Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522a.jpg" width="353">
Among the Euro area analysts and institutional investors surveyed by the Center for European Economic Research (ZEW) in Manheim Germany, the excess of those who feel good about the current situation over those who feel bad rose to an all time high of 81.8% in May, an increase of 11.9 percentage points over April, and 63.5 points above May 2006. These same financial types became more optimistic regarding the economic outlook six months ahead. The optimists exceeded the pessimists by 24.0% in May. This is 11.6 percentage points higher than in April, but 26.0 percentage points below May of 2006. In the eight plus years that the data have been available, the level of optimism seems cautious as can be seen in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522b.jpg" width="353">
A similar pattern emerges in the ZEW results for Germany alone, as shown in the second chart. An excess of 88% (again an all time high) of the respondents found current conditions good over those who found them bad. This was 11.1 percentage points above April and 79.3 points above May 2006. The excess of optimists over pessimists regarding the economic outlook rose to 24.0% in May, 7.5 percentage points above April, but 26.0 points below May 2006. It is also well below the long term average of expectations in Germany, which is an excess of optimists over pessimists of 33%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522c.jpg" width="353">
Two indicators of consumer confidence were also released today--one for Italy and one for Turkey. Consumer confidence in Italy, expressed in terms of an index with the base 1980, has increased irregularly since May 2004 as can be seen in the third chart that shows the historical record for this series. The May figure was 109.5 up 1.6 points from April but still well below the previous peaks of 126.9 in February 2002 and 130.7 in November 1988.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522d.jpg" width="353">
The Turkish measure of consumer confidence has four components: Personal Financial Standing, General Economic Situation, Expenditures and Price Expectations. The results of the surveys of these factors are shown as four diffusion indexes. The general index is calculated by taking arithmetic means of the four diffusion indexes. The range of the general index is 0 to 200. If it is above (below)100, it means consumer confidence is optimistic (pessimistic). A value of 100 indicates a neutral position. Data are available only since December 2003. The fourth chart shows that while consumer confidence in Turkey has recovered from a low point reached in July 2006, it is still in pessimistic territory.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">BUSINESS AND CONSUMER CONFIDENCE IN EUROPE</th>
<th scope="col">May 07</th>
<th scope="col">Apr 07&nbsp;</th>
<th scope="col">May 06</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro Area&nbsp; (ZEW)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions % Balance</td>
<td>81.8</td>
<td>69.9</td>
<td>18.3</td>
<td>11.9</td>
<td>63.5</td>
<td>23.8</td>
<td>-28.7</td>
<td>-41.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations Six Months Ahead, &nbsp; % Balance</td>
<td>22.3</td>
<td>10.7</td>
<td>47.7</td>
<td>11.6</td>
<td>-25.4</td>
<td>26.6</td>
<td>32.3</td>
<td>52.1</td>
</tr>
<tr>
<td class="firstcol"> Germany (ZEW) </td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Current Conditions % Balance</td>
<td>88.0</td>
<td>76.9</td>
<td>8.7</td>
<td>11.1</td>
<td>79.3</td>
<td>18.3</td>
<td>-61.8</td>
<td>-67.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Expectations Six Months Ahead, &nbsp; % Balance</td>
<td>24.0</td>
<td>16.5</td>
<td>50.0</td>
<td>7.5</td>
<td>-26.0</td>
<td>22.3</td>
<td>34.8</td>
<td>44.6</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>May 07</td>
<td>Apr 07&nbsp;</td>
<td>Mar 07</td>
<td>Feb 07&nbsp;</td>
<td>Jan 07</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp; Consumer Confidence&nbsp; (1980=100) </td>
<td>109.5</td>
<td>107.9</td>
<td>112.5</td>
<td>111.6</td>
<td>110.3</td>
<td>105.7</td>
<td>104.2</td>
<td>101.5</td>
</tr>
<tr>
<td class="firstcol"> Turkey&nbsp; </td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp;Consumer Confidence (Index &gt;100, &nbsp;Optimistic: &lt; 100, Pessimistic: &nbsp;100=Neutral) </td>
<td>n.a.</td>
<td>93.7</td>
<td>92.4</td>
<td>92.7</td>
<td>91.8</td>
<td>95.6</td>
<td>100.2</td>
<td>106.7</td>
</tr>
</tbody>
</table>
</body>
</html>

Among the Euro area analysts and institutional investors surveyed by the Center for European Economic Research (ZEW) in Manheim Germany, the excess of those who feel good about the current situation over those who feel bad rose to an [...]

European Surveys of Business and Consumer Confidence Show Increases in Optimism but Level Remains Subdued

Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522f.jpg" width="353">
The Richmond Index rose by one point to a still very weak -10. The chart on the left puts the index in context, plotting the 12-month moving average vs 2-year trailing maximums and minimums, forming a tunnel. At -11 the Richmond MFG index is coming off a 2-year low and has not risen off that low very robustly. 
Looking back, the weakness seen in Richmond in the monthly index is similarly to the sort that preceded that last recession. The 12-month average however is not nearly that low. Still the degree of weakness in Richmond MFG is clearly established and is not minor. These are not spike lows, but lows that persist. 
The ranges below show that the current MFG readings are quite low in their respective ranges. Among the current readings only wages and prices are above the midpoint in their ranges. The forward-looking indexes show some firmness in jobs hours and prices. 
The Richmond services report is substantially stronger. Expected production is very strong. Current readings are firm to strong. The surveys - with or without retailing show that the service sector firmness is widespread. Readings are generally above the midpoints of their ranges. Wage readings are the relative weakest within their ranges. Revenues are firm. Employment is strong. The outlook index is upbeat in stark contrast with conditions in MFG. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Richmond MFG Index
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Since Nov 1993</td>
<td>May-07</td>
<td>Apr-07</td>
<td colspan="2">Percentile of own range</td>
</tr>
<tr>
<td class="firstcol">Component</td>
<td>Levels</td>
<td>Levels</td>
<td>Current</td>
<td>6-mos Ahead</td>
</tr>
<tr>
<td class="firstcol">Index</td>
<td>-10</td>
<td>-11</td>
<td>30.4%</td>
<td>36.9%</td>
</tr>
<tr>
<td class="firstcol">Shipments</td>
<td>-7</td>
<td>-11</td>
<td>32.7%</td>
<td>37.9%</td>
</tr>
<tr>
<td class="firstcol">New Order</td>
<td>-13</td>
<td>-14</td>
<td>24.1%</td>
<td>34.4%</td>
</tr>
<tr>
<td class="firstcol">backlogs</td>
<td>-18</td>
<td>-13</td>
<td>39.1%</td>
<td>48.6%</td>
</tr>
<tr>
<td class="firstcol">Capacity</td>
<td>-17</td>
<td>1</td>
<td>13.6%</td>
<td>43.9%</td>
</tr>
<tr>
<td class="firstcol">Vendor Speed</td>
<td>-1</td>
<td>-6</td>
<td>15.4%</td>
<td>36.8%</td>
</tr>
<tr>
<td class="firstcol">Employees</td>
<td>-9</td>
<td>-14</td>
<td>43.6%</td>
<td>64.3%</td>
</tr>
<tr>
<td class="firstcol">Workweek</td>
<td>-9</td>
<td>12</td>
<td>26.8%</td>
<td>51.2%</td>
</tr>
<tr>
<td class="firstcol">Wages</td>
<td>16</td>
<td>27</td>
<td>69.6%</td>
<td>29.7%</td>
</tr>
<tr>
<td class="firstcol">Inventories</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Finished Goods</td>
<td>21</td>
<td>19</td>
<td>42.9%</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Raw Materials</td>
<td>12</td>
<td>0</td>
<td>47.8%</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>2.62</td>
<td>0.94</td>
<td>63.8%</td>
<td>82.8%</td>
</tr>
<tr>
<td class="firstcol">Prices Received</td>
<td>1.5</td>
<td>0.94</td>
<td>62.7%</td>
<td>45.0%</td>
</tr>
<tr>
<td class="firstcol">Capital Expenditures</td>
<td>16</td>
<td>14</td>
<td>--</td>
<td>40.0%</td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Richmond Seasonally Adjusted Services Index
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>Number of</td>
<td>Average</td>
<td>Prod expected next</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Revenues</td>
<td>employees</td>
<td>wage</td>
<td>six months</td>
</tr>
<tr class="even">
<td class="firstcol">May-07</td>
<td>7</td>
<td>9</td>
<td>21</td>
<td>62</td>
</tr>
<tr class="even">
<td class="firstcol">Apr-07</td>
<td>5</td>
<td>0</td>
<td>19</td>
<td>80</td>
</tr>
<tr class="even">
<td class="firstcol">avg</td>
<td>10</td>
<td>2</td>
<td>19</td>
<td>33</td>
</tr>
<tr class="even">
<td class="firstcol">max</td>
<td>45</td>
<td>20</td>
<td>39</td>
<td>66</td>
</tr>
<tr class="even">
<td class="firstcol">min</td>
<td>-34</td>
<td>-25</td>
<td>3</td>
<td>1</td>
</tr>
<tr class="even">
<td class="firstcol">%range</td>
<td>51.9%</td>
<td>75.6%</td>
<td>50.0%</td>
<td>93.8%</td>
</tr>
<tr class="odd">
<td colspan="5">Richmond Services Excluding Retailing</td>
</tr>
<tr class="even">
<td class="firstcol">%range</td>
<td>59.0%</td>
<td>73.5%</td>
<td>42.5%</td>
<td>40.8%</td>
</tr>
<tr>
<td colspan="5">Richmond Services - Retail</td>
</tr>
<tr class="even">
<td class="firstcol">%range</td>
<td>64.0%</td>
<td>61.2%</td>
<td>42.4%</td>
<td>87.3%</td>
</tr>
</tbody>
</table>
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The Richmond Index rose by one point to a still very weak -10. The chart on the left puts the index in context, plotting the 12-month moving average vs 2-year trailing maximums and minimums, forming a tunnel. At -11 the Richmond MFG [...]

Richmond Fed MFG Index Rose to -10 From -11

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522e.jpg" width="353">
Italy has become EMU&#146;s marginalized large economy. It is the third largest economy in EMU and fourth largest in the EU but it has been struggling of late. The chart shows the ongoing rise in consumer confidence until the start of the New Year when it began to hit some turbulence.
EU/EMU measures continue to be strong to firm. But the rising euro is causing some troubles as are rising energy prices. To some extent the rising euro blunts higher dollar costs for petroleum products. We have yet to see any widespread weakness in trade flows or export orders as a result of euro strength. But since Italy is the weakest of the large EMU economies maybe we should look there first. When we do see we find that the consumer is struggling.
The table below summarizes key responses for the ISAE&#146;s consumer survey. The far right column puts the various May readings in the context of the receptive ranges since 1990. In that context confidence itself is still below the midpoint of that range (at 46%). The overall situation over the past 12 months is not deemed so bad. In fact it is one of the best residing in the 75th percentile of its range. Savings are called the best of the period as consumers have been socking away funds. But the remaining readings are low in the respective ranges. Fear of unemployment is in the 64th percentile - nearly the top third of the range and this is in the Euro area, a place that is supposed to be heating up. Truly Italy is not Germany even though they share a currency.
The overall situation is in the top 72nd percentile of its range for the past 12 months and is in the 27th percentile for the next 12-months. That can&#146;t be a good sign. The consumer evaluates his budget to be in the bottom five percentile over the next 12 months. Italy&#146;s showing signs of weakness. Will those spread to the rest of EMU or is this an isolated problem for Italy?

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
ITALY: ISAE CONSUMER CONFIDENCE
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="4">Since 1990</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Mar-07</td>
<td>12-MO Avg</td>
<td>AVG</td>
<td>Max</td>
<td>Min</td>
<td>% Range</td>
</tr>
<tr>
<td class="firstcol">CONSUMER CONFIDENCE</td>
<td>109.5</td>
<td>107.9</td>
<td>112.5</td>
<td>-110</td>
<td>-112</td>
<td>128</td>
<td>94</td>
<td>46.3%</td>
</tr>
<tr>
<td class="firstcol">Last 12-Mos</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Overall Situation</td>
<td>-52</td>
<td>-55</td>
<td>-48</td>
<td>57</td>
<td>67</td>
<td>-16</td>
<td>-147</td>
<td>72.5%</td>
</tr>
<tr>
<td class="firstcol">Price Trends</td>
<td>-24.5</td>
<td>-26.5</td>
<td>-25.5</td>
<td>24</td>
<td>16</td>
<td>4</td>
<td>-34</td>
<td>25.3%</td>
</tr>
<tr>
<td class="firstcol">HH Financial Situation</td>
<td>-35</td>
<td>-38</td>
<td>-35</td>
<td>36</td>
<td>27</td>
<td>0</td>
<td>-49</td>
<td>28.6%</td>
</tr>
<tr>
<td class="firstcol">Current</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">HH Savings**</td>
<td>77</td>
<td>73</td>
<td>69</td>
<td>-70</td>
<td>-62</td>
<td>77</td>
<td>49</td>
<td>100.0%</td>
</tr>
<tr>
<td class="firstcol">Major Purcahses**</td>
<td>23.5</td>
<td>23</td>
<td>25.5</td>
<td>-24</td>
<td>-28</td>
<td>41</td>
<td>18</td>
<td>26.1%</td>
</tr>
<tr>
<td class="firstcol">Next 12 Months</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Overall Situation*</td>
<td>-18</td>
<td>-17</td>
<td>-10</td>
<td>16</td>
<td>11</td>
<td>24</td>
<td>-34</td>
<td>27.6%</td>
</tr>
<tr>
<td class="firstcol">Prices Trends</td>
<td>17.5</td>
<td>15.5</td>
<td>15.5</td>
<td>-16</td>
<td>-24</td>
<td>49</td>
<td>7</td>
<td>25.0%</td>
</tr>
<tr>
<td class="firstcol">Unemployment</td>
<td>-5</td>
<td>-5</td>
<td>-6</td>
<td>5</td>
<td>5</td>
<td>9</td>
<td>-30</td>
<td>64.1%</td>
</tr>
<tr>
<td class="firstcol">Budget</td>
<td>3</td>
<td>2</td>
<td>7</td>
<td>-8</td>
<td>-20</td>
<td>40</td>
<td>1</td>
<td>5.1%</td>
</tr>
<tr>
<td class="firstcol">Purchases planned**</td>
<td>8.5</td>
<td>7.5</td>
<td>8</td>
<td>-10</td>
<td>-11</td>
<td>20</td>
<td>4</td>
<td>28.1%</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Savings**</td>
<td>26.5</td>
<td>23</td>
<td>28.5</td>
<td>-27</td>
<td>-34</td>
<td>44</td>
<td>20</td>
<td>28.6%</td>
</tr>
<tr class="odd">
<td colspan="8">* Since Nov 1998, index is More +0.5 &#39;Probable&#39; or +0.5 &#39;same&#39; depending on category</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
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Italy has become EMUs marginalized large economy. It is the third largest economy in EMU and fourth largest in the EU but it has been struggling of late. The chart shows the ongoing rise in consumer confidence until the start of the [...]

Italian Consumer Confidence Up in May

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522a.jpg" width="353">
Among the Euro area analysts and institutional investors surveyed by the Center for European Economic Research (ZEW) in Manheim Germany, the excess of those who feel good about the current situation over those who feel bad rose to an all time high of 81.8% in May, an increase of 11.9 percentage points over April, and 63.5 points above May 2006. These same financial types became more optimistic regarding the economic outlook six months ahead. The optimists exceeded the pessimists by 24.0% in May. This is 11.6 percentage points higher than in April, but 26.0 percentage points below May of 2006. In the eight plus years that the data have been available, the level of optimism seems cautious as can be seen in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522b.jpg" width="353">
A similar pattern emerges in the ZEW results for Germany alone, as shown in the second chart. An excess of 88% (again an all time high) of the respondents found current conditions good over those who found them bad. This was 11.1 percentage points above April and 79.3 points above May 2006. The excess of optimists over pessimists regarding the economic outlook rose to 24.0% in May, 7.5 percentage points above April, but 26.0 points below May 2006. It is also well below the long term average of expectations in Germany, which is an excess of optimists over pessimists of 33%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522c.jpg" width="353">
Two indicators of consumer confidence were also released today--one for Italy and one for Turkey. Consumer confidence in Italy, expressed in terms of an index with the base 1980, has increased irregularly since May 2004 as can be seen in the third chart that shows the historical record for this series. The May figure was 109.5 up 1.6 points from April but still well below the previous peaks of 126.9 in February 2002 and 130.7 in November 1988.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522d.jpg" width="353">
The Turkish measure of consumer confidence has four components: Personal Financial Standing, General Economic Situation, Expenditures and Price Expectations. The results of the surveys of these factors are shown as four diffusion indexes. The general index is calculated by taking arithmetic means of the four diffusion indexes. The range of the general index is 0 to 200. If it is above (below)100, it means consumer confidence is optimistic (pessimistic). A value of 100 indicates a neutral position. Data are available only since December 2003. The fourth chart shows that while consumer confidence in Turkey has recovered from a low point reached in July 2006, it is still in pessimistic territory.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">BUSINESS AND CONSUMER CONFIDENCE IN EUROPE</th>
<th scope="col">May 07</th>
<th scope="col">Apr 07&nbsp;</th>
<th scope="col">May 06</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro Area&nbsp; (ZEW)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions % Balance</td>
<td>81.8</td>
<td>69.9</td>
<td>18.3</td>
<td>11.9</td>
<td>63.5</td>
<td>23.8</td>
<td>-28.7</td>
<td>-41.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations Six Months Ahead, &nbsp; % Balance</td>
<td>22.3</td>
<td>10.7</td>
<td>47.7</td>
<td>11.6</td>
<td>-25.4</td>
<td>26.6</td>
<td>32.3</td>
<td>52.1</td>
</tr>
<tr>
<td class="firstcol"> Germany (ZEW) </td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Current Conditions % Balance</td>
<td>88.0</td>
<td>76.9</td>
<td>8.7</td>
<td>11.1</td>
<td>79.3</td>
<td>18.3</td>
<td>-61.8</td>
<td>-67.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Expectations Six Months Ahead, &nbsp; % Balance</td>
<td>24.0</td>
<td>16.5</td>
<td>50.0</td>
<td>7.5</td>
<td>-26.0</td>
<td>22.3</td>
<td>34.8</td>
<td>44.6</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>May 07</td>
<td>Apr 07&nbsp;</td>
<td>Mar 07</td>
<td>Feb 07&nbsp;</td>
<td>Jan 07</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp; Consumer Confidence&nbsp; (1980=100) </td>
<td>109.5</td>
<td>107.9</td>
<td>112.5</td>
<td>111.6</td>
<td>110.3</td>
<td>105.7</td>
<td>104.2</td>
<td>101.5</td>
</tr>
<tr>
<td class="firstcol"> Turkey&nbsp; </td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp;Consumer Confidence (Index &gt;100, &nbsp;Optimistic: &lt; 100, Pessimistic: &nbsp;100=Neutral) </td>
<td>n.a.</td>
<td>93.7</td>
<td>92.4</td>
<td>92.7</td>
<td>91.8</td>
<td>95.6</td>
<td>100.2</td>
<td>106.7</td>
</tr>
</tbody>
</table>
Italian Consumer Confidence Up in May 
by <a href="/comment/Brusca.html">Robert Brusca</a> May 22, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522e.jpg" width="353">
Italy has become EMU&#146;s marginalized large economy. It is the third largest economy in EMU and fourth largest in the EU but it has been struggling of late. The chart shows the ongoing rise in consumer confidence until the start of the New Year when it began to hit some turbulence.
EU/EMU measures continue to be strong to firm. But the rising euro is causing some troubles as are rising energy prices. To some extent the rising euro blunts higher dollar costs for petroleum products. We have yet to see any widespread weakness in trade flows or export orders as a result of euro strength. But since Italy is the weakest of the large EMU economies maybe we should look there first. When we do see we find that the consumer is struggling.
The table below summarizes key responses for the ISAE&#146;s consumer survey. The far right column puts the various May readings in the context of the receptive ranges since 1990. In that context confidence itself is still below the midpoint of that range (at 46%). The overall situation over the past 12 months is not deemed so bad. In fact it is one of the best residing in the 75th percentile of its range. Savings are called the best of the period as consumers have been socking away funds. But the remaining readings are low in the respective ranges. Fear of unemployment is in the 64th percentile - nearly the top third of the range and this is in the Euro area, a place that is supposed to be heating up. Truly Italy is not Germany even though they share a currency.
The overall situation is in the top 72nd percentile of its range for the past 12 months and is in the 27th percentile for the next 12-months. That can&#146;t be a good sign. The consumer evaluates his budget to be in the bottom five percentile over the next 12 months. Italy&#146;s showing signs of weakness. Will those spread to the rest of EMU or is this an isolated problem for Italy?

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
ITALY: ISAE CONSUMER CONFIDENCE
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="4">Since 1990</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Mar-07</td>
<td>12-MO Avg</td>
<td>AVG</td>
<td>Max</td>
<td>Min</td>
<td>% Range</td>
</tr>
<tr>
<td class="firstcol">CONSUMER CONFIDENCE</td>
<td>109.5</td>
<td>107.9</td>
<td>112.5</td>
<td>-110</td>
<td>-112</td>
<td>128</td>
<td>94</td>
<td>46.3%</td>
</tr>
<tr>
<td class="firstcol">Last 12-Mos</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Overall Situation</td>
<td>-52</td>
<td>-55</td>
<td>-48</td>
<td>57</td>
<td>67</td>
<td>-16</td>
<td>-147</td>
<td>72.5%</td>
</tr>
<tr>
<td class="firstcol">Price Trends</td>
<td>-24.5</td>
<td>-26.5</td>
<td>-25.5</td>
<td>24</td>
<td>16</td>
<td>4</td>
<td>-34</td>
<td>25.3%</td>
</tr>
<tr>
<td class="firstcol">HH Financial Situation</td>
<td>-35</td>
<td>-38</td>
<td>-35</td>
<td>36</td>
<td>27</td>
<td>0</td>
<td>-49</td>
<td>28.6%</td>
</tr>
<tr>
<td class="firstcol">Current</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">HH Savings**</td>
<td>77</td>
<td>73</td>
<td>69</td>
<td>-70</td>
<td>-62</td>
<td>77</td>
<td>49</td>
<td>100.0%</td>
</tr>
<tr>
<td class="firstcol">Major Purcahses**</td>
<td>23.5</td>
<td>23</td>
<td>25.5</td>
<td>-24</td>
<td>-28</td>
<td>41</td>
<td>18</td>
<td>26.1%</td>
</tr>
<tr>
<td class="firstcol">Next 12 Months</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Overall Situation*</td>
<td>-18</td>
<td>-17</td>
<td>-10</td>
<td>16</td>
<td>11</td>
<td>24</td>
<td>-34</td>
<td>27.6%</td>
</tr>
<tr>
<td class="firstcol">Prices Trends</td>
<td>17.5</td>
<td>15.5</td>
<td>15.5</td>
<td>-16</td>
<td>-24</td>
<td>49</td>
<td>7</td>
<td>25.0%</td>
</tr>
<tr>
<td class="firstcol">Unemployment</td>
<td>-5</td>
<td>-5</td>
<td>-6</td>
<td>5</td>
<td>5</td>
<td>9</td>
<td>-30</td>
<td>64.1%</td>
</tr>
<tr>
<td class="firstcol">Budget</td>
<td>3</td>
<td>2</td>
<td>7</td>
<td>-8</td>
<td>-20</td>
<td>40</td>
<td>1</td>
<td>5.1%</td>
</tr>
<tr>
<td class="firstcol">Purchases planned**</td>
<td>8.5</td>
<td>7.5</td>
<td>8</td>
<td>-10</td>
<td>-11</td>
<td>20</td>
<td>4</td>
<td>28.1%</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Savings**</td>
<td>26.5</td>
<td>23</td>
<td>28.5</td>
<td>-27</td>
<td>-34</td>
<td>44</td>
<td>20</td>
<td>28.6%</td>
</tr>
<tr class="odd">
<td colspan="8">* Since Nov 1998, index is More +0.5 &#39;Probable&#39; or +0.5 &#39;same&#39; depending on category</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
Richmond Fed MFG Index Rose to -10 From -11 
by <a href="/comment/Brusca.html">Robert Brusca</a> May 22, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522f.jpg" width="353">
The Richmond Index rose by one point to a still very weak -10. The chart on the left puts the index in context, plotting the 12-month moving average vs 2-year trailing maximums and minimums, forming a tunnel. At -11 the Richmond MFG index is coming off a 2-year low and has not risen off that low very robustly. 
Looking back, the weakness seen in Richmond in the monthly index is similarly to the sort that preceded that last recession. The 12-month average however is not nearly that low. Still the degree of weakness in Richmond MFG is clearly established and is not minor. These are not spike lows, but lows that persist. 
The ranges below show that the current MFG readings are quite low in their respective ranges. Among the current readings only wages and prices are above the midpoint in their ranges. The forward-looking indexes show some firmness in jobs hours and prices. 
The Richmond services report is substantially stronger. Expected production is very strong. Current readings are firm to strong. The surveys - with or without retailing show that the service sector firmness is widespread. Readings are generally above the midpoints of their ranges. Wage readings are the relative weakest within their ranges. Revenues are firm. Employment is strong. The outlook index is upbeat in stark contrast with conditions in MFG. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Richmond MFG Index
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Since Nov 1993</td>
<td>May-07</td>
<td>Apr-07</td>
<td colspan="2">Percentile of own range</td>
</tr>
<tr>
<td class="firstcol">Component</td>
<td>Levels</td>
<td>Levels</td>
<td>Current</td>
<td>6-mos Ahead</td>
</tr>
<tr>
<td class="firstcol">Index</td>
<td>-10</td>
<td>-11</td>
<td>30.4%</td>
<td>36.9%</td>
</tr>
<tr>
<td class="firstcol">Shipments</td>
<td>-7</td>
<td>-11</td>
<td>32.7%</td>
<td>37.9%</td>
</tr>
<tr>
<td class="firstcol">New Order</td>
<td>-13</td>
<td>-14</td>
<td>24.1%</td>
<td>34.4%</td>
</tr>
<tr>
<td class="firstcol">backlogs</td>
<td>-18</td>
<td>-13</td>
<td>39.1%</td>
<td>48.6%</td>
</tr>
<tr>
<td class="firstcol">Capacity</td>
<td>-17</td>
<td>1</td>
<td>13.6%</td>
<td>43.9%</td>
</tr>
<tr>
<td class="firstcol">Vendor Speed</td>
<td>-1</td>
<td>-6</td>
<td>15.4%</td>
<td>36.8%</td>
</tr>
<tr>
<td class="firstcol">Employees</td>
<td>-9</td>
<td>-14</td>
<td>43.6%</td>
<td>64.3%</td>
</tr>
<tr>
<td class="firstcol">Workweek</td>
<td>-9</td>
<td>12</td>
<td>26.8%</td>
<td>51.2%</td>
</tr>
<tr>
<td class="firstcol">Wages</td>
<td>16</td>
<td>27</td>
<td>69.6%</td>
<td>29.7%</td>
</tr>
<tr>
<td class="firstcol">Inventories</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Finished Goods</td>
<td>21</td>
<td>19</td>
<td>42.9%</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Raw Materials</td>
<td>12</td>
<td>0</td>
<td>47.8%</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>2.62</td>
<td>0.94</td>
<td>63.8%</td>
<td>82.8%</td>
</tr>
<tr>
<td class="firstcol">Prices Received</td>
<td>1.5</td>
<td>0.94</td>
<td>62.7%</td>
<td>45.0%</td>
</tr>
<tr>
<td class="firstcol">Capital Expenditures</td>
<td>16</td>
<td>14</td>
<td>--</td>
<td>40.0%</td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Richmond Seasonally Adjusted Services Index
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>Number of</td>
<td>Average</td>
<td>Prod expected next</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Revenues</td>
<td>employees</td>
<td>wage</td>
<td>six months</td>
</tr>
<tr class="even">
<td class="firstcol">May-07</td>
<td>7</td>
<td>9</td>
<td>21</td>
<td>62</td>
</tr>
<tr class="even">
<td class="firstcol">Apr-07</td>
<td>5</td>
<td>0</td>
<td>19</td>
<td>80</td>
</tr>
<tr class="even">
<td class="firstcol">avg</td>
<td>10</td>
<td>2</td>
<td>19</td>
<td>33</td>
</tr>
<tr class="even">
<td class="firstcol">max</td>
<td>45</td>
<td>20</td>
<td>39</td>
<td>66</td>
</tr>
<tr class="even">
<td class="firstcol">min</td>
<td>-34</td>
<td>-25</td>
<td>3</td>
<td>1</td>
</tr>
<tr class="even">
<td class="firstcol">%range</td>
<td>51.9%</td>
<td>75.6%</td>
<td>50.0%</td>
<td>93.8%</td>
</tr>
<tr class="odd">
<td colspan="5">Richmond Services Excluding Retailing</td>
</tr>
<tr class="even">
<td class="firstcol">%range</td>
<td>59.0%</td>
<td>73.5%</td>
<td>42.5%</td>
<td>40.8%</td>
</tr>
<tr>
<td colspan="5">Richmond Services - Retail</td>
</tr>
<tr class="even">
<td class="firstcol">%range</td>
<td>64.0%</td>
<td>61.2%</td>
<td>42.4%</td>
<td>87.3%</td>
</tr>
</tbody>
</table>
</body>
</html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070521a.jpg" width="353">
Singapore released data on its first quarter gross domestic product today. Although the quarterly year over year increases have been decelerating over the past year, GDP is holding up better than expected. The seasonally unadjusted GDP increased 6.13% in the first quarter, somewhat higher than consensus expectations.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070521b.jpg" width="353">
Part of the better than expected performance is due to the fact that the expected sluggish demand for Singapore&#39;s exports from the United States and Europe has been more than offset by strong demand from its neighbors in the Pacific Rim, as can be seen in the first two charts. An additional factor has been the increasing importance of the service industries in Gross Value Added. As can be seen in the third chart, the value added by the service industries has been increasing faster than that of the goods producing industries.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070521d.jpg" width="353">
Singapore is the fifth among the countries of the Pacific Rim that have so far this year released first quarter gross domestic product data. Hong Kong, Indonesia and South Korea have shown a deceleration in growth, similar to that shown by Singapore. The exception has been China, which showed an increase in quarterly growth to 11.1% in the first quarter of 2007 compared with growth of 10.4% in the fourth quarter of 2006.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070521c.jpg" width="353">
The year over year increases in the seasonally unadjusted data for Hong Kong, Indonesia, South Korea and Singapore are shown in the fourth char.t 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">SELECTED PACIFIC RIM COUNTRIES: Y/Y INCREASE IN GDP (NSA)</th>
<th scope="col">Q1 07</th>
<th scope="col">Q4 06&nbsp;</th>
<th scope="col">Q3&nbsp;06</th>
<th scope="col">Q2 06</th>
<th scope="col">Q1 06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">China</td>
<td>11.1</td>
<td>10.4</td>
<td>10.6</td>
<td>11.3</td>
<td>10.4</td>
<td>10.7</td>
<td>9.9</td>
<td>9.5</td>
</tr>
<tr>
<td class="firstcol">Singapore</td>
<td>6.13</td>
<td>6.60</td>
<td>7.01</td>
<td>7.97</td>
<td>10.03</td>
<td>7.89</td>
<td>6.62</td>
<td>7.88</td>
</tr>
<tr class="odd">
<td class="firstcol">Hong Kong</td>
<td>5.64</td>
<td>7.27</td>
<td>6.77</td>
<td>5.58</td>
<td>8.07</td>
<td>6.92</td>
<td>7.52</td>
<td>8.58</td>
</tr>
<tr>
<td class="firstcol"> Indonesia </td>
<td>5.96</td>
<td>6.11</td>
<td>5.87</td>
<td>4.96</td>
<td>4.98</td>
<td>5.48</td>
<td>5.66</td>
<td>5.65</td>
</tr>
<tr class="odd">
<td class="firstcol">South Korea</td>
<td>4.00</td>
<td>3.96</td>
<td>4.85</td>
<td>5.05</td>
<td>5.34</td>
<td>4.99</td>
<td>4.20</td>
<td>4.73</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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Singapore released data on its first quarter gross domestic product today. Although the quarterly year over year increases have been decelerating over the past year, GDP is holding up better than expected. The seasonally unadjusted [...]

Singapore: Latest of Pacific Rim Countries to Report First Quarter GDP

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/070518b.jpg" width="353">
Gasoline prices in the US hit a record high last week (ended May 14), $3.103 a gallon for regular grade, according to the Department of Energy, up 4.9 cents from the week before. And the main summer driving season hasn&#39;t started yet.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070518c.jpg" width="353">
Oddly, it seems, the price of gasoline has risen more than proportionately with crude oil prices. This is readily apparent in the first graph, which includes regular gasoline and two crudes, West Texas Intermediate and UK Brent Blend. We see there that in the last two years of dramatically higher petroleum prices, gasoline prices have fallen more sharply in the winter and risen more in the spring. The extremity of the up-move this year is greater than last year. In the second graph, it is evident that demand for gasoline did not fall as much over the winter as in any recent year. Consequently, gasoline inventories are lower now than usual in the spring, seen in graph 3, so prices are rising more rapidly.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070518d.jpg" width="353">
The other feature of the energy markets that continues to fascinate us is the growth of demand for petroleum generally in emerging market countries and in China. The last graph -- another illustration of the new multiple-series and calculation features of the upcoming version of DLXVG3 software -- shows that Europe has decreased markedly as a share of world petroleum demand. The US is up slightly in the most recent few months, touching almost exactly 25% in April; but this is still modestly lower than the range that prevailed before 2004. China, in sharp contrast, is expanding rapidly, basically doubling its share since 1995 and raising its use by 60% in the last 5 years.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070518e.jpg" width="353">
The data here on prices and US inventories are in the OILWKLY database, and those on international demand comparisons are in the OMI database, which is provided by Haver&#39;s partner in energy information, Energy Intelligence. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">May 14</th>
<th scope="col">May 7</th>
<th scope="col">Apr 2007</th>
<th scope="col">Yr-Ago Week</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Gasoline, US Regular Grade (cents/gal)</td>
<td>310.3</td>
<td>305.4</td>
<td>284.5</td>
<td>294.7</td>
<td>257.2</td>
<td>227.0</td>
<td>148.4</td>
</tr>
<tr>
<td class="firstcol">Crude Oil, UK Brent ($/barrel)</td>
<td>May 11</td>
<td>May 4</td>
<td>67.58</td>
<td>70.47</td>
<td>65.19</td>
<td>54.58</td>
<td>28.53</td>
</tr>
<tr class="odd">
<td class="firstcol">66.92</td>
<td>66.92</td>
</tr>
<tr>
<td class="firstcol">West Texas Intermed</td>
<td>61.90</td>
<td>63.79</td>
<td>63.91</td>
<td>71.60</td>
<td>66.13</td>
<td>56.50</td>
<td>30.36</td>
</tr>
</tbody>
</table>
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Gasoline prices in the US hit a record high last week (ended May 14), $3.103 a gallon for regular grade, according to the Department of Energy, up 4.9 cents from the week before. And the main summer driving season hasn't started yet. [...]

Gasoline Price Hits New Record, as Springtime Inventories Are Low

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The chart on the left shows that many patterns for current conditions and expectations precede the economy&#146;s slip into recession. As we evaluate this year&#146;s pattern nothing is very telling. Current conditions are holding up, basically stabilizing in April and this month after a minor slide from a local peak reached in January. Consumer sentiment is up this month and has a saw-tooth pattern in the recovery. Sentiment is at levels more reminiscent of the 1982 recovery that of the 1991 recovery. Indeed if you remove the last set of recession bands from the chart the slide in expectations appears to be one ongoing episode of irregularly sliding expectations dating back to the lofty levels reached in 2000 ahead of the recession.
Current conditions have a more normal-looking recession pattern. What we cannot tell is if we are at a point like in 1996 when current conditions, after softening, rose sharply or if we are at a point like May 2000 where a series of slips and rebounds eventually gave way to a recession. One thing seems clear and that is we are apt to learn more from watching current conditions than by watching expectations since the later seem to range so widely and have been cyclically unruly. In that regard we are wary of the slippage in current conditions reported this month. 
The table below shows us that the major components of the U of M index are still quite firm in their recovery zone. Still the current conditions index is only in the 58th percentile of its recovery range of values. Expectations have dropped to the 43rd percentile. These are firm readings; not declining readings but the economy still has lost a lot of its momentum.
The problem with understanding these measures is that they hold in ranges until the &#146;bad event&#146; of recession kicks in then they fall sharply. So finding that each has lost a lot of ground within its respective range means we have to be somewhat wary of these readings. Certainly, the economy is getting hit with another series of shocks from oil prices. The rebound in sentiment is only somewhat reassuring, but it has a rising stock market to help it out. Keep your eye on current conditions; it&#146;s the measure that must respond positively in coming months if the growth is going to continue.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
 Univ of Michingan Consumer Sentiment-Preliminary
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td> Sentiment</td>
<td> Current</td>
<td> Expectations</td>
</tr>
<tr class="grey3">
<td class="firstcol">Prelim</td>
<td>88.7</td>
<td>103.8</td>
<td>79.0</td>
</tr>
<tr class="grey3">
<td class="firstcol">Last Month</td>
<td>87.1</td>
<td>104.6</td>
<td>75.9</td>
</tr>
<tr class="grey3">
<td class="firstcol">Mo/Mo %</td>
<td>1.8%</td>
<td>-0.8%</td>
<td>4.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">2-Mos</td>
<td>0.3%</td>
<td>0.3%</td>
<td>0.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Yr/Yr%</td>
<td>12.1%</td>
<td>8.0%</td>
<td>15.8%</td>
</tr>
<tr class="grey2">
<td colspan="4"> In Recovery: Max,Min, Avg &amp; Percentile</td>
</tr>
<tr class="grey3">
<td class="firstcol">Max</td>
<td>103.8</td>
<td>113.5</td>
<td>100.1</td>
</tr>
<tr class="grey3">
<td class="firstcol">Min</td>
<td>74.2</td>
<td>90.0</td>
<td>63.2</td>
</tr>
<tr class="grey3">
<td class="firstcol">Average</td>
<td>89.7</td>
<td>102.5</td>
<td>81.5</td>
</tr>
<tr class="grey1">
<td class="firstcol"> percentile</td>
<td> 49.0%</td>
<td> 58.7%</td>
<td> 42.8%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Cycle peak</td>
<td> 103.8</td>
<td> 113.5</td>
<td> 100.1</td>
</tr>
<tr class="grey3">
<td class="firstcol">% of Peak</td>
<td>85.5</td>
<td>91.5</td>
<td>78.9</td>
</tr>
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The chart on the left shows that many patterns for current conditions and expectations precede the economys slip into recession. As we evaluate this years pattern nothing is very telling. Current conditions are holding up, basically [...]

U.S. Consumer Sentiment Bounced Back but Current Conditions Slip

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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Tom Moeller

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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

250430A.jpg

250430B.jpg

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**.

250430C.jpg

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

Personal Income, Consumption, and Prices in March

250430F20.jpg

250430G20.jpg

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

250430F5.jpg

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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: May 2007

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