertising ticked up to 38 last month versus a downwardly revised December reading of 37. The latest figure was equal to the 2003 average.
During the last ten years there has been a 93% 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 57% from 29% in December, but that was just even with last January.
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"> Jan</th>
<th scope="col">Dec</th>
<th scope="col">Jan &#39;03</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>38</td>
<td>37</td>
<td>41</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for jobless insurance rose by 6,000 (1.7%) to 350,000 last week, spot on Consensus expectations. The prior week's level was unrevised. During the last ten years there has been a 79% (negative) correlation between the [...]

Initial Jobless Insurance Claims Tick Up

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AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

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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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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 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 February m/m drops in nondefense and defense aircraft orders, motor vehicles & parts orders rose 3.1% (7.6% y/y), the third consecutive m/m rise, after a 0.7% January gain. 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 rise. 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 January. 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

Robert Brusca

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The S&P composite PMIs in March weakened decisively across the board, with only four of 25 reporters showing an improvement in March compared to February. February had been a strong month, with only 10 of 25 monthly composite indicators weaker on a month-to-month basis. In January, 11 of the composite indicators weakened month-to-month. So, between January and March, the proportion of countries showing composite indicators as weaker month-to-month went up from 40% to 44% and then all the way up to 80%, a huge shift for the worse.

**Sequential trends**
Sequentially, looking at 12-months compared to 12-months ago, six-months compared to 12-months, and three-months compared to six-months, we see a similar progression. Over 12 months, 43.5% of the reporters were weaker; over six months, 39.1% of them were weaker period-to-period. And then over three months, that proportion jumped to 65.2% that were weaker month-to-month.

The war in Iran has been reflected in these numbers. We see it very clearly for the March data, the first full month after the attack. The average and median total PMI readings deteriorated from February to March: the average readings fell from 52.6 in February to 50.7 in March, and the median readings fell from 52.1 to 51.4.

The number of reporters with PMI values below 50, indicating contraction, jumped to 9 in March from 4 in February and 5 in January.

The data show that there has been broad weakening among these reporters. In addition, there has been a sharp rise in the number of them reporting outright economic contraction. The composite indexes are showing not just weakness month-to-month, but actual stepped-up contraction.

The queue percentile standings are also substantially degraded, with only eight of the 25 queue metrics that are reported above their historic medians on data back to January 2022. And the countries that are reporting good performance are often very small countries. Ghana and Zambia show very strong queue percentile standings. Sweden shows a high percentile standing. However, Japan and Hong Kong also show percentile standings in their 90th percentile, and Germany's standing has gotten to its 70th percentile. However, if oil prices climb and shortages in a variety of supply chains begin to be impacted because of the lack of oil, and in some cases, fertilizer and other commodities, we are going to start to see weakness spread.

In some developing countries, there's already a more generalized economic weakness being caused by fuel rationing because prices are so high. If the Strait of Hormuz is not open soon, these conditions are going to get demonstrably worse. Even though the U.S. economy has done relatively well and is unaffected by oil supply shortages—although prices in the U.S. certainly have risen—the U.S. composite PMI index has only a 19.6 percentile standing, not a terribly good place to say that the economy is largely unaffected by these events. The U.S. composite PMI has fallen for two months in a row.

Not surprisingly, three countries have reported the lowest composite PMI readings since 2022 when these rankings began. They are Saudi Arabia, Qatar, and the United Arab Emirates, all of whom are in the middle of this Middle East conflict.

The European Monetary Union posted a queue standing above its 50th percentile, at 54.9. And its diffusion reading on the month at 50.5 is similar to the U.S. at 50.3, indicating that economic activity is still expanding in the community—but barely. Both France and Italy logged composite PMI readings below 50; France has generated three sub-50 diffusion readings in a row, and in addition, three more of them sequentially over three months, six months, and 12 months. The queue standings may overstate the case for resiliency in some instances. There was plenty of weakness to go around across economies in March.

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Composite PMIs Retreat Broadly

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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.

Economy in Brief

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