Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040426b.jpg" width="353">
The IFO survey of the German business climate rose unexpectedly in April to 96.3 (2000=100) from 95.4 in March. However, the expectations component, appraising conditions six months ahead, continued to decline and was at 97.8 in April compared with 98.8 in March. The rise in the overall index was due entirely to the business confidence component, which is an appraisal of current conditions. It rose from 92.2 in March to 94.9 In April.
The recent decline in the euro, which has fallen by nearly 8% since the peak reached on February 17 of this year, has been a welcome turnaround from the persistent rise of about 55% in the euro from October 25, 2000 to February 17, 2004. That rise had had a dampening effect on world demand for German exports. Germany&#39;s main source of growth. Now with a somewhat lower euro and the improvement in growth in the United States and Asia, particularly China, since late last year the outlook for German exports has brightened.
In spite of the improved outlook for export growth, businessmen have become more cautious about the outlook for the next six months as there are few, if any, indications that domestic demand is improving.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">IFO&nbsp; Business Climate Survey&nbsp; (2000=100)</th>
<th scope="col">Apr 04</th>
<th scope="col">Mar 04</th>
<th scope="col">Apr&nbsp; 03</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %&nbsp;</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;Business Climate</td>
<td>96.3</td>
<td>95.4</td>
<td>88.4</td>
<td>0.94</td>
<td>8.94</td>
<td>91.7</td>
<td>89.4</td>
<td>92.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Confidence</td>
<td>94.9</td>
<td>92.2</td>
<td>86.6</td>
<td>2.93</td>
<td>9.58</td>
<td>88.4</td>
<td>85.3</td>
<td>93.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>&nbsp;&nbsp;&nbsp; 97.8</td>
<td>98.8</td>
<td>90.3</td>
<td>-1.01</td>
<td>8.38</td>
<td>95.1</td>
<td>93.8</td>
<td>91.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro/US$</td>
<td>&nbsp;</td>
<td>% Chg</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">October 25, 2000</td>
<td>1.2068</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">February 17, 2004</td>
<td>0.7791</td>
<td>54.9</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">April 26, 2004</td>
<td>0.8448</td>
<td>-7.8</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body>
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The IFO survey of the German business climate rose unexpectedly in April to 96.3 (2000=100) from 95.4 in March. However, the expectations component, appraising conditions six months ahead, continued to decline and was at 97.8 in April [...]

German IFO Business Climate Survey Surprises on the Up Side but Expectations Component Continues to Decline

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040423b.jpg" width="353">
 Growth in the UK economy moderated a bit in Q1 2004, according to the &quot;Preliminary&quot; release of GDP today. Total GDP at market prices gained 0.6%, somewhat slower than the 0.9% advance in Q4 2003.
For the industrial sector, this meant a steeper decline. That portion of the economy, which includes manufacturing, mining and energy output, has shown an increase in only one quarter since the end of 2000.
Services, by contrast, continue to grow vigorously, although not quite as fast in the first quarter as the fourth quarter&#39;s full 1.0%. However, within that broad segment, the subcategory of distribution, food and hotel services and repair services, expanded by 1.2%, its largest advance since the summer of 2002.
In this preliminary release, there is little further detail. But overall, the UK economy, driven by service sector expansion, is extending its healthy growth track, not as strongly as the late 1990s, but firmer, surely, than the recession plagued period two-to-three years ago.Note: the UK Office of National Statistics cautions that early data responses were unusually low in March, so these figures may be subject to more revision than normal.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Q1 2004</th>
<th scope="col">Q4 2003</th>
<th scope="col">Year/Year</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP Chained Volume Index, 2000=100</td>
<td>108.1</td>
<td>107.4</td>
<td>104.9*</td>
<td>106.1</td>
<td>103.8</td>
<td>102.1</td>
</tr>
<tr>
<td class="firstcol">% Change&nbsp;</td>
<td>0.6</td>
<td>0.9</td>
<td>3.0</td>
<td>2.2</td>
<td>1.6</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Production % Change</td>
<td>-0.5</td>
<td>-0.1</td>
<td>-0.3</td>
<td>-0.5</td>
<td>-2.7</td>
<td>-1.6</td>
</tr>
<tr>
<td class="firstcol">Service Industries&nbsp;&nbsp;&nbsp; % Change</td>
<td>0.8</td>
<td>1.0</td>
<td>2.9</td>
<td>2.2</td>
<td>2.2</td>
<td>2.6</td>
</tr>
</tbody>
</table>
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Growth in the UK economy moderated a bit in Q1 2004, according to the "Preliminary" release of GDP today. Total GDP at market prices gained 0.6%, somewhat slower than the 0.9% advance in Q4 2003. For the industrial sector, this meant [...]

UK GDP Growth Eases as Industrial Production Falls; Services Remain Vigorous

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040423a.jpg" width="353">
Durable goods orders soared 3.4% last month and the February gain was revised to 3.8% from 2.5%. Consensus expectations had been for a 0.7% rise in March orders.
Non-defense capital goods orders added 2.1% to a 4.5% February rise that was initially reported at 2.9%. Excluding aircraft and parts, orders rose 2.4% and February was revised to 2.8% from 1.1%.
Machinery orders surged 3.1% (17.1% y/y) and February now shows a 3.8% increase versus the advance 1.3% gain. Orders for electrical equipment, appliances &amp; components rose 0.8% (3.8% y/y) following a 3.0% February gain, revised from -0.4%.
Orders for computers &amp; electronic products rose 0.2% (14.9% y/y) and February is now pegged at 2.7% versus the advance report of a 1.2% gain.
Excluding the transportation sector durable goods orders jumped 3.3% (+14.2% y/y).
Shipments of durable goods surged 3.2% (11.3% y/y) following an upwardly revised 1.7% February gain. Excluding transportation shipments jumped 4.1% (12.1% y/y).
Durable inventories edged up 0.1% (-1.8% y/y).

<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/@ED/@ED01/@ED0101/@ED0101.HTM"> NAICS Classification</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Durable Goods Orders</td>
<td>3.4%</td>
<td>3.8%</td>
<td>13.1%</td>
<td>2.6%</td>
<td>-1.7%</td>
<td>-10.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non-defense Capital Goods</td>
<td>2.1%</td>
<td>4.5%</td>
<td>14.0%</td>
<td>5.6%</td>
<td>-7.2%</td>
<td>-15.5%</td>
</tr>
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Durable goods orders soared 3.4% last month and the February gain was revised to 3.8% from 2.5%. Consensus expectations had been for a 0.7% rise in March orders. Non-defense capital goods orders added 2.1% to a 4.5% February rise that [...]

U.S. Durable Goods Orders Soar, Revisions Up

Carol Stone, CBE

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040422c.jpg">
Labor market conditions are mixed in three countries reporting data today. Unemployment rates are high and/or rising in Israel and Poland, but easing in Russia. At the same time, employment patterns don&#39;t necessarily match the behavior of the unemployment rate.
In Israel, unemployment is climbing gradually, with March&#39;s 11.0% rate the highest in the eight-year history of these data. This is accompanied by divergent trends in measures of employment. The number of employed persons, a quarterly series, has been rising, as indicated in the accompanying chart. But the number of jobs, both including and excluding those offered to Palestinian Authority workers, has been basically flat for the last couple of years.
In Poland, where unemployment is also rising, employment data are the mirror image, falling markedly, as might be expected and <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040422d.jpg" width="353"> generating the higher trend in unemployment. Notably, though, Poland&#39;s neighbors appear to be doing better, as employment in the Czech Republic is largely flat and mostly rising in Hungary and Slovakia.
Employment in Russia is also moving ahead, albeit somewhat erratically, while its unemployment rate is declining. Indeed, the progress in Russia looks favorable by other gauges as well, including production growth and GDP, with a distinct recovery evident beginning in 1999 after the country&#39;s plunge to debt default in 1998.
Yesterday, in this space, we cited evidence of the emergence of a broadening recovery in world trade. That should help jobs and unemployment conditions in many countries. Perhaps it&#39;s too early to expect this everywhere, but the mixed pattern in these countries today suggests that country-specific circumstances can get in the way, slowing desired improvements, even as neighboring nations do better.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Percent</th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Year Ago</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Israel (NSA)</td>
<td>n.a.</td>
<td>11.0</td>
<td>10.9</td>
<td>10.5</td>
<td>10.7</td>
<td>10.4</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">Poland (SA)</td>
<td>19.6</td>
<td>19.6</td>
<td>19.8</td>
<td>19.7</td>
<td>19.9</td>
<td>17.8</td>
<td>16.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Russia (SA)</td>
<td>7.7</td>
<td>7.6</td>
<td>7.6</td>
<td>8.6</td>
<td>8.5</td>
<td>8.0</td>
<td>9.0</td>
</tr>
</tbody>
</table>
</body>
</html>

Labor market conditions are mixed in three countries reporting data today. Unemployment rates are high and/or rising in Israel and Poland, but easing in Russia. At the same time, employment patterns don't necessarily match the [...]

Unemployment Rates on Varying Paths in Israel, Poland & Russia

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040422a.jpg" width="353">
Finished producer prices jumped 0.5% higher last month following a 0.1% February uptick. The surge matched consensus expectations. The core PPI also rose a moderate 0.2% following the 0.1% February rise. A 0.1% increase in the core PPI had been the Consensus expectation.
Finished food prices jumped 1.5% (5.3% y/y) in March. Pricing strength during the last year has been broad based. Energy prices rose 0.6% (-0.4% y/y)
Finished consumer goods prices surged 0.7% after the tame 0.1% increase in February. Less food &amp; energy finished consumer goods prices rose 0.3% (0.6% y/y following no change in February. Consumer durable prices rose 0.6% (+0.4% y/y) after a 0.2% February drop. Core non-durable prices fell 0.1% (+0.7% y/y) after 0.2% increases in the prior two months.
Finished capital goods prices rose 0.3% (0.8% y/y) after no change in February. That gain was fueled by a 0.8% (-1.6% y/y) recovery in light truck prices after a 1.9% February drop.
Intermediate goods prices again were strong, rising 0.7%. Core intermediate prices climbed 0.6% (2.9% y/y) led by an 8.6% jump in plywood prices (49.1% y/y) after a 15.2% spike in February.
Crude goods prices were tame as crude energy prices fell 6.1% (-26.5% y/y) after no change in February. Lower natural gas prices (-40.3% y/y) account for recent weakness. Prices for core crude goods jumped 2.7% as metals prices continued to spike higher.
&quot;Decomposing Inflation&quot; from the Federal Reserve Bank of Atlanta can be found <a href="http://www.frbatlanta.org/invoke.cfm?objectid=825437DF-B173-FAB1-3D72FA96A8E8B7D3&amp;method=display_body#bauer">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/@E8/@E802/@E80201/@E80201.HTM"> Producer Price Index</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>0.5%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>3.2%</td>
<td>-1.3%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.2%</td>
<td>0.1%</td>
<td>0.7%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.7%</td>
<td>0.9%</td>
<td>1.3%</td>
<td>4.7%</td>
<td>-1.5%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.6%</td>
<td>0.9%</td>
<td>2.9%</td>
<td>2.0%</td>
<td>-0.5%</td>
<td>-0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>0.7%</td>
<td>2.5%</td>
<td>-1.6%</td>
<td>25.0%</td>
<td>-10.6%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>2.7%</td>
<td>5.5%</td>
<td>29.8%</td>
<td>12.3%</td>
<td>3.8%</td>
<td>-10.0%</td>
</tr>
</tbody>
</table>
Jobless Claims Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 22, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040422b.jpg" width="353">
Initial claims for jobless insurance fell 9,000 last week to 353,000 but fell short of Consensus expectations for a decline to 345,000 claims. Claims during the prior week were revised up slightly.
The 4-week moving average of initial claims rose to 347,000 (-19.5% y/y), the highest level since late February.
Continuing claims for unemployment insurance jumped 52,000 in the latest week but claims so far in April remained 1.5% below the March average.
The insured rate of unemployment was unchanged at 2.4% for the seventh consecutive week. This unemployment rate averaged 2.8% during 2002 and 2003.

<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"> 4/17/04</th>
<th scope="col">4/10/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;&nbsp; 353</td>
<td>362</td>
<td>-20.5%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>3,019</td>
<td>-15.3%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
</body>
</html>

Finished producer prices jumped 0.5% higher last month following a 0.1% February uptick. The surge matched consensus expectations. The core PPI also rose a moderate 0.2% following the 0.1% February rise. A 0.1% increase in the core [...]

PPI Goosed By Food & Light Trucks

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040421b.jpg" width="353">
Trade flows are increasing. Three large, but otherwise very diverse countries reported trade data today which show markedly rising trends in BOTH exports and imports. This development indicates widespread gains in economic activity, that is, in the demand for goods in many parts of the world.
Japan&#39;s trade surplus is larger in 2004 through March than in recent years, but this is because exports have increased considerably more than imports.
In Italy, imports are growing, while exports are uneven. More detailed data suggest that energy imports are not the source of the rise in imports; as we explained here a week ago in discussing relative inflation rates, the rise in the euro through February may have held down the euro value of dollar-priced oil imports in such places as Italy.
For exports, the uneven pattern in recent months is actually an improvement, following a declining trend from late 2000 through early last year.
In India, where we cite US dollar-denominated figures, both exports and imports have climbed sharply. Commentary from the Indian government relates that March exports were affected by changes in reporting practices that speed up the processing of shipments information. But this is only a partial explanation, as indicted by the steeply rising trend throughout the period shown in the table and chart. The behavior of both kinds of trade flows in India thus corresponds to what we believe intuitively about the Indian economy. It is being strengthened by the role of outsourcing, so imports possibly of both intermediate and consumer goods may be rising even as exports increasingly make inroads into world markets.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Year Ago</th>
Monthly Average
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Japan: Trade Balance (Bil.Yen)</td>
<td>1010</td>
<td>1184</td>
<td>1038</td>
<td>641</td>
<td>850</td>
<td>826</td>
<td>562</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>4864</td>
<td>4802</td>
<td>4892</td>
<td>4359</td>
<td>4546</td>
<td>4345</td>
<td>4091</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>3854</td>
<td>3618</td>
<td>3854</td>
<td>3717</td>
<td>3696</td>
<td>3519</td>
<td>3529</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy: Trade Balance (Mil.Euros)</td>
<td>n.a.</td>
<td>-246</td>
<td>-711</td>
<td>+6</td>
<td>+56</td>
<td>+699</td>
<td>+817</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports</td>
<td>n.a.</td>
<td>21799</td>
<td>20651</td>
<td>21088</td>
<td>21292</td>
<td>22144</td>
<td>22515</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports</td>
<td>n.a.</td>
<td>22045</td>
<td>21362</td>
<td>21082</td>
<td>21237</td>
<td>21445</td>
<td>21699</td>
</tr>
<tr>
<td class="firstcol">India: Trade&nbsp;&nbsp; Balance (Mil.US$)</td>
<td>-172</td>
<td>-1866</td>
<td>-1560</td>
<td>-1105</td>
<td>-1245</td>
<td>-601</td>
<td>-569</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>6518</td>
<td>5819</td>
<td>5037</td>
<td>4589</td>
<td>4670</td>
<td>4110</td>
<td>3591</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>6690</td>
<td>7685</td>
<td>6597</td>
<td>5694</td>
<td>5916</td>
<td>4711</td>
<td>4159</td>
</tr>
</tbody>
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Trade flows are increasing. Three large, but otherwise very diverse countries reported trade data today which show markedly rising trends in BOTH exports and imports. This development indicates widespread gains in economic activity, [...]

Trade Expanding in Japan, Italy & India

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040421a.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association dropped another 5.6% (-29.5% y/y) last week, for the fourth consecutive steep weekly decline.
Applications to refinance tumbled 10.9% (-50% y/y) on the heels of a 30.7% drop the prior week.
Purchase applications ticked up 0.4% w/w (+20.6% y/y) after a 9.5% decline the prior week. So far in April purchase applications are 1.0% ahead of the March average.
The effective interest rate on a conventional 30-Year mortgage rose to 6.11% from 6.03% the week prior and versus 5.65% averaged in March. The effective rate on a 15-year mortgage rose to 5.49% from 5.45% the week prior and from 5.00% in March.
During the last ten years there has been a 56% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.
Federal Reserve Chairman Alan Greenspan&#39;s testimony before the Joint Economic Committee on the economic outlook is available <a href="http://www.federalreserve.gov/BoardDocs/Testimony/2004/20040421/default.htm"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">04/16/04</th>
<th scope="col">04/09/04</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>744.5</td>
<td>788.6</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>434.1</td>
<td>432.2</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,550.3</td>
<td>2,861.6</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
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The index of mortgage applications compiled by the Mortgage Bankers Association dropped another 5.6% (-29.5% y/y) last week, for the fourth consecutive steep weekly decline. Applications to refinance tumbled 10.9% (-50% y/y) on the [...]

Mortgage Applications Fell Further, Rates Continued to Rise

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040420b.jpg" width="353">
Institutional investors and analysts poled by the ZEW Center for European Economic Research are losing confidence in the German recovery. The ZEW indicator of economic sentiment, while still positive, indicating that the optimists outweigh the pessimists, fell to 49.7 in April. This was the fourth month of decline and is now 32% below the peak of December 2002.
Using industrial production, excluding construction, as a proxy for the economy, we find, according to the attached chart, that the Zew indicator tends to lead economic activity. As a result, the recent trend in the Zew indicator suggests that the economic recovery in Germany may be fall far short of previous expectations.
Institutional investors and analysts continue to view the stock market more favorably than the bond market. The stock market indicator in April was 6.7, up 0.6 points from March to April and 0.7 points above April 2003. The bond market indicator in April was -6.8, an increase of 0.1 points from March, but 3.9 points below the year ago figure.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Zew Indicators</th>
<th scope="col">Apr 04</th>
<th scope="col">Mar 04</th>
<th scope="col">Apr 03</th>
<th scope="col">M/M&nbsp; &nbsp;chg</th>
<th scope="col">Y/Y&nbsp; &nbsp;chg</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp; Economic Sentiment</td>
<td>49.7</td>
<td>57.6</td>
<td>14.0</td>
<td>-7.9</td>
<td>31.3</td>
<td>38.4</td>
<td>45.3</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Stock Market</td>
<td>6.7</td>
<td>6.1</td>
<td>6.0</td>
<td>0.6</td>
<td>0.7</td>
<td>6.5</td>
<td>2.0</td>
<td>7.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Bond Market</td>
<td>-6.8</td>
<td>-6.9</td>
<td>-2.9</td>
<td>0.1</td>
<td>-3.9</td>
<td>-4.8</td>
<td>-4.3</td>
<td>0.3</td>
</tr>
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Institutional investors and analysts poled by the ZEW Center for European Economic Research are losing confidence in the German recovery. The ZEW indicator of economic sentiment, while still positive, indicating that the optimists [...]

German Investors and Analysts Losing Confidence in Germany's Recovery

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: April 2004

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