Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061030a.jpg" width="353">
Personal income beat expectations last month and rose 0.5% after an upwardly revised 0.4% August increase. Despite these firm gains, the three month income rise at 5.5% (AR) is down from near 10% growth early this year.
Disposable personal income increased 0.5% (5.9% y/y) after an upwardly revised 0.5% August increase. In contrast to the slowdown in total income, the three month growth in take home pay has been stable at 6.4% (AR), helped by very recent weakness in personal taxes (+13.3% y/y).
Adjusted for recently lower prices, disposable personal income increased 0.8% (3.9% y/y) after two months of 0.2% gain. Real disposable income grew 3.7% (AR) last quarter after a 1.7% 2Q increase. Real disposable income per capita jumped 0.7% (3.0% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061030b.jpg" width="353">
Personal consumption rose 0.1%. Expectations had been for a 0.3% increase. When adjusted for the 0.3% decline in prices, real consumer spending rose 0.4% after a 0.1% August decline. Unit vehicle sales in September recovered half of the prior month&#39;s decline with a 3.5% increase. Real PCE in 3Q grew 3.1% (AR), better than the 2.6% gain during 2Q.
The PCE chain price index fell 0.3% due to last month&#39;s 13.4% decline in retail gasoline prices. Gasoline prices in October are down another 11.9% m/m. Less food &amp; energy prices rose an expected 0.2% but the August gain was revised higher to 0.3%. The three month change in core prices is flat-to-lower since March at 2.3% (AR), helped by falling durable and nondurable goods prices.
Wage &amp; salary disbursements surged 0.5% (7.6% y/y) after the meager 0.2% August increase. Wages in the private service-producing industries surged 0.8% (8.4% y/y) but factory sector wages fell 0.1% (+6.7% y/y) for the second decline in the last three months.
Interest income rose 0.1% (8.7% y/y) for the third straight month while dividend income jumped another 1.1% (11.5% y/y).
The personal savings rate was a slightly less negative -0.2% last month and so far in 2006 has averaged -0.5%, the same as last year. Should the Decline in the Personal Saving Rate Be a Cause for Concern? from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/2Q06garn.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/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.5%</td>
<td>0.4%</td>
<td>6.8%</td>
<td>5.2%</td>
<td>6.2%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.1%</td>
<td>0.2%</td>
<td>5.5%</td>
<td>6.5%</td>
<td>6.6%</td>
<td>4.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>-0.2%</td>
<td>-0.5%</td>
<td>-0.5% (Sept. &#39;05)</td>
<td>-0.4%</td>
<td>2.0%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>-0.3%</td>
<td>0.3%</td>
<td>2.0%</td>
<td>2.9%</td>
<td>2.6%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.4%</td>
<td>2.1%</td>
<td>2.0%</td>
<td>1.4%</td>
</tr>
</tbody>
</table>
Renewed Interest in the Money Supply??  
by <a href="/comment/Curley.html">Louise Curley</a> October 30, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061030h.jpg" width="353">
With the exception of the European Central Bank, which explicitly uses the money supply to gauge inflation, most central bankers have down played the role of money in forming monetary policy in recent years. In fact, in the United States, the Board of Governors of the Federal Reserve System discontinued publication of its money supply measure--M3-- on March 23, 2006, stating that M3 had not played a leading role in monetary policy process for many years.
There is some indication that more emphasis is beginning to be placed on the role of money in the economy by at least one central bank. In the United Kingdom, the Governor of the Bank of England (BOE), Mervyn King, recently referred to the rising money supply as a factor increasing inflationary pressures. Indeed, M4, the preferred measure of the money supply in the UK, has been rising at year- over- year levels in excess of 10% since May of 2005. The latest increase in September was 14.4%, the highest rate of increase since September, 1990. This in spite of the 25 basis point rise in the BOE&#39;s key interest rate to 4.75% on August 3rd. The year- over- year increases in the money supply in the UK and the Euro Zone are shown in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061030g.jpg" width="353">
Plentiful and relatively easy money fuels investment in real assets and in the financial markets. If excessive, there is the danger of creating bubbles. Although the housing market in the UK has cooled off from the fevered activity of the last half of 2005, the August interest rate increase has failed to dampen renewed activity in the housing market as attested by the unexpected rise in mortgage approvals in September. Housing prices have also been gaining strength since early this year. In September the price of the average house was up 1.3% from August and 8.3% from September, 2005. The year- over- year changes in the value of mortgage approvals are shown in the second chart.
Should the Monetary Policy Committee of BOE announce an increase in its key interest rate when it next meets on November 9th, it is likely that the persistent rise in the money supply will have played a role in the decision.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
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<tr>
<th scope="col" class="firstcol"></th>
<th scope="col">Sep&nbsp; 06</th>
<th scope="col">Aug 06</th>
<th scope="col">Sep 05</th>
<th scope="col">M/M %&nbsp;&nbsp;</th>
<th scope="col">Y/Y %&nbsp;&nbsp;&nbsp;</th>
<th scope="col">2005&nbsp;&nbsp; %</th>
<th scope="col">2004 %</th>
<th scope="col">2003&nbsp; %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Money Supply&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;UK M4&nbsp; (Bil. Pounds)</td>
<td>1,459</td>
<td>1,434.8</td>
<td>1,275.2</td>
<td>1.70</td>
<td>14.43</td>
<td>12.66</td>
<td>8.75</td>
<td>7.18</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Euro Zone M3 (Bil Euros)</td>
<td>7,564.7</td>
<td>7,464.7</td>
<td>6,966.0</td>
<td>1.34</td>
<td>8.59</td>
<td>8.17</td>
<td>6.38</td>
<td>6.50</td>
</tr>
<tr>
<td class="firstcol">UK Mortgage Approvals (Mil Pounds)</td>
<td>30,254</td>
<td>29,457</td>
<td>27,314</td>
<td>2.70</td>
<td>10.76</td>
<td>6.17</td>
<td>-1.21</td>
<td>22.78</td>
</tr>
<tr class="odd">
<td class="firstcol">UK House Prices (Q1,1993=100)</td>
<td>336.8</td>
<td>332.5</td>
<td>311.1</td>
<td>1.29</td>
<td>8.26</td>
<td>5.13</td>
<td>17.10</td>
<td>19.47</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>


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Personal income beat expectations last month and rose 0.5% after an upwardly revised 0.4% August increase. Despite these firm gains, the three month income rise at 5.5% (AR) is down from near 10% growth early this year. Disposable [...]

U.S. Personal Income Firm, Core Price Increases Stable-to-Lower

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/061027g.jpg" width="353">
Employment in Spain expanded &quot;only&quot; 3.7%, year-on-year, in Q3, less than the 4.2% and 4.9% of Q2 and Q1, respectively. Even so, this is still 2.3 times as fast as the growth in working-age population (age 16 and over) and unemployment continues to fall. In Q3, the unemployment rate was just 8.2%, the lowest since Q2 1979, more than 27 years ago. Further, at that time, the labor force participation rate was only 49.3%, about 9 points lower than the latest 58.4%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061027h.jpg" width="353">
The industrial structure of Spanish employment somewhat resembles that in many Western countries. The number of &quot;industry&quot; jobs has been nearly flat for the last few years. But as seen in the second graph, those jobs had been growing before this: from 1996 to 2002 they expanded at more than a 3.5% annual rate. At the same time, in all of Europe, industry employment was flat, and since the middle of 2001 it has fallen consistently. The service sector in both regions has shown gains, though. For all of Europe, this expansion has been between 2% and 3%, with some slowing recently. In Spain, though, these jobs have been growing at about 5%, and recent periods have maintained that pace. Employment opportunities in Spain look favorable.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061027i.jpg" width="353">
On the unemployment side of the ledger, we can&#39;t help but recall the riots in France among young frustrated &quot;wannabe&quot; workers just about a year ago. What&#39;s the situation in Spain? It seems to be some better. Unemployment rates for ages under 25 are far higher than for the general population, to be sure, with Q3 at 16.9%. But this level includes some improvement. Two years ago, the rate was 21.6%. In the year from Q3 2004 to Q3 2005, employment among this group actually surged by 8.7%; it has held steady at last year&#39;s level across the latest four quarters. The resulting unemployment conditions are shown in the last graph, which contains harmonized data compiled by Eurostat and reported yesterday through September. Spain&#39;s youth unemployment is now about equal to that of Europe as a whole, a substantial improvement relative to the far higher rates of three years ago and more.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SPAIN/@S06/@S06.HTM">Spain</a><a href="http://www.haverselect.com/dlx/SPAIN/@S06/@S06.HTM">, NSA, Millions</a></th>
<th scope="col">3Q 2006</th>
<th scope="col">2Q 2006</th>
<th scope="col">Q3 2005</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Employment</td>
<td>19.90</td>
<td>19.69</td>
<td>19.19</td>
<td>18.97</td>
<td>17.97</td>
<td>17.30</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Industry</td>
<td>3.29</td>
<td>3.29</td>
<td>3.31</td>
<td>3.28</td>
<td>3.21</td>
<td>3.20</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Construction</td>
<td>2.59</td>
<td>2.52</td>
<td>2.40</td>
<td>2.36</td>
<td>2.25</td>
<td>2.10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services</td>
<td>13.10</td>
<td>12.93</td>
<td>12.49</td>
<td>12.34</td>
<td>11.52</td>
<td>11.00</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment</td>
<td>1.76</td>
<td>1.84</td>
<td>1.76</td>
<td>1.91</td>
<td>2.21</td>
<td>2.24</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>8.2</td>
<td>8.5</td>
<td>8.4</td>
<td>9.1</td>
<td>11.0</td>
<td>11.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Participation Rate (%)</td>
<td>58.4</td>
<td>58.3</td>
<td>57.4</td>
<td>57.4</td>
<td>56.4</td>
<td>55.5</td>
</tr>
</tbody>
</table>
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Employment in Spain expanded "only" 3.7%, year-on-year, in Q3, less than the 4.2% and 4.9% of Q2 and Q1, respectively. Even so, this is still 2.3 times as fast as the growth in working-age population (age 16 and over) and unemployment [...]

Spanish Labor Markets Remain Vigorous

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061027d.jpg" width="353">
The University of Michigan&#39;s full month reading of October consumer sentiment rose 9.6% from September to 93.6 after a preliminary indication of an 8.1% rise. The gain exceeded Consensus expectations for a reading of 92.5 and was to the highest level in over a year.
During the last ten years there has been a 76% correlation between the level of consumer sentiment and the y/y change in real consumer spending and during those ten years sentiment has a 68% correlation with the change in nonfarm payrolls.
Expected inflation during the next year notched up to 3.7% from 3.5% in the preliminary report and from 3.6% in September. Since 1980 there has been an inverse 63% correlation between the level of sentiment and expected inflation during the next year. The five to ten year expected rate of inflation also rose m/m to 3.5% but that was down slightly from the preliminary read.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061027e.jpg" width="353">
Expectations for the economy rose 8.4% m/m to the highest level since July of last year. Expected business conditions next year rose 7.4% (17.0% y/y) and over the next five years also rose 5.4% (34.7% y/y) to the highest since July 2005. The expected change in personal finances improved 7.4% (17.0% y/y).
The reading of current economic conditions added to the preliminary gain and surged 11.1% m/m, rising to the highest level since April. The current read of personal finances (22.9% y/y) rose to the best level since April and perceived buying conditions for large household goods recovered all of the prior month&#39;s decline and rose 15.1% y/y.
Consumers&#39; opinion about gov&#39;t economic policy rose 6.1% (11.5% y/y) after three months having been unchanged. Twenty percent of respondents indicated that a good job was being done, the highest percentage in over a year. Thirty three percent felt that a poor job was being down, the lowest since April.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061027f.jpg" width="353">
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.
Consumption Amenities and City Crowdedness from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/Publicat/Reswkpap/PDF/RWP06-10.pdf"> here</a>.
Targeting Inflation and the Fiscal Balance: What is the Optimal Policy Mix? also from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/Publicat/Reswkpap/PDF/RWP06-07.pdf"> here</a>. 

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">October (Final)</th>
<th scope="col">October (Prelim.)</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>93.6</td>
<td>92.3</td>
<td>85.4</td>
<td>26.1%</td>
<td>88.6</td>
<td>95.2</td>
<td>87.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>107.3</td>
<td>106.1</td>
<td>96.6</td>
<td>17.7%</td>
<td>105.9</td>
<td>105.6</td>
<td>97.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>84.8</td>
<td>83.4</td>
<td>78.2</td>
<td>34.2%</td>
<td>77.4</td>
<td>88.5</td>
<td>81.4</td>
</tr>
</tbody>
</table>
</body>
</html>

The University of Michigan's full month reading of October consumer sentiment rose 9.6% from September to 93.6 after a preliminary indication of an 8.1% rise. The gain exceeded Consensus expectations for a reading of 92.5 and was to [...]

U.S. Consumer Sentiment Improved Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061027a.jpg" width="353">
U.S. real GDP grew just 1.6% (AR) last quarter, well below the 3.5% average of the prior four quarters and the weakest since 1Q 2003. Growth even fell short of Consensus expectations for a 2.5% rise.
Virtually all of the disappointment was due to housing. Residential investment fell 17.4% (AR, -7.7% y/y) after an 11.1% decline during 2Q. That decline alone sapped 1.1 percentage points from GDP growth last quarter and it was the largest quarterly subtraction made by housing since 1981.
A deterioration in the net export deficit also subtracted 0.6 percentage points from last quarter&#39;s growth in real GDP. That followed a 0.4 point addition during 2Q. Exports grew 6.5% (9.0% y/y) but import growth outpaced that with a 7.8% (7.8% y/y) rise. It was paced by a 13.4% rise in nonauto consumer goods, a 15.4% rise in capital goods and an 18.6% rise in industrial supplies &amp; materials other than petroleum.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061027b.jpg" width="353">
Growth in final sales to domestic purchasers overall accelerated to 2.2% despite the weakness in housing. The acceleration was due to 3.1% (2.8% y/y) growth in real personal consumption expenditures which was up from 2.6% growth during 2Q while quarterly growth in business fixed investment nearly doubled to 8.6% (7.9% y/y). Equipment &amp; software investment recovered after a 2Q decline with a 6.5% (5.7% y/y) gain. Notably strong was business investment in structures, up 14.1% (13.7% y/y).
Government expenditures also picked up last quarter and grew 1.9% (1.6% y/y) though the Federal government&#39;s spending on defense fell 0.7% (-1.1% y/y), the third decline in the last four quarters. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061027c.jpg" width="353">
A lessened pace of investment in inventories subtracted 0.1 percentage points from GDP growth following a 0.4 point addition during 2Q.
The GDP chain price index rose just 1.8%, its weakest quarterly advance in over three years. The PCE chain price index grew just 2.5% (2.9% y/y). That increase was held back by quarterly declines in prices of furniture (-4.3% y/y) and apparel (+0.1% y/y). The chain price for residential investment fell 0.4% (+3.1% y/y), the first quarterly decline since early 2002.
Barreling Down the Road To Recession? from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20060901/cover.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">3Q &#39;06</th>
<th scope="col">2Q &#39;06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>1.6%</td>
<td>2.6%</td>
<td>2.9%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-0.1%</td>
<td>0.4%</td>
<td>0.6%</td>
<td>-0.3%</td>
<td>0.4%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>1.7%</td>
<td>2.1%</td>
<td>2.3%</td>
<td>3.5%</td>
<td>3.5%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign Trade Effect</td>
<td>-0.6%</td>
<td>0.4%</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>2.2%</td>
<td>1.6%</td>
<td>2.4%</td>
<td>3.6%</td>
<td>4.0%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>1.8%</td>
<td>3.3%</td>
<td>2.9%</td>
<td>3.0%</td>
<td>2.8%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>


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U.S. real GDP grew just 1.6% (AR) last quarter, well below the 3.5% average of the prior four quarters and the weakest since 1Q 2003. Growth even fell short of Consensus expectations for a 2.5% rise. Virtually all of the [...]

US GDP Growth Weakest Since 2003

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061027a.jpg" width="353">
U.S. real GDP grew just 1.6% (AR) last quarter, well below the 3.5% average of the prior four quarters and the weakest since 1Q 2003. Growth even fell short of Consensus expectations for a 2.5% rise.
Virtually all of the disappointment was due to housing. Residential investment fell 17.4% (AR, -7.7% y/y) after an 11.1% decline during 2Q. That decline alone sapped 1.1 percentage points from GDP growth last quarter and it was the largest quarterly subtraction made by housing since 1981.
A deterioration in the net export deficit also subtracted 0.6 percentage points from last quarter&#39;s growth in real GDP. That followed a 0.4 point addition during 2Q. Exports grew 6.5% (9.0% y/y) but import growth outpaced that with a 7.8% (7.8% y/y) rise. It was paced by a 13.4% rise in nonauto consumer goods, a 15.4% rise in capital goods and an 18.6% rise in industrial supplies &amp; materials other than petroleum.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061027b.jpg" width="353">
Growth in final sales to domestic purchasers overall accelerated to 2.2% despite the weakness in housing. The acceleration was due to 3.1% (2.8% y/y) growth in real personal consumption expenditures which was up from 2.6% growth during 2Q while quarterly growth in business fixed investment nearly doubled to 8.6% (7.9% y/y). Equipment &amp; software investment recovered after a 2Q decline with a 6.5% (5.7% y/y) gain. Notably strong was business investment in structures, up 14.1% (13.7% y/y).
Government expenditures also picked up last quarter and grew 1.9% (1.6% y/y) though the Federal government&#39;s spending on defense fell 0.7% (-1.1% y/y), the third decline in the last four quarters. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061027c.jpg" width="353">
A lessened pace of investment in inventories subtracted 0.1 percentage points from GDP growth following a 0.4 point addition during 2Q.
The GDP chain price index rose just 1.8%, its weakest quarterly advance in over three years. The PCE chain price index grew just 2.5% (2.9% y/y). That increase was held back by quarterly declines in prices of furniture (-4.3% y/y) and apparel (+0.1% y/y). The chain price for residential investment fell 0.4% (+3.1% y/y), the first quarterly decline since early 2002.
Barreling Down the Road To Recession? from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20060901/cover.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">3Q &#39;06</th>
<th scope="col">2Q &#39;06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>1.6%</td>
<td>2.6%</td>
<td>2.9%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-0.1%</td>
<td>0.4%</td>
<td>0.6%</td>
<td>-0.3%</td>
<td>0.4%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>1.7%</td>
<td>2.1%</td>
<td>2.3%</td>
<td>3.5%</td>
<td>3.5%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign Trade Effect</td>
<td>-0.6%</td>
<td>0.4%</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>2.2%</td>
<td>1.6%</td>
<td>2.4%</td>
<td>3.6%</td>
<td>4.0%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>1.8%</td>
<td>3.3%</td>
<td>2.9%</td>
<td>3.0%</td>
<td>2.8%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Improved Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 27, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061027d.jpg" width="353">
The University of Michigan&#39;s full month reading of October consumer sentiment rose 9.6% from September to 93.6 after a preliminary indication of an 8.1% rise. The gain exceeded Consensus expectations for a reading of 92.5 and was to the highest level in over a year.
During the last ten years there has been a 76% correlation between the level of consumer sentiment and the y/y change in real consumer spending and during those ten years sentiment has a 68% correlation with the change in nonfarm payrolls.
Expected inflation during the next year notched up to 3.7% from 3.5% in the preliminary report and from 3.6% in September. Since 1980 there has been an inverse 63% correlation between the level of sentiment and expected inflation during the next year. The five to ten year expected rate of inflation also rose m/m to 3.5% but that was down slightly from the preliminary read.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061027e.jpg" width="353">
Expectations for the economy rose 8.4% m/m to the highest level since July of last year. Expected business conditions next year rose 7.4% (17.0% y/y) and over the next five years also rose 5.4% (34.7% y/y) to the highest since July 2005. The expected change in personal finances improved 7.4% (17.0% y/y).
The reading of current economic conditions added to the preliminary gain and surged 11.1% m/m, rising to the highest level since April. The current read of personal finances (22.9% y/y) rose to the best level since April and perceived buying conditions for large household goods recovered all of the prior month&#39;s decline and rose 15.1% y/y.
Consumers&#39; opinion about gov&#39;t economic policy rose 6.1% (11.5% y/y) after three months having been unchanged. Twenty percent of respondents indicated that a good job was being done, the highest percentage in over a year. Thirty three percent felt that a poor job was being down, the lowest since April.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061027f.jpg" width="353">
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.
Consumption Amenities and City Crowdedness from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/Publicat/Reswkpap/PDF/RWP06-10.pdf"> here</a>.
Targeting Inflation and the Fiscal Balance: What is the Optimal Policy Mix? also from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/Publicat/Reswkpap/PDF/RWP06-07.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/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">October (Final)</th>
<th scope="col">October (Prelim.)</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>93.6</td>
<td>92.3</td>
<td>85.4</td>
<td>26.1%</td>
<td>88.6</td>
<td>95.2</td>
<td>87.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>107.3</td>
<td>106.1</td>
<td>96.6</td>
<td>17.7%</td>
<td>105.9</td>
<td>105.6</td>
<td>97.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>84.8</td>
<td>83.4</td>
<td>78.2</td>
<td>34.2%</td>
<td>77.4</td>
<td>88.5</td>
<td>81.4</td>
</tr>
</tbody>
</table>
Spanish Labor Markets Remain Vigorous 
by <a href="/comment/Stone.html">Carol Stone</a> October 27, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061027g.jpg" width="353">
Employment in Spain expanded &quot;only&quot; 3.7%, year-on-year, in Q3, less than the 4.2% and 4.9% of Q2 and Q1, respectively. Even so, this is still 2.3 times as fast as the growth in working-age population (age 16 and over) and unemployment continues to fall. In Q3, the unemployment rate was just 8.2%, the lowest since Q2 1979, more than 27 years ago. Further, at that time, the labor force participation rate was only 49.3%, about 9 points lower than the latest 58.4%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061027h.jpg" width="353">
The industrial structure of Spanish employment somewhat resembles that in many Western countries. The number of &quot;industry&quot; jobs has been nearly flat for the last few years. But as seen in the second graph, those jobs had been growing before this: from 1996 to 2002 they expanded at more than a 3.5% annual rate. At the same time, in all of Europe, industry employment was flat, and since the middle of 2001 it has fallen consistently. The service sector in both regions has shown gains, though. For all of Europe, this expansion has been between 2% and 3%, with some slowing recently. In Spain, though, these jobs have been growing at about 5%, and recent periods have maintained that pace. Employment opportunities in Spain look favorable.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061027i.jpg" width="353">
On the unemployment side of the ledger, we can&#39;t help but recall the riots in France among young frustrated &quot;wannabe&quot; workers just about a year ago. What&#39;s the situation in Spain? It seems to be some better. Unemployment rates for ages under 25 are far higher than for the general population, to be sure, with Q3 at 16.9%. But this level includes some improvement. Two years ago, the rate was 21.6%. In the year from Q3 2004 to Q3 2005, employment among this group actually surged by 8.7%; it has held steady at last year&#39;s level across the latest four quarters. The resulting unemployment conditions are shown in the last graph, which contains harmonized data compiled by Eurostat and reported yesterday through September. Spain&#39;s youth unemployment is now about equal to that of Europe as a whole, a substantial improvement relative to the far higher rates of three years ago and more.

<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/SPAIN/@S06/@S06.HTM">Spain</a><a href="http://www.haverselect.com/dlx/SPAIN/@S06/@S06.HTM">, NSA, Millions</a></th>
<th scope="col">3Q 2006</th>
<th scope="col">2Q 2006</th>
<th scope="col">Q3 2005</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Employment</td>
<td>19.90</td>
<td>19.69</td>
<td>19.19</td>
<td>18.97</td>
<td>17.97</td>
<td>17.30</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Industry</td>
<td>3.29</td>
<td>3.29</td>
<td>3.31</td>
<td>3.28</td>
<td>3.21</td>
<td>3.20</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Construction</td>
<td>2.59</td>
<td>2.52</td>
<td>2.40</td>
<td>2.36</td>
<td>2.25</td>
<td>2.10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services</td>
<td>13.10</td>
<td>12.93</td>
<td>12.49</td>
<td>12.34</td>
<td>11.52</td>
<td>11.00</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment</td>
<td>1.76</td>
<td>1.84</td>
<td>1.76</td>
<td>1.91</td>
<td>2.21</td>
<td>2.24</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>8.2</td>
<td>8.5</td>
<td>8.4</td>
<td>9.1</td>
<td>11.0</td>
<td>11.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Participation Rate (%)</td>
<td>58.4</td>
<td>58.3</td>
<td>57.4</td>
<td>57.4</td>
<td>56.4</td>
<td>55.5</td>
</tr>
</tbody>
</table>


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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061026f.jpg" width="353">
It&#39;s almost unanimous. Housing is slumping in almost every region of the country. The Census Bureau reported building permit data today for September and the year-to-date for regions, divisions, states and metro areas as well as counties and individual &quot;permit-issuing places&quot;, i.e., towns. These data include the number of units, the number of separate buildings and their aggregate value. Haver maintains these in the PERMITY and other PERMIT databases, which are part of our REGIONAL offerings.
As we know, total building permits for the nation have fallen in every month since January; September&#39;s were off 5.2% from August (seasonally adjusted) and 31% from a year ago (not seasonally adjusted). Single-family housing permits were down 5.1% from August and 35.6% from September 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061026g.jpg" width="353">
The Regional permit data for single-family houses show a year-to-date decline of 13.9% from the comparable period of 2005. Every &quot;division&quot; of the country except &quot;West South Central&quot; has participated in this contraction. The biggest declines in single-family units have been in the Pacific states and the East North Central, both down about 22%. In value terms, the total dollar value of building permits in the Pacific states is down 18.9% and in the East North Central division, 17.8%. The Pacific states include California, Washington, Oregon, Alaska and Hawaii. The East North Central group includes Illinois, Indiana, Michigan, Ohio and Wisconsin.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061026h.jpg" width="353">
The West South Central division comprises Arkansas, Louisiana, Oklahoma and Texas. This area is benefiting from the surge in energy prices and is also the subject of much rebuilding effort after last year&#39;s hurricanes. This latter effect is not yet fully evident, though; permits in New Orleans are still very low, but they have rebounded in Gulfport-Biloxi, Mississippi and Lafayette, Louisiana. In Texas, the energy factor is a notable stimulus: there are major gains in the Midland-Odessa areas in the West Texas oil fields and also in Houston, Dallas and Waco. Even so, in the West South Central division as a whole, the momentum is flagging. In the East South Central States, which include Mississippi plus Alabama, Kentucky and Tennessee, the number of permits is down slightly and their value is up. For all Census divisions, the value of permits is not as weak as the number, indicating persisting increases in the value per unit. We did not examine the month-by-month data to see if this is ongoing or if it has petered out as the year has worn on for the weakening housing market and as other home price measures show outright declines. Indeed, the year-on-year price declines in national data for new and existing home sales set in just in the last couple of months, so the year-to-date could still be up from last year. This isn&#39;t likely to last much longer, though. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/HOUSING.HTM">Building Permits, Single-Family Houses</a><a href="http://www.haverselect.com/dlx/HOUSING.HTM">, by Division</a></th>
<th scope="col">Type</th>
Year-to-Date Through September
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2006</td>
<td>2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">New England</td>
<td>Number</td>
<td>26,518</td>
<td>32,563</td>
<td>31,764</td>
<td>28,359</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Value (Mil.$)</td>
<td>$5,239</td>
<td>$6,251</td>
<td>$5,790</td>
<td>$4,852</td>
</tr>
<tr>
<td class="firstcol">Middle Atlantic</td>
<td>Number</td>
<td>56,757</td>
<td>63,581</td>
<td>65,702</td>
<td>59,903</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Value (Mil.$)</td>
<td>$10,100</td>
<td>$10,902</td>
<td>$10,318</td>
<td>$8,820</td>
</tr>
<tr>
<td class="firstcol">East North Central</td>
<td>Number</td>
<td>117,179</td>
<td>150,249</td>
<td>149,104</td>
<td>145,138</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Value (Mil.$)</td>
<td>$21,355</td>
<td>$25,970</td>
<td>$24,768</td>
<td>$22,711</td>
</tr>
<tr>
<td class="firstcol">West North Central</td>
<td>Number</td>
<td>58,730</td>
<td>73,264</td>
<td>71,593</td>
<td>68,881</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Value (Mil.$)</td>
<td>$10,170</td>
<td>$11,923</td>
<td>$11,015</td>
<td>$10,061</td>
</tr>
<tr>
<td class="firstcol">South Atlantic</td>
<td>Number</td>
<td>345,613</td>
<td>399,893</td>
<td>357,661</td>
<td>312,148</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Value (Mil.$)</td>
<td>$59,597</td>
<td>$64,069</td>
<td>$52,141</td>
<td>$42,545</td>
</tr>
<tr>
<td class="firstcol">East South Central</td>
<td>Number</td>
<td>70,270</td>
<td>71,707</td>
<td>70,193</td>
<td>62,550</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Value (Mil.$)</td>
<td>$10,438</td>
<td>$10,113</td>
<td>$9,219</td>
<td>$7,588</td>
</tr>
<tr>
<td class="firstcol">West South Central</td>
<td>Number</td>
<td>167,220</td>
<td>161,940</td>
<td>143,032</td>
<td>133,465</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Value (Mil.$)</td>
<td>$25,323</td>
<td>$23,021</td>
<td>$19,373</td>
<td>$17,180</td>
</tr>
<tr>
<td class="firstcol">Mountain</td>
<td>Number</td>
<td>142,321</td>
<td>173,719</td>
<td>162,029</td>
<td>134,341</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Value (Mil.$)</td>
<td>$26,159</td>
<td>$29,327</td>
<td>$25,438</td>
<td>$19,450</td>
</tr>
<tr>
<td class="firstcol">Pacific</td>
<td>Number</td>
<td>137,741</td>
<td>177,339</td>
<td>168,764</td>
<td>154,026</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Value (Mil.$)</td>
<td>$29,389</td>
<td>$36,225</td>
<td>$33,374</td>
<td>$28,782</td>
</tr>
</tbody>
</table>
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It's almost unanimous. Housing is slumping in almost every region of the country. The Census Bureau reported building permit data today for September and the year-to-date for regions, divisions, states and metro areas as well as [...]

Building Permits Down Sharply in 8 of 9 Census Divisions; Only Oil Patch Shows Gain

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061026e.jpg" width="353">
The Conference Board reported that its Index of Help-Wanted Advertising held at 30 in September after having dropped the prior month to a new forty five year low.
During the last ten years there has been a 57% correlation between the level of help-wanted advertising and the three month change in non-farm payrolls.
The proportion of labor markets with rising want-ad volume ticked up to 33% from the one year low of 25% in August.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month.
The latest help wanted report from the Conference Board is available <a href="http://www.conference-board.org/economics/helpwanted.cfm">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">September &#39;05</th>
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<td class="firstcol">National Help Wanted Index</td>
<td>30</td>
<td>30</td>
<td>39</td>
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The Conference Board reported that its Index of Help-Wanted Advertising held at 30 in September after having dropped the prior month to a new forty five year low. During the last ten years there has been a 57% correlation between the [...]

Help-Wanted Advertising: Stable & Low

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Initial claims for unemployment insurance last week rose 8,000 and reversed the little revised 9,000 worker decline during the prior period. At 308,000 claims remained low but up slightly from the lowest levels near 280,000 reached this past January. Consensus expectations had been for 309,000 claims during the latest week.
During the last ten years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four-week moving average of initial claims fell to 305,250 (-13.6% y/y).
Continuing claims for unemployment insurance rose 3,000 after a downwardly revised 18,000 increase the prior week.
The insured rate of unemployment was steady at 1.9% where it has been since February.
How Labor Market Policies Shape Immigrants&#146; Opportunities from the Federal Reserve Bank of Dallas is available <a href="http://dallasfed.org/research/eclett/2006/el0607.html"> here</a>.

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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">10/21/06</th>
<th scope="col">10/14/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
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<td class="firstcol">Initial Claims</td>
<td>308</td>
<td>300</td>
<td>-3.4%</td>
<td>332</td>
<td>343</td>
<td>403</td>
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<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,449</td>
<td>-12.3%</td>
<td>2,662</td>
<td>2,924</td>
<td>3,532</td>
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Initial claims for unemployment insurance last week rose 8,000 and reversed the little revised 9,000 worker decline during the prior period. At 308,000 claims remained low but up slightly from the lowest levels near 280,000 reached [...]

Initial Claims for Unemployment Insurance Reversed Decline

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Real GDP eased 0.3% SAAR (+2.1% y/y) during the first quarter of 2025 after increasing 2.4% in Q4’24 and 3.1% in Q3’24. A 0.4% increase had been expected in the Action Economics Forecast Survey. It was the first decline since Q1 2022.

Foreign trade subtracted 4.83 percentage points from growth last quarter as imports surged 41.3% (13.4% y/y) ahead of tariffs, which began to come into effect in the first quarter. The rise followed a 1.9% decline in Q4’24. Exports rose 1.8% (3.0% y/y) after easing 0.2% in Q4. Inventories added 2.25 percentage points to growth after subtracting 0.84 percentage point from Q4 growth.

Real final sales to domestic purchasers grew 2.3% (2.9% y/y) in Q1 after rising 3.0% in Q4. Personal consumption expenditures rose 1.8% (3.1% y/y) following a 4.0% gain. Durable goods spending fell 3.4% (+5.3% y/y) after surging 12.4% in Q4. Motor vehicle purchases declined 11.1% (+5.5% y/y) after strengthening 19.7% in Q4. Spending on home furnishings & appliances gained 1.5% (6.1% y/y) following a 5.4% rise. Recreational goods & vehicle outlays rose 2.5% (7.0% y/y) last quarter after a 13.9% Q4 increase.

Nondurable goods outlays rose 2.7% (3.0% y/y) following 3.1% growth in Q4. Apparel spending increased 6.7% (2.5% y/y) following a 5.0% rise. Food & beverage buying gained 2.5% (2.3% y/y) after a 1.8% increase. Gasoline & fuel oil purchases increased 4.6% (3.4% y/y) after falling 2.0% in Q4.

Spending on services increased 2.4% last quarter (2.7% y/y) after a 3.0% gain. Outlays on housing & utilities increased 3.4% (1.8% y/y) after rising 1.1% in Q4. Health care expenditures rose 4.0% (4.8% y/y) following a 4.7% strengthening. Transportation outlays increased 5.3% (4.6% y/y) after a 3.7% rise while recreation spending rose 4.7% (2.8% y/y) following a 4.5% rise. Restaurant & hotel expenditures declined 2.1% (+0.5% y/y) following a 2.8% rise. Financial services expenditures rose 1.9% (2.0% y/y) after a 3.1% Q4 increase.

Business fixed investment increased 9.8% (3.6% y/y) following a 3.0% decline in Q4. Expenditures on structures rose 0.4% (-0.4% y/y) after a 2.9% increase. Expenditures on producers’ durable equipment jumped 22.5% (8.0% y/y) after falling 8.7%.  Outlays on information processing equipment soared 69.3% (18.9% y/y) following a 7.3% decline. Industrial equipment investment fell 1.4% (-0.3% y/y) after easing 0.9%. Intellectual property product spending rose 4.1% (1.8% y/y) following a 0.5% decline. 

Residential structures investment increased 1.3% (-0.1% y/y) in Q1 after a 5.5% Q4 rise.

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Government spending fell 1.5% (+2.4% y/y) after a 3.1% Q4 rise. Federal government expenditures declined 5.1% (+2.9% y/y) after rising 4.0% in Q4. National defense expenditures declined 8.0% (+4.0% y/y) after increasing 4.8% in Q4. State & local government spending rose 0.8% (2.1% y/y) following a 2.5% rise.

The GDP price index rose 3.7% (2.6% y/y) after increasing 2.3% in Q4. It was the largest increase since Q4’22. A 2.4% increase had been expected. The PCE chain price index increased 3.6% (2.5% y/y) following a 2.4% rise. The PCE price index excluding food and energy rose 3.5% (2.8% y/y) after increasing 2.6% in Q4. The business fixed investment price index rose 0.4% (1.8% y/y) after 1.5% rise. The residential price index strengthened 3.9% (3.2% y/y) after a 1.9% rise while the government price index increased 4.7% (2.8% y/y) following a 2.1% rise.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Decline in GDP is first in three years.
- Foreign trade subtracts substantially ahead of tariffs.
- Domestic final demand growth weakens.
- Price index strengthens with higher core PCE prices.

U.S. GDP Unexpectedly Declines in Q1’25; Prices Strengthen

Michael J. Moran

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High-side readings on the price indexes for personal consumption expenditures in January and February caused some concern about emerging price pressure, especially with some policies of the Trump administration possibly adding to the upward force. However, March brought notable relief, with the headline price index falling slightly (-0.04%). A marked decline in energy prices was helpful (-2.7%), but core prices also were subdued, increasing less than 0.1%.  Year-over-year changes were still above the Fed’s target of 2%, but only barely so for the headline measure (2.3%). The core index backed away from the reading of 3.0% in February, but the latest reading of 2.7% was in line with observations in the past year, and still uncomfortably above target.

Consumers roused from a winter slumber in March, with nominal outlays increasing 0.7%. With inflation restrained, real outlays also posted a gain of 0.7%. Spending on durable gods stood out, with real outlays advancing 3.2%. Real outlays for both nondurable goods and services rose 0.4%, a solid pace. Signs of life were certainly welcome after an average decline of 0.1% in January and February. The March rebound left growth of 1.8% (annual rate) in the first quarter.

The brisk increase in spending in March was supported by a solid gain in personal income (0.5% in both nominal and real terms). Growth in wage income was firm at 0.5%, while proprietors’ income was robust with a gain of 1.8% (not annualized!). The farm sector led the advance in proprietors’ income, but the nonfarm sector also was strong (0.6%).

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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- Price pressure eases.
- Spending rebounds after two soft months.

Personal Income, Consumption, and Prices in March

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The Pending Home Sales Index, a forward-looking home sales measure based on contract signings, from the National Association of Realtors rose 6.1% to 76.5 (-0.6% y/y) during March after rising a little-revised 2.1% in February. These changes followed a 4.6% January decline.

The rise in March sales occurred as the rate on a 30-year mortgage eased to an average 6.65% from 6.84% in February. This rate was well above a low of 2.68% averaged in December 2020.

Pending home sales were up in most regions of the country. Sales in the Midwest rose 4.9% (1.4% y/y) last month after rising 1.8% in February. Sales in the South increased 9.8% (-0.4% y/y) following a 5.8% February rise. Sales in the West improved 4.8% (-2.0% y/y) after falling 3.0% in February. Sales in the Northeast were off 0.5% (-3.0% y/y) in March after falling 0.9% in February.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- Sales rise to highest level in four months.
- Strength is evident throughout most of country.

U.S. Pending Home Sales Surge in March

Sandy Batten

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The employment cost index (ECI) for civilian workers, arguably the most accurate measure of labor compensation in the United States, rose 0.9% q/q (3.6% y/y) in Q1, the same quarterly increase as in last year’s Q4, according to the Bureau of Labor Statistics. The quarterly gains have fluctuated between 0.8% and 1.0% for the past six quarters. The Action Economics Forecast Survey had expected a 0.9% q/q increase and a 3.5% y/y gain.

Wages and salaries for civilian workers rose 0.8% q/q (3.5% y/y) in Q1, down from 1.0% q/q in Q4. This tied the Q3 2024 quarterly rise as the smallest increase since Q2 2021. It was also the smallest y/y increase since Q2 2021. Benefits increased by an outsized 1.2% q/q (3.9% y/y) in Q1 versus 0.8% q/q in Q4. This is the largest quarterly gain since Q2 2022. In general, employment cost gains remain above the pace observed prior to the pandemic but are slowing gradually.

Private industry workers’ compensation rose 0.8% q/q (3.4% y/y) in Q1, down from 0.9% q/q (3.6% y/y) in Q4. Wages and salaries for private industry workers increased 0.8% q/q (3.4% y/y) in Q1 versus 0.8% q/q (3.7% y/y) in Q4. The quarterly gain in Q1 tied that in Q3 2024 as the smallest increase since Q4 2020. Benefits for private industry workers jumped 1.2% q/q (3.6% y/y). the largest quarterly gain since Q2 2022. The acceleration in benefits in Q1 was primarily in service-producing industries.

Compensation in private goods-producing industries increased 1.0% q/q (3.2% y/y) in Q1, the largest quarterly gain in five quarters, versus a 0.7% q/q increase in Q4. Compensation in construction jumped 1.3% q/q, its largest quarterly increase since Q2 2022, up from a 0.6% q/q gain in Q4. Manufacturing compensation growth slowed to 0.7% q/q, its slowest quarterly advance since Q4 2020, from 0.8% q/q in Q4. Compensation in private service-producing industries increased 0.8% q/q (3.5% y/y), down slightly from a 0.9% q/q gain in Q4. Compensation in education and health services jumped 1.3% q/q, its largest quarterly gain since Q3 2023. In contrast, compensation in other services edged up 0.1% q/q in Q1, its smallest quarterly advance since before the pandemic.

The employment cost index measures the change in the cost of labor, free from the influence of employment shifts across occupations and industries. It is provided by the Bureau of Labor Statistics and is available in Haver’s **USECON** database. Consensus estimates from the Action Economics Forecast Survey are in Haver’s **AS1REPNA** database.

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- Compensation grew 0.9 q/q in Q1, the same pace as in Q4.
- Wage growth slowed to 0.8% q/q while benefits surged 1.2% q/q, their largest quarterly increase since Q2 2022.

Employment Cost Growth Steady in Q1 2025

Kathleen Stephansen, CBE

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The ADP National Employment Report indicated that nonfarm private sector payrolls rose 62,000 (1.4% y/y) during April after increasing 147,000 (1.4% y/y) during March, revised from 155,000. A 124,000 April rise in ADP employment had been expected in the Action Economics Forecast Survey.

Growth in median annual pay for "job stayers" eased to 4.5% y/y during April, from 4.6% y/y in March and from 4.7% y/y in the prior two months. Manufacturing sector pay grew 4.6% y/y during April, down from 4.8% y/y in March. Construction sector pay was unchanged at 4.7% y/y. Natural resource & mining sector pay grew 4.4% y/y. Financial sector pay rose 5.1% y/y, while education & health services pay rose 4.7% y/y. Leisure & hospitality pay also increased 4.7% y/y. Professional & business service sector pay increased 4.3% y/y as did trade, transportation & utilities pay. Information pay rose 4.1% y/y. Median annual pay for “job changers” rose 6.9% y/y after 6.7% y/y in March.

Small business hiring (less than 50 employees) rose 11,000 (0.6% y/y) after rising 18,000 (0.6% y/y) in March, revised down from 52,000. Employment at medium-sized firms (50-499,000 employees) rose 40,000 (1.1% y/y) after rising 43,000 (1.1% y/y). Large business hiring (500+ employees) rose 12,000 (3.4% y/y) in April, after rising 61,000 (3.6% y/y) in March, revised from 59,000.

Goods-producing employment rose 26,000 (1.3% y/y) in April, after rising 16,000 (1.3% y/y) during March, revised from 24,000. Manufacturing jobs rose 4,000 (-0.2% y/y) after rising 17,000 (-0.3% y/y) in March. The number of construction sector jobs rose 16,000 (3.4% y/y) in April, following a 2,000 (3.6% y/y) March increase, revised from 6,000. Natural resources & mining jobs rose 6,000 (2.8% y/y) in April after falling 3,000 (+1.9% y/y) in March.

The number of service-producing jobs rose 34,000 (1.4% y/y) during April, following a rise of 131,000 (1.4% y/y) in March. Professional & business services employment fell 2,000 (0.6% y/y) after rising 46,000 (0.7% y/y) in the prior month, revised from 57,000. Employment in the financial industry rose 20,000 (2.1% y/y) in April, after rising 38,000 (2.0% y/y) in March. Leisure and hospitality employment increased 27,000 (3.0% y/y), following a 23,000 (2.9% y/y) March increase, revised from 17,000. The number of education & health care jobs fell 23,000 (1.6% y/y) in April, following a 15,000 (1.8% y/y) rise in March, revised from 12,000. Information sector employment fell 8,000 (-0.1% y/y) after a rise of 3,000 (0.2% y/y) in March. The number of jobs in trade, transportation & utilities rose 21,000 (0.4% y/y) in April, after falling 4,000 (+0.4% y/y) in March, revised from a 6,000 fall. Employment in “other” services rose fell 1,000 (+3.2% y/y) following a 10,000 (3.4% y/y) rise in March, revised from 11,000.

By region, employment in the Northeast increased 10,000 (1.9% y/y) in April, following an increase of 95,000 (2.0% y/y) in March, revised from 89,000. Employment in the Midwest rose 42,000 (1.5% y/y) after a gain of 84,000 (1.4% y/y) in March, revised from 81,000. In the South, employment rose 3,000 (1.3% y/y) during April, after rising 10,000 (1.4% y/y) in March, revised from 27,000. In the West, employment rose 9,000 (0.6% y/y) after declining 43,000 (+0.6% y/y), revised from a 41,000 decline in March.

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

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- Employment increase is modest in both services & factory sectors.
- Wage growth for “job stayers” moderates.
- Small and medium-sized business employment slows.

Economy in Brief: October 2006

Jump to:

U.S. Personal Income Firm, Core Price Increases Stable-to-Lower

Spanish Labor Markets Remain Vigorous

U.S. Consumer Sentiment Improved Further

US GDP Growth Weakest Since 2003

US GDP Growth Weakest Since 2003

Building Permits Down Sharply in 8 of 9 Census Divisions; Only Oil Patch Shows Gain

Help-Wanted Advertising: Stable & Low

Initial Claims for Unemployment Insurance Reversed Decline