Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021205a.jpg" width="353">
Initial claims for unemployment insurance fell unexpectedly last week and remained at the lowest level since early last year. Claims in the prior week were revised up slightly.
The latest decline in initial claims may reflect the late timing of the Thanksgiving holiday and the difficulties of seasonal adjustment.The four-week moving average of initial claims dropped to 376,500, down 14.3% y/y.
Continuing claims for unemployment insurance fell a sharp 3.4% to the lowest level since mid-July. The prior week&#39;s sharp increase was revised down. The latest figure is for the week before Thanksgiving. Regardless, the timing of holidays should not affect the seasonal patterns of continuing claims since claimants receive benefits by mail.
The insured rate of unemployment fell to 2.7%, the lowest level since early August, and the prior week&#39;s rate was revised down.

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<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">11/30/02</th>
<th scope="col">11/23/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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</thead>
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<td class="firstcol">Initial Claims</td>
<td>355.0</td>
<td>368.0</td>
<td>-19.7%</td>
<td>405.8</td>
<td>299.8</td>
<td>297.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,486</td>
<td>-2.7%</td>
<td>3,021</td>
<td>2,114</td>
<td>2,186</td>
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Initial claims for unemployment insurance fell unexpectedly last week and remained at the lowest level since early last year. Claims in the prior week were revised up slightly. The latest decline in initial claims may reflect the late [...]

Initial Claims for Jobless Insurance Fell Unexpectedly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021204a.jpg" width="353">
Nonfarm labor productivity last quarter was revised up more than expected. Consensus estimates were for a revision to 4.3%.
A large upward revision to output, following the upward revision to GDP growth, was the source of the upward revision. Output was revised to 5.1% growth from 4.0% (AR). Hours worked were unchanged in 3Q, as reported last month.
Unit Labor costs were revised down, declining for the fourth quarter in the last five. Compensation growth was little changed from the earlier report of strong growth.
Manufacturing sector productivity was revised down slightly to 5.5% (5.8% y/y) from 5.9% . Nevertheless, unit labor costs fell 1.0% (-2.1% y/y), the fifth consecutive quarterly decline.
Productivity in the nonfinancial corporate sector, a figure derived from the income side of the National Income and Product Accounts, grew 5.7% (6.7% y/y). Unit labor costs were unchanged (-2.5% y/y).

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Nonfarm Business Sector</a> (SAAR)</th>
<th scope="col">3Q &#39;02 Final</th>
<th scope="col">3Q &#39;02 Prelim.</th>
<th scope="col">2Q &#39;02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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<td class="firstcol">Output per Hour</td>
<td>5.1%</td>
<td>4.0%</td>
<td>1.7%</td>
<td>5.6%</td>
<td>1.1%</td>
<td>2.9%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>4.9%</td>
<td>4.8%</td>
<td>3.9%</td>
<td>3.3%</td>
<td>2.7%</td>
<td>6.9%</td>
<td>4.4%</td>
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<td class="firstcol">Unit Labor Costs</td>
<td>-0.2%</td>
<td>0.8%</td>
<td>2.2%</td>
<td>-2.2%</td>
<td>1.6%</td>
<td>3.9%</td>
<td>2.0%</td>
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</table>
ISM Nonmanufacturing Index Firm 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 4, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021204b.jpg" width="353">
The Institute for Supply Management business activity index of the nonmanufacturing sector was much stronger than expected last month, rising to the highest level since May. Consensus expectations were for a slight increase to 54.0. 
The overall index has remained above 50, the dividing line for expansion and contraction, since February.
Of the seasonally adjusted subgroups, new orders rose sharply and imports rose slightly, but employment fell. 
The not seasonally adjusted index of prices was unchanged and was down versus the highs of earlier this year. 
During the last five years, there has been a 62% correlation between the level of the NAPM nonmanufacturing index and the three month growth in service sector payrolls.
Business activity for the nonmanufacturing sector is a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index weights the components.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The nonmanufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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<td class="firstcol">Business Activity Index</td>
<td>57.4</td>
<td>53.1</td>
<td>49.8</td>
<td>49.0</td>
<td>59.2</td>
<td>59.1</td>
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Factory Inventories Flat Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 4, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021204c.jpg" width="353">
Manufacturing inventories were unchanged in October after rising September. The initial report for September was of no change. During the last three months, factory inventories have risen 0.3%.
Excluding the transportation sector inventory accumulation has been slightly stronger than for the total - unchanged in October but up 0.7% since June.
Increases in inventories continued to be led by the nondurable goods sector, up 2.6% during the last five months. Gains have been strong for petroleum, textile products, plastics and basic chemicals.
Decumulation in the durable goods sector continued unabated, down 0.2% m/m and 4.5% YTD. Declines have been widespread amongst industries.
Factory shipments rose 1.0% following two months of decline. For the year shipments have risen 3.0%. Gains have been strongest in nondurable goods industries (3.0% YTD), notably petroleum. Less petroleum, nondurable shipments were up 1.2% YTD in October. Prior months&#39; figures were revised down. Shipments of durable goods rose a strong 1.3% in October (3.0% YTD.
Factory orders rose 1.5% following two months of decline led by higher orders for durable goods, up 2.4% and revised from the advance report of a 2.8% gain. The strong 4.5% rise in nondefense capital goods was little revised.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Inventories</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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<td class="firstcol">Mfg Inventories</td>
<td>0.0%</td>
<td>0.2%</td>
<td>-4.4%</td>
<td>-8.0%</td>
<td>4.5%</td>
<td>3.1%</td>
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Nonfarm labor productivity last quarter was revised up more than expected. Consensus estimates were for a revision to 4.3%. A large upward revision to output, following the upward revision to GDP growth, was the source of the upward [...]

Revised Productivity Growth Stronger in 3Q

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021203c.jpg" width="353">
The unemployment rate for the Euro Zone rose to 8.4% in October from 8.3% in September.
Of the countries for which data are available for October, ten recorded an increase in their unemployment rates in the last twelve months. Among them were France which registered an increase from 8.5% to 8.8% and Germany which registered an increase from 7.9% to 8.3%. Only Sweden and Finland registered declines in their unemployment rates-- from 5.1% to 5.0% and from 9.2%. to 9.1% respectively.
Unemployment rates range from a low of 2.6% in Luxembourg to a high of 11.7% in Spain. Some 11.6 million workers are unemployed, an increase of .5 million from a year ago. 

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The unemployment rate for the Euro Zone rose to 8.4% in October from 8.3% in September. Of the countries for which data are available for October, ten recorded an increase in their unemployment rates in the last twelve months. Among [...]

Euro-zone Unemployment Rate Rose

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021203b.jpg" width="353">
Prices for existing homes rose last quarter by the smallest degree in nearly five years. With the exception of a 0.8% gain in 4Q 01, prices have risen between one and three percent each quarter since 1998 according to the government&#39;s Office of Federal Housing Enterprise Oversight.
The data cover only home mortgages repurchased by Fannie Mae and Freddie Mac and therefore do not cover high priced homes with mortgages over roughly $300,000 (roughly 25% of the market).
The data correct for &quot;mix shifts&quot;, i.e., changes in home quality, size and location.
Prices of existing homes as published by the National Association of Realtors rose 2.3% last quarter. Year to year, the Realtors&#39; price series rose 6.9% versus a 6.2% gain in the Government series. A strong gain in October home prices lifted the Y/Y comparison in the Realtors&#39; price series to 9.8%.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E911/@E911.HTM">House Price Index</a></th>
<th scope="col">3Q 02</th>
<th scope="col">2Q 02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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<td class="firstcol">US Total, Q/Q %</td>
<td>0.8%</td>
<td>2.4%</td>
<td>6.2%</td>
<td>8.5%</td>
<td>7.7%</td>
<td>5.5%</td>
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</table>
Weekly Chain Store Sales Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 3, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021203a.jpg" width="353">
Chain store sales rose 0.3% last week according to the BTM-UBSW survey. The rise during Thanksgiving week was somewhat less ebullient than earlier reports from individual stores of holiday sales. The gain followed a 0.9% rise in sales the prior week.
Sales for the month of November were down 0.2% from the average level of October. October sales fell 1.5% from September.
Month to month comparisons, and certainly year to year comparisons, are difficult due to the late timing of Thanksgiving this year.
During the last ten years there has been a 48% correlation between the year-to-year percent change in monthly chain store sales and the change in GAF retail sales. That correlation rose to 63% during the last five years.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">11/30/02</th>
<th scope="col">11/23/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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</thead>
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<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>402.0</td>
<td>400.8</td>
<td>4.0%</td>
<td>2.1%</td>
<td>3.4%</td>
<td>6.7%</td>
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Challenger Survey Showed Layoffs High in November 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 3, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021203d.jpg" width="353">
According to Challenger, Gray &amp; Christmas, announced job cuts remained high last month. The level of layoffs did fall 10.5% versus October, but layoffs during that month had more than doubled
The three month moving average of job cut announcements rose again to 134,525. That level was down 39.9% versus the high of late last year.
Lower announced job cuts were notable in the consumer goods, utility, retail, automotive and commodities industries. Layoff announcements rose broadly amongst other industries.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
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<td class="firstcol">Announced Job Cuts</td>
<td>157,508</td>
<td>176,010</td>
<td>-13.2%</td>
<td>1,956,876</td>
<td>613,980</td>
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U.S. Light Vehicle Sales Slightly Better Than Expected 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 3, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021203e.jpg" width="353">
Unit sales of light vehicles rose in November for the first month in three, up a modest 3.8% versus October. Sales were down 10.0% from last November. Sales were better than Consensus expectations for a 15.8M unit sales rate.
Sales through the first eleven months have averaged 16.64 mil. units, down 4% from the first eleven months of 2001.
Sales of domestically built vehicles rose 1.3% m/m following two months of decline. Auto sales rose 4.9% but sales of light trucks fell 1.4%.
Imported vehicle sales rose 14.7%, recouping nearly all of a sharp October decline. Imported auto sales rose 17.1% and truck sales rose 9.9%.
Imports&#39; share of the US light vehicle market surged to 20.9%, the highest monthly share for imports since a record 21.1% share this past January. Imports&#39; share of the US vehicle market year to date has averaged 19.6% versus 17.8% during all of last year. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil.Units)</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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<td class="firstcol">Total</td>
<td>16.04</td>
<td>15.45</td>
<td>-10.0%</td>
<td>17.27</td>
<td>17.40</td>
<td>16.95</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Domestic</td>
<td>12.69</td>
<td>12.53</td>
<td>-12.8%</td>
<td>14.20</td>
<td>14.58</td>
<td>14.47</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imported</td>
<td>3.35</td>
<td>2.92</td>
<td>2.3%</td>
<td>3.07</td>
<td>2.82</td>
<td>2.48</td>
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Prices for existing homes rose last quarter by the smallest degree in nearly five years. With the exception of a 0.8% gain in 4Q 01, prices have risen between one and three percent each quarter since 1998 according to the government's [...]

Home Price Data Diverge

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021202b.jpg" width="353">
The ISM Composite Index of manufacturing sector activity rose less than expected last month and remained below 50 for the third month. The rise to 49.2 was less than suggested by the Chicago purchasing managers report and other regional reports of November business activity.
The production and inventory sub indexes rose, but new orders, employment and the supplier delivery indexes fell.
The separate index of inflation pressure fell for the third month in four to the lowest level since March. The percentage (NSA) of companies reporting higher prices fell to 18%.
Over the last ten years there has been a 57% correlation between the ISM Composite Index and the change in factory sector industrial production in the next month.

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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">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Composite Index</td>
<td>49.2</td>
<td>48.5</td>
<td>44.7</td>
<td>43.9</td>
<td>51.6</td>
<td>54.6</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>55.7</td>
<td>58.3</td>
<td>32.0</td>
<td>43.0</td>
<td>64.8</td>
<td>54.2</td>
</tr>
</tbody>
</table>
Construction Spending Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 2, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021202a.jpg" width="353">
The value of construction put in place rose slightly more than expected in October due to higher nonresidential building. Figures for September and August were revised down.
Residential building was unchanged. A huge 1.0% gain in one-unit structures, the second spurt in two months, offset a 3.0% drop in spending on multi unit structures. 
Nonresidential building activity rose for the first monthly gain since April. Spending here was still down 14.2% YTD. The gain was due to widespread increases amongst categories, but spending on industrial and office structures continued down.
Public construction fell. Performance amongst categories was decidedly mixed

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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">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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</thead>
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<td class="firstcol">Total</td>
<td>0.3%</td>
<td>0.3%</td>
<td>-0.2%</td>
<td>2.5%</td>
<td>7.3%</td>
<td>8.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential</td>
<td>0.0%</td>
<td>0.7%</td>
<td>5.1%</td>
<td>3.3%</td>
<td>7.4%</td>
<td>11.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.1%</td>
<td>-2.0%</td>
<td>-16.7%</td>
<td>-3.1%</td>
<td>7.1%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Public</td>
<td>-0.3%</td>
<td>1.6%</td>
<td>6.4%</td>
<td>7.4%</td>
<td>5.4%</td>
<td>10.6%</td>
</tr>
</tbody>
</table>
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The ISM Composite Index of manufacturing sector activity rose less than expected last month and remained below 50 for the third month. The rise to 49.2 was less than suggested by the Chicago purchasing managers report and other [...]

ISM Index Up Slightly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021127b.jpg" width="353">
Personal income (4.2% AR, YTD) rose as expected last month. It was the weakest gain in income since a slight decline in July. September&#39;s figure was unrevised
Wage and salary disbursements were unchanged (3.0% AR, YTD) following 0.6% gains in both the prior two months. Wages in the goods-producing industries fell 0.3% and are down YTD. Personal transfer payments were unchanged (9.2% YTD, AR). Personal interest income fell for the fourth straight month (0.8% YTD, AR).
Personal consumption expenditures (4.7% YTD, AR) rose slightly more than expected and began 4Q 0.2% above the 3Q average. Durable goods purchases fell a sharp 1.0% following a 5.0% September drop. Unit sales of light vehicles plunged in both months. Spending on nondurable goods rose 0.7%, recovering after two months of decline. Spending on services also rose a firm 0.5% (5.4% YTD, AR).
Disposable personal income rose 0.2% (8.3% YTD, AR) following two months of solid gain. Personal tax payments fell for the eighth month this year. 
The PCE price deflator rose 0.2% for the third month in a row. Prices were up 2.3% (YTD, AR). Less food and energy, the price deflator rose only 0.1% (1.8% YTD, AR). 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.1%</td>
<td>0.4%</td>
<td>4.1%</td>
<td>3.3%</td>
<td>8.0%</td>
<td>4.9%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.4%</td>
<td>-0.4%</td>
<td>3.7%</td>
<td>4.5%</td>
<td>7.0%</td>
<td>6.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>4.2%</td>
<td>4.4%</td>
<td>0.3%</td>
<td>2.3%</td>
<td>2.8%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">PCE Price Deflator</td>
<td>0.2%</td>
<td>0.2%</td>
<td>1.7%</td>
<td>2.0%</td>
<td>2.5%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
Initial Unemployment Insurance Claims Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 27, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021127a.jpg" width="353">
Initial claims for unemployment insurance fell more than expected in the latest week and were at the lowest level since early last year. Claims in the prior week were revised up slightly.
The recent sharp decline in initial claims may reflect aberrant seasonal adjustment factors as well as genuine improvement in the labor market.The four-week moving average of initial claims dropped to 385,750, down 11.8% y/y.
Continuing claims for unemployment insurance rose a sharp 2.6%, more than recovering the sharp decline in the prior week which was deepened.
The insured rate of unemployment rose slightly to 2.9%.

<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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">11/23/02</th>
<th scope="col">11/16/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>364.0</td>
<td>381.0</td>
<td>-21.0%</td>
<td>405.8</td>
<td>299.8</td>
<td>297.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,650</td>
<td>4.9%</td>
<td>3,021</td>
<td>2,114</td>
<td>2,186</td>
</tr>
</tbody>
</table>
Durable Goods Orders Recovered, Some 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 27, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021127c.jpg" width="353">
Durable goods orders last month rose twice Consensus expectations for a 1.5% rise. The steep decline in September was lessened slightly.
Orders for nondefense capital goods recovered some of their September plunge which was lessened. Importantly, capital goods orders excluding aircraft and parts orders rose 5.3%. That gain recouped all the sharp declines of the prior two months
Civilian aircraft and parts orders fell another 3.3% following a huge 47.6% drop in September. Orders for motor vehicles and parts rose 3.9% and gained back all of the prior two months&#39; declines. Orders excluding all transportation equipment rose 2.4% last month and are up 3.6% YTD.
Orders for computers and electronic products rose 6.2% (-0.9% YTD) following two months of sharp decline. Machinery orders also rose sharply after two months of decline, but still were up 3.0% YTD. Orders for electrical equipment dropped 1.6% and were down 0.4% YTD.
Shipments of durable goods rose 1.2% (3.0% YTD), the first in three months.
Durable inventories fell 0.2% (-4.5% YTD), the thirteenth consecutive monthly decline.

<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">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Durable Goods Orders</td>
<td>2.8%</td>
<td>-4.6%</td>
<td>0.0%</td>
<td>-11.4%</td>
<td>3.3%</td>
<td>5.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nondefense Capital Goods</td>
<td>4.2%</td>
<td>-10.7%</td>
<td>7.9%</td>
<td>-16.5%</td>
<td>7.9%</td>
<td>3.9%</td>
</tr>
</tbody>
</table>
Chicago Purchasing Agents' Index Up Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 27, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021127d.jpg" width="353">
The Chicago Purchasing Manager&#146;s Index of Business activity rose more than expected in November. Consensus estimates were for moderate rise to 48.5. 
The rise recouped virtually all of the declines in the prior two months. Directionally, the gain is sympathetic with other improved activity surveys reported for November including the Philadelphia Fed and Empire State surveys.
An 87% correlation over the last ten years between the Chicago PMI and the ISM Composite Index suggests the ISM index will improve when released next Monday.
The indexes of new orders, production, order backlogs, employment and inventories all rose. The delivery speed index fell to the lowest level since February, indicating that delivery speeds rose. 
The prices paid index fell to the lowest level since June.
Visit the Chicago Purchasing Managers website at <a href="http://www.napm-chicago.org/">www.napm-chicago.org.</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/@EF/@EF05/@EF05.HTM">Chicago Purchasing Managers Index, SA</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Barometer</td>
<td>54.3</td>
<td>45.9</td>
<td>42.7</td>
<td>41.4</td>
<td>51.8</td>
<td>56.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>57.2</td>
<td>62.0</td>
<td>40.3</td>
<td>50.5</td>
<td>65.6</td>
<td>57.6</td>
</tr>
</tbody>
</table>
Help Wanted Advertising Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 27, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021127e.jpg" width="353">
The Conference Board&#39;s National Index of Help-Wanted Advertising in October fell to a new cycle low last month. It was the lowest index reading since early 1964.
The proportion of labor markets with rising want-ad volume plummeted to 24% versus 76% in September.
During the last five years there has been a 75% correlation between the level of help-wanted advertising and the monthly change in nonfarm payrolls. 
Job opportunities deteriorated in virtually all of the regions of the country.
The figures are seasonally adjusted.

<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">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Oct &#39;01</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>40</td>
<td>43</td>
<td>46</td>
</tr>
</tbody>
</table>
Consumer Sentiment Up in November 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 27, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021127f.jpg" width="353">
Consumer Sentiment for all of November rose 4.5% from October according to the University of Michigan. The gain was slightly less than expected and did not recoup the sharp decline in October.
Indexes of consumer expectations and current conditions both rose, but the current index rose just slightly.
The University of Michigan survey is not seasonally adjusted.

<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">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Sentiment</td>
<td>84.2</td>
<td>80.6</td>
<td>0.4%</td>
<td>89.2</td>
<td>107.6</td>
<td>105.8</td>
</tr>
</tbody>
</table>
</body>
</html>

Personal income (4.2% AR, YTD) rose as expected last month. It was the weakest gain in income since a slight decline in July. September's figure was unrevised Wage and salary disbursements were unchanged (3.0% AR, YTD) following 0.6% [...]

Personal Income Modest

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021126a.jpg" width="353">
Real GDP last quarter was revised up more than Consensus expectations for a revision to 3.6% growth. Year to date growth in real GDP has been 3.4% (AR).
The effect from inventory accumulation was raised notably, adding nearly one half of a percentage point to growth, as production was stronger than estimated initially.
Corporate profits after tax were strong, rising 8.7%, though they were still down 1.0% y/y. Profits with IVA &amp; CCA fell 7.0% (+12.2% y/y), the third consecutive down quarter. Tax law changes greatly boosted the Capital Consumption Adjustment (depreciation) as of 4Q01. The CCA has fallen sharply since the 4Q peak.
Domestic final demand growth was revised slightly higher led by an upward revision to residential investment, revised to show a 2.1% increase rather than the decline reported initially. Personal consumption growth was revised to 4.1%.
Capital spending declined 0.7% instead of rising 0.6% as reported initially. The decline in business spending on structures was deepened to 20.6%. Spending on equipment was revised up slightly to 6.6% as a result of a raised estimate of spending on information processing equipment &amp; software (14.4%).
The trade sector&#39;s contribution to growth was revised up slightly to zero as export growth was raised to 3.3% (2.5% y/y). Import growth was little changed at 2.3% (6.5% y/y).
Estimated inflation was little changed and down slightly from 1Q02.

<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 &#39;96 $, % AR</a></th>
<th scope="col">3Q&#39;02 (Prelim.)</th>
<th scope="col">3Q&#39;02 (Advance)</th>
<th scope="col">2Q&#39;02 (Final)</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>4.0%</td>
<td>3.1%</td>
<td>1.3%</td>
<td>3.2%</td>
<td>0.3%</td>
<td>3.8%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.4%</td>
<td>-0.1%</td>
<td>1.3%</td>
<td>0.7%</td>
<td>-1.2%</td>
<td>0.1%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>3.5%</td>
<td>3.2%</td>
<td>-0.1%</td>
<td>2.5%</td>
<td>1.5%</td>
<td>3.7%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>-1.4%</td>
<td>-0.5%</td>
<td>-0.1%</td>
<td>-0.6%</td>
<td>-0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>3.4%</td>
<td>3.2%</td>
<td>1.3%</td>
<td>3.0%</td>
<td>1.6%</td>
<td>4.3%</td>
<td>5.2%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Deflator</td>
<td>1.0%</td>
<td>1.1%</td>
<td>1.2%</td>
<td>0.8%</td>
<td>2.4%</td>
<td>2.1%</td>
<td>1.4%</td>
</tr>
</tbody>
</table>
Weekly Chain Store Sales Recover a Bit 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 26, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021126b.jpg" width="353">
Chain store sales rose 0.9% last week according to the BTM-UBSW survey. The rise recouped some of the 1.2% drop the prior week.
With the important Thanksgiving week to go, November sales were down 0.2% from the average sales level a month earlier. October sales fell 1.5% from September.
During the last ten years there has been a 48% correlation between the year-to-year percent change in monthly chain store sales and the change in GAF retail sales.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">11/23/02</th>
<th scope="col">11/16/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>400.8</td>
<td>397.1</td>
<td>2.0%</td>
<td>2.1%</td>
<td>3.4%</td>
<td>6.7%</td>
</tr>
</tbody>
</table>
Consumer Confidence Recovered a Bit 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 26, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021126d.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence this month recovered some of the October plunge. Consensus expectations were for a reading of 85.0. October&#39;s level was revised up slightly.
The 5.7% m/m gain in Consumer Confidence was the first m/m gain since May. It was in line with the rebound in the Consumer Sentiment reading from the University of Michigan.
The rise in confidence reflected higher readings of both the present situation and consumer expectations, but the gain in the present situation reading was just slight.
During the last ten years there has been a 48% correlation between the level of Consumer Confidence and the y/y percent change in real PCE. 
The Conference Board&#39;s survey is conducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>84.1</td>
<td>79.6</td>
<td>-0.9%</td>
<td>106.6</td>
<td>139.0</td>
<td>135.3</td>
</tr>
</tbody>
</table>
New Home Sales Again Strong 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 26, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021126c.jpg" width="353">
Sales of new single family homes remained near record territory last month. Sales fell 4.5% from September, but the strong sales in both August and September were revised higher. Consensus expectations were for a 980,000 sales rate.
Sales were mixed across the country&#146;s regions. In the Northeast, sales fell 32.3% following the huge 88.2% gain a month earlier. Sales in the Midwest fell for the second consecutive month. In the West, sales rose for the third consecutive month and in the South sales recovered a piece of the September decline.
The median price of a new home rose 0.3% to $176,700 (3.2% y/y). Prices in September were revised down.
The new home sales data reflect current sales versus the existing home sales figure which reflect closings on past sales.

<table border="0" cellspacing="0" width="100%">
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<thead>
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<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">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">New Single-Family</td>
<td>1,007</td>
<td>1,054</td>
<td>16.4%</td>
<td>908</td>
<td>880</td>
<td>879</td>
</tr>
</tbody>
</table>
</body>
</html>

Real GDP last quarter was revised up more than Consensus expectations for a revision to 3.6% growth. Year to date growth in real GDP has been 3.4% (AR). The effect from inventory accumulation was raised notably, adding nearly one half [...]

3Q 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/021125b.jpg" width="353">
Sales of existing single family homes rose much more than expected in October. Sales rose 6.1% from September which was revised up slightly.
Sales through October were up 11.0% versus last December. During the first ten months of 2002 sales were up 5.3% versus 2001.
Home sales rose in each of the country&#39;s regions.
The median price of an existing home rose 1.1% to $159,600 (9.8% y/y). The median price in September was revised down.
The figures reflect closings of past home sales. 
The average rate on a conventional 30-year mortgage rose slightly last month versus September to 6.11%. Rates averaged 6.97% during all of last year. The decline this year in mortgage rates has combined with strong growth in disposable income to offset higher home prices and thus raise home affordability.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
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<td class="firstcol">Existing Single-Family</td>
<td>&nbsp;5,770</td>
<td>&nbsp;5,440</td>
<td>9.5%</td>
<td>5,291</td>
<td>5,159</td>
<td>5,193</td>
</tr>
</tbody>
</table>
OECD Leaders Fell Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 25, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021125c.jpg" width="353">
The OECD Index of Leading Indicators fell in each of the three months ending in September, heralding an end to the steady gains in industrial production of this year.
In the European Union, industrial production rose through the summer capped by a strong 1.5% August gain in Germany, but German leading indicators have fallen moderately in each of the last four months. EU leaders also have fallen in each of the last four months.
In the UK, production already has started to move lower, down in three of the four months ended September (-0.7% YTD). Leaders have fallen in the last two months.
Production in France has moved sideways since some respectable monthly gains early this year. Leading indicators in France have fallen in each of the last four months.
Trends in Japan have been firm relative to Europe. Production in Japan fell moderately in September but has gained 5.1% YTD. Leading indicators have been moving steadily higher since last Fall with a modest decline only this past September
The OECD Economic Outlook (Preliminary Edition) for November 2002 can be found by clicking <a href="http://www.oecd.org/EN/document/0,,EN-document-0-nodirectorate-no-2-21578-0,00.html">here</a>.

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Sales of existing single family homes rose much more than expected in October. Sales rose 6.1% from September which was revised up slightly. Sales through October were up 11.0% versus last December. During the first ten months of 2002 [...]

Existing Home Sales Up Again

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

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Tian Yong Woon

In this week’s Letter, we continue to track developments in the Middle East and their implications for Asia. While the recent US–Iran ceasefire initially provided some relief to markets, subsequent complications have kept uncertainty elevated, with no conclusive resumption of trade flows yet through the Strait of Hormuz (chart 1)—flows that are critical to restoring the global energy system to more normal conditions.

Overall, our Blue Chip Economic Indicators panellists have broadly downgraded growth expectations for Asia this year, with the exceptions of China and Taiwan, while inflation forecasts have been revised higher across the board (chart 2). That said, the growth and inflation impact from the conflict are largely viewed as transitory, with most panellists expecting them to last between six and twelve months (chart 3). Nonetheless, central banks in the region appear increasingly reluctant to ease policy further. This is evident in the latest round of decisions, where India, South Korea, and New Zealand all held policy rates steady (chart 4), citing heightened uncertainty stemming from the ongoing conflict.

While inflationary pressures are beginning to build more broadly across the region, China had already been experiencing a pickup in recent months (chart 5). This has been supported by easing producer price deflation and improving industrial profits, alongside policy efforts to curb excessive price competition among producers. Attention now turns to China’s upcoming Q1 GDP release and the full slate of monthly data due later this week (chart 6).

**Middle east conflict developments**
Crude oil prices fell sharply earlier last week following news of a temporary US–Iran ceasefire. That said, the geopolitical backdrop remains highly fragile, as reflected in continued rhetoric from both sides, alongside the US announcement of a naval blockade over the strait after talks failed to yield an agreement. Compounding this, Iran has indicated that it cannot fully reopen the strait, citing uncertainty over the location of sea mines it had previously laid—further complicating any swift normalization of oil flows. Even prior to these latest developments, IMF-tracked shipping volumes had only begun to show tentative signs of recovery and remain well below pre-escalation levels. As such, while the ceasefire provides a welcome reprieve, meaningful economic relief will hinge on a sustained restoration of oil flows—crucially without additional frictions or costs that could impair global trade. Until then, crude prices are likely to remain elevated, albeit possibly off recent highs, weighing on growth while sustaining inflationary pressures. In Asia, where many economies are heavily reliant on oil imports, the region is likely to bear a disproportionate share of these effects.

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**The latest Blue Chip Economic Indicators survey**
In light of recent developments, our latest Blue Chip Economic Indicators (BCEI) survey provides a timely update. It is a monthly poll of forecasters covering key economic indicators across a wide range of economies. As shown in chart 2, panellists have generally trimmed their 2026 growth forecasts across most Asian economies. Taiwan is a notable exception, with growth expectations revised higher, likely continuing to be supported by the ongoing AI-driven expansion. Meanwhile, forecasts for China’s 2026 growth were left unchanged. On the inflation front, expectations for 2026 have been revised higher across all Asian economies, consistent with the pass-through from the recent surge in oil prices. The largest upward revision was seen in Australia (+0.7 ppts), while increases were more modest in economies such as Japan and China (+0.3 ppts each).

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Digging deeper into this month’s BCEI survey, the special questions provide additional insight into panellists’ views. In particular, one question asked about the time horizon over which current energy supply chain disruptions are expected to materially affect global inflation and growth. Panellists largely view the impact as short term (chart 3), with most clustering around a six- to twelve-month window. Smaller shares see effects lasting either less than six months or extending between one and three years, while only a very small minority expect disruptions to persist beyond three years. Overall, while the recent oil price surge represents a clear shock to the global economy, it is widely seen as transitory—temporarily lifting inflation and weighing modestly on growth, but unlikely to drive a fundamental shift in the broader macroeconomic outlook.

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**The week’s central bank decisions**
Turning to last week’s key monetary policy decisions in the region, the central banks of India (RBI), South Korea (BoK), and New Zealand (RBNZ) all kept policy rates unchanged, with several common threads across their communications. Notably, each highlighted the considerable uncertainty stemming from the Middle East conflict, which has already begun to feed into global inflation via higher oil prices. This aligns with broader investor sentiment: the bar for further policy easing has risen given renewed inflationary pressures, while the threshold for a shift toward tightening remains high, as most economies are still far from overheating. On central bank–specific nuances, the RBI emphasized the delicate trade-off between anchoring inflation expectations and minimizing growth sacrifices. The BoK noted that its policy rate is around the neutral level, while flagging potential additional pressure on the won from elevated oil prices. Meanwhile, the RBNZ signalled that near-term inflation is likely to rise even as the economic recovery softens, citing significant supply chain disruptions linked to the Middle East conflict.

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**China and the week ahead**
Lastly, we turn to China and the week ahead. As shown in chart 5, even prior to the Middle East conflict, China had already begun to see a pickup in inflation—an early indication that it may be moving out of its prolonged period of chronically low, or even negative, price pressures. This recent firming in CPI inflation has been accompanied by more sustained growth in industrial profits and a steady improvement in producer price pressures, with PPI inflation recently turning positive after a multi-year stretch of deflation. Together, these trends point to gradually strengthening price dynamics. The shift in inflation also reflects underlying policy efforts to curb excessive price competition among producers, which had weighed on prices for an extended period. Looking ahead, the recent oil price shock could provide an additional boost to inflation, as higher energy costs begin to feed through into future readings.

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Looking ahead to the coming week, Asia faces a packed data calendar, with the spotlight firmly on China as its Q1 GDP release and the usual slate of monthly indicators are due (chart 6). A key focus will be how March data shapes overall Q1 growth, particularly given that activity in the first two months of the year largely surprised to the upside. Investors will also be watching for any early signs of spillovers from the Middle East conflict in the March prints. Retail sales will be closely monitored as a gauge of the effectiveness of policy support for consumption, while developments in house prices will remain in focus as the property downturn continues to unfold gradually.

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Asia

Economic Letter from Asia: A Shifting Consensus

Michael J. Moran

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The Consumer Price Index rose 0.9% in March, easily the sharpest monthly rise since the inflation burst in 2022. Although pronounced in magnitude, the increase was not surprising, as essentially all analysts had built in pressure from the energy sector. Energy prices jumped 10.9%, led by a surge of 21.2% in gasoline prices. Other energy components wiggled: charges for electricity services rose 0.8%, offsetting declines in the prior two months; a drop 0.9% in the price of natural gas services followed sharp increases in the prior three months.

The press report from the Bureau of Labor Statistics showed food prices as unchanged, but calculating the shift to more than one decimal point showed a marginal decline (-0.005%) The dip was almost imperceptible, but it nevertheless was a welcome rarity. The decline occurred in the food-at-home component (i.e. grocery store prices, -0.2%); prices of food away from home (i.e. at restaurants and bars) rose 0.2%.

Core prices rose 0.2 percent, softer than the expected increase of 0.3%. Only two areas posted high-side readings. Apparel prices increased 1.0% after a jump of 1.3% in February, perhaps reflecting hope for an active spring selling season. Airfares jumped 2.7%, hardly surprising in light of recent energy developments. Sharper increases are likely in coming months because of higher fuel prices. Most other core items were contained, including declines of 1.0% in medical-care commodities and 0.4% in the prices of used motor vehicles. Prices of medical-care commodities have been quiet since the middle of 2024; the latest year-over-year change totaled only 0.3%. Prices of used cars and trucks have declined for four consecutive months, leaving a year-over-year decline of 3.2%.

Although core prices were well contained in March, the outlook is uncertain because of potential passthrough from higher energy prices. At the same time, recent trends in the inflation rates for core goods and core services offer a reason to be optimistic, as both are decelerating. As shown in the left chart below, core goods prices in the past six months have been subdued, which has pulled the year-over-year change from 1.5% last fall (August to October) to 1.2% in March. Core service prices, shown in the right chart below, have registered changes of 0.3% or 0.4% in the three months before the 0.2% reading in March. However, results for October and November were restrained, and changes in the past six months in total show deceleration. The year-over-year change of 3.0% in core service prices in March reflects an advance of 3.3% in the first six months of this span (annual rate) and 2.7% in the past six months. The pattern is choppy, but it traces a decelerating trend.

The Consumer Price figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- Gasoline prices drove the energy component higher; electricity prices also contributed.
- Food prices provided a surprise by posting a fractional decline.
- Core prices rose less than expected; both goods and services components were contained.

March CPI: Pressure in the Energy Sector (as Expected); Tame Elsewhere (Surprisingly)

Winnie Tapasanun

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Total factory orders were virtually unchanged m/m in February following a flat reading in January and a 0.4% decline in December, data from the U.S. Census Bureau showed. The Action Economics Forecast Survey had expected a 0.2% m/m February increase. The year-on-year growth rate eased to 3.7% in February, the lowest since October, from 4.2% in January (+3.0% in February 2025), remaining far below the April 2021 peak of 39.6%. Notably, orders for nondefense aircraft & parts plunged 28.6% m/m in February following decreases of 1.7% in January and 22.7% in December, while orders for defense aircraft & parts fell 2.1% after a 26.9% January slump and an 11.8% December jump. Factory orders excluding defense edged up 0.1% (3.6% y/y), the third m/m increase in four months, following a 0.4% January rebound. Factory orders excluding the transportation sector rose 1.2% (2.5% y/y), the strongest of four consecutive m/m gains, after a 0.5% January increase.

Durable goods orders fell 1.3% (+7.4% y/y) in February after a 0.4% decline in January (in line with a 1.4% m/m decrease in the advance report on April 7), marking the fourth m/m decline in five months. The February m/m fall reflected a 5.3% orders drop (+10.2% y/y) in transportation equipment following a 1.9% January decrease, alongside m/m declines of 0.5% (+2.4% y/y) in furniture & related products and 0.3% (+4.9% y/y) in electrical equipment, appliances & components. Other major durable goods orders categories rose m/m in February, led by a 2.4% gain (10.5% y/y) in primary metals, followed by increases of 1.7% (9.5% y/y) in machinery, 0.5% (5.4% y/y) in fabricated metal products, and 0.2% (7.7% y/y) in computers & electronic products.

Nondurable goods orders, which equal nondurable goods shipments, advanced 1.5% (0.1% y/y) in February, the biggest of three successive m/m gains, after a 0.5% increase in January. The February m/m rise was led by a 6.2% jump (-6.4% y/y) in petroleum & coal products, followed by gains of 5.9% (-5.8% y/y) leather & allied products, 1.2% (-2.8% y/y) in textile mills, 1.0% (1.6% y/y) in paper products, 0.9% (1.2% y/y) in plastics & rubber products, 0.6% (3.7% y/y) in beverage & tobacco products, 0.5% (3.2% y/y) in chemical products, 0.4% (3.2% y/y) in apparel, and 0.2% (0.5% y/y) in food products. To the downside, nondurable goods shipments for textile products (-1.4%; -1.5% y/y) and printing (-0.4%; -0.9% y/y) fell m/m in February following their January increases.

Total shipments rose 1.4% (3.5% y/y) in February after gains of 0.7% in January and December, registering the fourth m/m rise in five months. Excluding transportation, shipments advanced 1.4% (2.3% y/y), the fifth m/m gain in six months, after a 0.5% January increase. Shipments of durable goods industries also rose 1.4% (6.9% y/y), up for the fifth time in six months, after a 0.9% January gain. This reflected m/m increases across nearly all durable goods shipments categories, led by a 2.5% rise (10.1% y/y) in primary metals, followed by gains of 1.7% (5.5% y/y) in electrical equipment, appliances & components, 1.7% (4.0% y/y) in furniture & related products, 1.6% (9.7% y/y) in transportation equipment, 1.4% (7.6% y/y) in machinery, 1.3% (3.8% y/y) in nonmetallic mineral products, 1.0% (6.1% y/y) in computers & electronic products, 1.0% (2.5% y/y) in miscellaneous durable goods, and 0.9% (5.4% y/y) in fabricated metal products. In contrast, durable goods shipments for wood products were the only category with a monthly decline in February, easing 0.1% (-2.9% y/y) following a flat January reading.

Unfilled orders edged up 0.1% (11.1% y/y) in February, the smallest of seven consecutive m/m increases, following a 0.6% rise in January. Excluding transportation, unfilled orders grew 0.2% (1.9% y/y), up for the seventh straight month, after a 0.3% January increase. Backlogs of durable goods ticked up 0.1% (11.1% y/y) in February, led by gains of 0.5% (2.0% y/y) in machinery and 0.2% (4.9% y/y) in electrical equipment, appliances & components, partially offset by declines of 0.7% (+1.5% y/y) in furniture & related products and 0.1% (+2.3% y/y) in primary metals.

Inventories inched up 0.1% (0.8% y/y) in February, the fourth successive m/m increase, following matching 0.1% gains in January and December. Excluding transportation, inventories edged up 0.1% (1.0% y/y) after no change in January. Durable goods inventories increased 0.1% (1.8% y/y) in February after rising 0.2% for four straight months, while nondurable goods inventories were virtually unchanged (-0.8% y/y) after declining 0.3% in January and December.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Factory orders virtually unchanged (+3.7% y/y) in Feb. for second straight month; still 7.6% above the Jan. ’24 low.
- Durable goods orders (-1.3%), fourth m/m fall in five mths.; nondurable goods orders (+1.5%), largest of three successive m/m gains; shipments (+1.4%), fourth m/m rise in five mths.
- Transportation orders -5.3% m/m, led by a 28.6% plunge in nondefense aircraft orders.
- Unfilled orders +0.1%, smallest of seven straight m/m increases.
- Inventories +0.1%, holding within a narrow 0.1%-0.2% range for four consecutive mths.

U.S. Factory Orders Flat in February on Weak Nondefense Aircraft Orders

Andrew Cates

**Positive Growth Surprises, Negative Inflation Surprises—For Now**
The global macro backdrop heading into the latest Middle East shock was, by recent standards, relatively constructive. As the chart shows, growth data had been consistently surprising to the upside, while inflation surprises have been in negative territory—an unusually benign combination suggesting resilient activity alongside easing price pressures. What is striking, however, is that—at least through March and into early April—this pattern has not yet been meaningfully dislodged. For now, the data flow still reflects a world that was stabilising rather than deteriorating. That said, this is almost certainly a lagging signal. Supply-side shocks of this nature—particularly those centred on energy—tend to work with a delay but can be highly disruptive once they feed through. The risk, therefore, is that the current “goldilocks” surprise dynamic proves short-lived as higher energy costs, supply chain frictions and rising uncertainty begin to reshape the incoming data in the weeks ahead.

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**Monetary Policy Expectations Shift as Easing Bets Are Repriced**
How policymakers respond to the evolving situation in the Middle East will be critical in shaping both market dynamics and the broader global outlook. This chart, based on the latest April Blue Chip Financial Forecasts survey, suggests that expectations are already beginning to shift. Forecasters are now less inclined to anticipate policy easing in the period ahead—particularly in the euro area, where expectations for rate cuts have been scaled back. Similarly, some of the easing previously priced for the Federal Reserve and the Bank of England has been pared back over the next 12 months. While this is not yet a full pivot toward tightening, it does point to a more cautious policy backdrop, reflecting the risk that renewed energy-driven inflation pressures could constrain central banks’ ability to support growth.

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**Delay, Don’t Tighten: Central Banks’ Likely Playbook**
If the previous chart highlights a shift in policy expectations, this one gives a clearer sense of the reaction function underpinning it. When asked how central banks would respond if energy-driven inflation proves more persistent, most panellists point not to renewed tightening, but to a more cautious delay in easing. In other words, the hurdle for rate cuts has risen, even if the bar for  hikes remains relatively high. This distinction matters. It suggests that policymakers are likely to treat the shock as a supply-driven inflation impulse—one that complicates the outlook but does not automatically warrant aggressive tightening. At the same time, the responses underscore a second important theme: divergence. A sizeable share of forecasters expect policy paths to vary significantly across regions, reflecting differences in energy exposure, inflation dynamics and domestic growth conditions. Taken together, the message is one of constrained flexibility. Central banks may want to support growth, but persistent energy pressures could keep them on hold for longer than previously anticipated—reinforcing the more cautious policy outlook already evident in market pricing.

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**Markets Signal Fiscal Concern, Not Inflation Panic**
If central banks are likely to proceed cautiously, financial markets are already beginning to draw their own conclusions. This chart shows that the recent adjustment in US Treasury markets has been driven primarily by a rise in real yields rather than a meaningful increase in inflation expectations. In other words, markets are not yet pricing a loss of monetary policy credibility or a sharp unanchoring of inflation expectations. Instead, the move points more toward concerns around the broader policy mix—particularly the fiscal backdrop and the potential for increased borrowing needs in an environment of heightened geopolitical risk. This distinction is important. A rise in inflation expectations would suggest fears of central banks falling behind the curve. What we are seeing instead is a repricing of real rates, consistent with tighter financial conditions and a higher risk premium. For now, at least, markets appear to view the shock less as a classic inflation spiral and more as a development that complicates the growth outlook and places greater strain on policy frameworks—especially on the fiscal side.

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**Electricity Prices Reflect Energy Dependence**
The initial response in electricity markets since the Middle East disruption has followed a familiar pattern. Economies with greater domestic energy capacity—such as Scandinavia and, to a lesser extent, the US—have seen relatively contained electricity prices. By contrast, those more reliant on imported energy—most notably the UK and parts of Europe—continue to face significantly higher costs

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**Generation Capacity Determines Energy Resilience**
These price dynamics are closely linked to underlying differences in electricity generation capacity. As the sixth chart shows, countries with higher per capita electricity production—again including Scandinavia and the US—are structurally better positioned to absorb external shocks. In contrast, economies with more limited domestic generation capacity, such as the UK and Germany, are inherently more exposed to fluctuations in global energy markets. This structural divide is likely to prove increasingly important in the period ahead, influencing not just near-term inflation outcomes but also the relative resilience of growth across economies as energy costs remain volatile.

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Amid further tentative signs of de-escalation—most notably President Trump’s decision on April 7th to step back from further escalation—financial markets have stabilised somewhat, but the macroeconomic implications of the Middle East crisis remain highly uncertain. As our charts show, the global economy entered this shock from a position of relative strength, with positive growth surprises and easing inflation pressures still evident in the data (chart 1). However, that benign backdrop now looks vulnerable. Central banks are already reassessing the outlook, with expectations for policy easing being pared back (chart 2) and a growing consensus that any response to persistent energy-driven inflation will likely involve delaying cuts rather than tightening aggressively—albeit with significant regional divergence (chart 3). Financial markets, for their part, are not yet signalling a loss of inflation control, but the rise in real yields suggests increasing concern around the broader policy mix, particularly fiscal pressures (chart 4). Finally, the adjustment to the shock is unlikely to be uniform. Structural differences in domestic energy capacity are already driving wide divergences in electricity prices, leaving more import-dependent economies exposed to higher costs and sharper trade-offs between growth and inflation (charts 5 and 6). Taken together, the message is clear: even if geopolitical tensions ease, the economic aftershocks are likely to be uneven, persistent and increasingly shaped by structural constraints.

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Charts of the Week: From Oil Shock to Policy Dilemma

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This monthly report is always packed with information relating to the household sector. At this time, most observers will probably be most interested in price developments, and the results for February were a bit unsettling. The headline price index rose 0.4%, influenced by a jump of 0.8% in energy prices. This increase was largely anticipated and not especially troubling when viewed in isolation. Energy prices have shown little net change in the past two years, and the latest reading of the index was comfortably within the recent range of observations. However, given developments in the Middle East, energy prices undoubtedly will surge out of that recent range in the months ahead.

Core PCE prices also rose 0.4%, a touch firmer than the expected increase of 0.3%. An increase of 0.4% in core inflation is a quick pace even when viewed in Isolation, but this advance followed a similar increase in January, and the December reading almost rounded to 0.4%. These recent changes pulled the year-over-year increase in core prices to 3.0%, a full percentage point above the Federal Reserve’s target.

Nominal personal income dipped 0.1% in February, which translated to a decline of 0.4% after adjusting for inflation (almost rounding to -0.5%). The softness is striking, but a review of the detail suggests that special factors played a role. Much of the weakness reflected a decline of 1.7% in dividend income, which followed a jump of 1.9% in January. Dividend payments in the prior two years followed the same pattern, leaving one to suspect that seasonal adjustment has gone awry. Government transfer payments also declined, with the miscellaneous category accounting for most of the drop. Medicaid payments also fell, marking the fifth consecutive decline, most likely driven by the tightening of provisions included in the One Big Beautiful Bill Act.

Nominal consumer expenditures rose 0.5%, a seemingly strong result, but the change amounted to only 0.1% in real terms. The small increase followed a flat reading in January and increases of only 0.1% in November and December. Consumers spent actively in the second and third quarters of last year, but they have become cautious recently. The data in hand suggest real outlay growth of approximately 1.0% in the first quarter, slower than the average pace of 3.0% in the middle of last year and 1.9% in 2025-Q4.

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- The energy component contributed to a high-side reading on the price index for personal consumption expenditures; the core component was firm as well.
- Consumer spending showed signs of slowing.