Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080529c.jpg" width="353">
Last week initial claims for unemployment insurance again ticked up, by 4,000 to 372,000 following the prior week&#39;s 6,000 decline. Consensus expectations had been for claims to total 370,000 last week.
The four week moving average of initial claims fell slightly week-to-week to 370,500 (231.5% y/y). Claims averaged 364,000 during April.
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
Continuing claims for unemployment insurance rose a large 36,000 after a 5,000 decline during the prior week. The latest level was the highest since March 2004. It provides some indication of workers&#39; ability to find employment.
The continuing claims numbers lag the initial claims figures by one week.
The insured rate of unemployment held steady at 2.3% for the fifth week. That was the highest since 2004.

<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>&nbsp;</th>
<th scope="col">05/24/08</th>
<th scope="col">05/17/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;372</td>
<td>368</td>
<td>22.0%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,104</td>
<td>24.9%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
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Last week initial claims for unemployment insurance again ticked up, by 4,000 to 372,000 following the prior week's 6,000 decline. Consensus expectations had been for claims to total 370,000 last week. The four week moving average of [...]

U.S. Initial Claims for Jobless Insurance Ticked Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080529a.jpg" width="353">
U.S. real GDP growth during 1Q&#39;08 was revised slightly higher to 0.9%, as expected. The rise followed a 4Q &#39;07 increase of 0.6% and, together, the figures still are the weakest since near the end of the recession year of 2001.
Corporate profits are estimated to have risen at a 1.3% (1.7% y/y) annual rate after declining at a 12.4% rate in 4Q and at a 4.9% rate in 3Q. Earnings in the financial sector continued lower at a 2.9% (-12.2% y/y) rate following declines of 48.3% in 4Q and -22.7% in 3Q. U.S. nonfinancial sector earnings rose all of 1.7% (-2.6% y/y) but that gain also followed two quarters of sharp declines. The gain in foreign sector earnings slowed considerably to a 5.1% (34.9% y/y) rate after outsized increases during each of the prior five quarters.
In the GDP accounts, revisions to trade and inventories offset one another in their effect on 1Q GDP growth. An improved foreign trade deficit added 0.8 percentage points to growth, up from the earlier estimate of a 0.2 percentage point addition, though growth in exports was lowered to 2.8% (8.8% y/y) from 5.5%. Imports are now estimated to have declined at a 2.6% rate (-0.6% y/y) instead of rising 2.5%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080529b.jpg" width="353">
Inventory accumulation is now estimated to have added 0.2 percentage points to 1Q GDP growth, down from the last reading of a 0.8 point addition.
Most of the 1Q weakness in final sales to domestic purchasers was preserved. They now are estimated to have ticked down at a 0.1% rate versus the last estimate of -0.4% growth. These figures are still the first sub-zero readings since the earlier recession in 1991.
The decline in residential construction was still quite severe. Activity declined at a little revised 25.5% (-20.9% y/y) rate which was about equal to the drops in 4Q and 3Q. These are the quickest rates of decline since the recession in 1981 and the 1Q drop reduced overall real GDP growth by 1.2 percentage points.
Business fixed investment also fell at 0.3% (+6.4% Y/Y) rate which was less than the 2.5% shortfall estimated earlier. It still was the first negative growth, however, since 4Q&#39;06 and the largest negative reading since early 2004. Overall it reduced 1Q GDP growth by less than 0.1 percentage points. Investment in structures grew 1.1% (13.7% y/y) while equipment investment fell 0.9% +3.3% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080529f.jpg" width="353">
Growth in real personal consumption was unrevised at 1.0% (1.9% y/y) growth which was its weakest since the recession year of 2001. Spending on autos &amp; light trucks fell at a 13.5% (-4.9% y/y) rate while spending on furniture &amp; other household equipment ticked up at a quite weak 0.6% (4.9% y/y) rate. Spending of clothing rose 1.7% (1.6% y/y) and spending on services rose 3.0% (2.7% y/y). Growth in real PCE added 0.7 percentage point to 1Q real GDP growth and that was its weakest contribution since the recession of 2001.
The GDP chain price index was unrevised at a 2.6% annual rate which was its fastest gain in three quarters. The PCE price index rose at a 3.5% rate (3.4% y/y) which was down slightly from the 3.9% rise in 4Q. Less food &amp; energy consumer prices rose at a 2.1% rate which was stable with growth during the prior four years. The price index for business fixed investment rose at a 0.2% rate and residential investment prices fell at a 2.3% (-0.9% y/y) rate which was the fastest rate of decline since 1970 (still not a typo).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">1Q &#39;08 (Preliminary)</th>
<th scope="col">1Q &#39;08 (Advance)</th>
<th scope="col">4Q &#39;07</th>
<th scope="col">3Q &#39;07</th>
<th scope="col">1Q Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>0.9</td>
<td>0.6</td>
<td>0.6</td>
<td>4.9</td>
<td>2.5</td>
<td>2.2</td>
<td>2.9</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.2</td>
<td>0.8</td>
<td>-1.8</td>
<td>0.9</td>
<td>0.1</td>
<td>-0.3</td>
<td>0.1</td>
<td>-0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>0.7</td>
<td>-0.2</td>
<td>2.4</td>
<td>4.0</td>
<td>2.7</td>
<td>2.5</td>
<td>2.8</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>0.8</td>
<td>0.2</td>
<td>1.0</td>
<td>1.4</td>
<td>1.0</td>
<td>0.7</td>
<td>-0.1</td>
<td>-0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>-0.1</td>
<td>-0.4</td>
<td>1.3</td>
<td>2.5</td>
<td>1.4</td>
<td>1.8</td>
<td>2.7</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.6</td>
<td>2.6</td>
<td>2.4</td>
<td>1.0</td>
<td>2.2</td>
<td>2.7</td>
<td>3.2</td>
<td>3.2</td>
</tr>
</tbody>
</table>


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U.S. real GDP growth during 1Q'08 was revised slightly higher to 0.9%, as expected. The rise followed a 4Q '07 increase of 0.6% and, together, the figures still are the weakest since near the end of the recession year of 2001. [...]

U.S. 1Q'08 GDP Revised Up Slightly, Profits Rose

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080528f.jpg" align="left" border="0" height="265" width="353">
Near term pressures: The German CPI and PPI may have slammed
on the brakes in April but export and import prices are still
advancing- even ex-energy. The German PPI is generally unruly but the
CPI has flattened out over three months with an annual rate of gain of
1.9% and an ex-energy reading of just 1.2%. German export prices in the
past three months are up at a 2.6% rate and imports at a 5.1% rate &#8211;
those numbers are not acceptable. While they are
not-seasonally-adjusted, German ex petroleum import prices are up at a
4.7% annual rate &#8211; over three-months -- and that is not much of an
improvement over the import headline pace. Moreover, the sequential
growth rates show acceleration in the ex-petrol import price trend,
12-Mo to 6-Mo to 3-Mo, just as for the PPI ex-energy. Even so,
ex-energy CPI prices are decelerating on this series of measures. 
Some progress but not enough: Yr/Yr comparisons show a very different
story, at least for ex-energy prices. German CPI prices are up by 2.5%
overall and by 1.8% ex energy. For imports the total Yr/Yr gains is
5.6% with an ex energy rise of just 1.5%. The chart above shows that
the key German prices Yr/Yr ex-energy all are below the 2% magic number
dictated by the ECB &#8211;that is except for the PPI. The ECB, however, does
not recognize any other target or ceiling for inflation except for the
HCIP headline rate and there the ceiling rate is 2% PERIOD. 
 

Are the pressures peaking? Yr/Yr gains in the CPI ex-energy
peaked in December of 2007. Ex petrol import prices peaked in August of
2006. Even the Yr/Yr PPI ex petrol prices shows signs of peaking in the
last few months. Of course with oil prices having spurted again it is
too soon to tell how robust this phenomenon will prove to be. For the
time being year-over-year inflation trends, at least in Germany, seems
to reveal the symptoms of being contained. And the ECB, like the Fed in
the US, seems to prefer gauging inflation on its Yr/Yr performance
instead on a shorter annualized pace. Still, inflation is too high on
the all-important headline measures to let the ECB breathe freely.
Moreover, the ECB has other countries to worry about besides Germany.
Germany is making a solid contribution to an improved EMU rate of
inflation but problems in the zone continue to linger and perhaps to
fester. 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">German International and Domestic Inflation Trends </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% m/m</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">SA;</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">Export Products</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.5%</td>
<td>2.6%</td>
<td>3.2%</td>
<td>2.2%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">Import Products</td>
<td>0.4%</td>
<td>0.0%</td>
<td>0.9%</td>
<td>5.1%</td>
<td>7.5%</td>
<td>5.6%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">NSA</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Export excl Petroleum</td>
<td>0.1%</td>
<td>0.2%</td>
<td>0.6%</td>
<td>3.4%</td>
<td>2.8%</td>
<td>1.7%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">Import excl Petroleum</td>
<td>0.3%</td>
<td>0.0%</td>
<td>0.9%</td>
<td>4.7%</td>
<td>3.5%</td>
<td>1.5%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo: SA</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">CPI</td>
<td>0.0%</td>
<td>0.4%</td>
<td>0.1%</td>
<td>1.9%</td>
<td>2.7%</td>
<td>2.5%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; CPI excl Energy</td>
<td>0.0%</td>
<td>0.3%</td>
<td>0.0%</td>
<td>1.2%</td>
<td>1.5%</td>
<td>1.8%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">PPI</td>
<td>0.9%</td>
<td>0.5%</td>
<td>0.6%</td>
<td>8.1%</td>
<td>7.7%</td>
<td>5.2%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; PPI excl Energy</td>
<td>0.2%</td>
<td>0.4%</td>
<td>0.4%</td>
<td>4.0%</td>
<td>3.1%</td>
<td>2.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
</body></html>

Near term pressures: The German CPI and PPI may have slammed on the brakes in April but export and import prices are still advancing- even ex-energy. The German PPI is generally unruly but the CPI has flattened out over three months [...]

German Export and Import Prices Show Mixed Trends: Pick Your Horizon

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080528d.jpg" align="left" border="0" height="265" width="353">
French household confidence is not having a vintage year and
its not due to the weather. The household survey is at its lowest level
since 1990. Living standards for the next 12-months are assessed as
likely to be the worst since 1990. The past 12-months are assessed as
having been the worst since 1990. That&#8217;s a bad start for the survey
right here. But there&#8217;s more...

The unemployment expectation is now mid-range at a +18 value.
Price developments in the last 12 months are assessed as the worst
since 1990. Mercifully, in the period ahead, price developments are
scored as in roughly the bottom quartile of their range. The ECB may
take some (minor) solace from that.

The favorability of the environment for savings gets a
mid-range 47th percentile response but the ability to save rating for
the next 12-months is a bottom 10 percentile score. Similarly, the
favorability of the environment for spending is in the bottom fifth of
its range. The current financial situation is in the bottom third of
its range but the past 12-months and future 12-months are assessed as
the worst since 1990. I think there is pattern developing here...

French consumers were at first very happy to have Mr Sarkozy
in office and confidence ran up even in the face of some clear problems
in the aftermath of his election to office. But since then some
internal social issues emerged, the euro continued to move higher, and
food and energy prices have shot up across Europe as the European
economy has slowed down.

Consumers are feeling the pinch in France where various
demonstrations have been petitioning for relief from high fuel prices.
Sarkozy has requested that the EMU&#8217;s VAT tax on fuel be capped to help
contain price pressures from rising faster at the pump as energy prices
spurt. While that might help somewhat France&#8217;s problems run deeper than
that. Most of the EMU nations seem to be sharing in this sort of pain
although Germany, so far has, expressed the smallest level of
discomfort, but even there discomfort seems to be growing. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">INSEE
Household Monthly Survey </th>
</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="2">Since Jan 1990</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>May-08</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>Percentile</td>
<td>Rank</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Confidence</td>
<td>-41</td>
<td>-38</td>
<td>-37</td>
<td>-36</td>
<td>0.0</td>
<td>221</td>
</tr>
<tr>
<td class="firstcol" colspan="7">Living
Standards</td>
</tr>
<tr class="odd">
<td class="firstcol">past 12 Mos</td>
<td>-74</td>
<td>-70</td>
<td>-71</td>
<td>-69</td>
<td>0.0</td>
<td>221</td>
</tr>
<tr class="odd">
<td class="firstcol">Next 12-Mos</td>
<td>-49</td>
<td>-44</td>
<td>-41</td>
<td>-42</td>
<td>0.0</td>
<td>221</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment: Next 12</td>
<td>18</td>
<td>4</td>
<td>10</td>
<td>12</td>
<td>50.0</td>
<td>140</td>
</tr>
<tr>
<td class="firstcol" colspan="7">Price
Developments</td>
</tr>
<tr class="odd">
<td class="firstcol">Past 12Mo</td>
<td>66</td>
<td>58</td>
<td>61</td>
<td>43</td>
<td>100.0</td>
<td>1</td>
</tr>
<tr class="odd">
<td class="firstcol">Next 12-Mos</td>
<td>-36</td>
<td>-36</td>
<td>-41</td>
<td>-25</td>
<td>26.4</td>
<td>113</td>
</tr>
<tr>
<td class="firstcol" colspan="7">Savings</td>
</tr>
<tr class="odd">
<td class="firstcol">Favorable to save</td>
<td>21</td>
<td>24</td>
<td>25</td>
<td>23</td>
<td>47.2</td>
<td>130</td>
</tr>
<tr class="odd">
<td class="firstcol">Ability to save Next 12</td>
<td>-20</td>
<td>-13</td>
<td>-17</td>
<td>-14</td>
<td>10.3</td>
<td>219</td>
</tr>
<tr>
<td class="firstcol" colspan="7">Spending</td>
</tr>
<tr class="odd">
<td class="firstcol">Favorable for major purchase</td>
<td>-31</td>
<td>-29</td>
<td>-29</td>
<td>-27</td>
<td>19.0</td>
<td>214</td>
</tr>
<tr>
<td class="firstcol" colspan="7">Financial
Situation</td>
</tr>
<tr class="odd">
<td class="firstcol">Current</td>
<td>10</td>
<td>12</td>
<td>12</td>
<td>12</td>
<td>33.3</td>
<td>138</td>
</tr>
<tr class="odd">
<td class="firstcol">Past 12 MOs</td>
<td>-32</td>
<td>-30</td>
<td>-31</td>
<td>-27</td>
<td>0.0</td>
<td>221</td>
</tr>
<tr class="odd">
<td class="firstcol">Next 12-Mos</td>
<td>-18</td>
<td>-16</td>
<td>-14</td>
<td>-14</td>
<td>0.0</td>
<td>221</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Number of observations in the period</td>
<td>221</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

French household confidence is not having a vintage year and its not due to the weather. The household survey is at its lowest level since 1990. Living standards for the next 12-months are assessed as likely to be the worst since [...]

French Household Confidence Remains in Steep Fall

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080528c.jpg" width="353">
The International Council of Shopping Centers reported that chain store sales were unchanged last week after declines during four of the prior five weeks.
So far in May sales are down 0.6% from April after that month&#39;s 1.0% increase from March.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
During the latest week, the leading indicator of chain store sales from ICSC-UBS continued the erratic decline since 2004 with a 0.3% drop.
The chain store sales figures are available in Haver&#39;s SURVEYW database.

<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/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">05/24/08</th>
<th scope="col">05/17/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>488.2</td>
<td>488.2</td>
<td>1.5%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>


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The International Council of Shopping Centers reported that chain store sales were unchanged last week after declines during four of the prior five weeks.

U.S. Chain Store Sales Weak Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080528b.jpg" width="353">
The retail price for a gallon of regular gasoline increased nearly fifteen cents last week to $3.94 per gallon, according to the U.S. Department of Energy survey.So far this year gasoline prices have risen nearly one dollar.
Yesterday, the spot market price for gasoline rose three cents from last week&#39;s average to $3.24 per gallon.
During all of last week, the price of a barrel of WTI crude oil rose w/w to an average of $130.15. Yesterday, however, the price slipped back to $128.85. Crude oil prices have roughly doubled from last year&#39;s May level.
Natural gas prices dipped slightly last week to $11.08 per mmbtu (46.2% y/y).
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database, daily prices are found in the DAILY database.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">05/26/08</th>
<th scope="col">05/19/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Gasoline ($ per Gallon)</td>
<td>3.94</td>
<td>3.79</td>
<td>22.7%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>130.15</td>
<td>124.94</td>
<td>100.4%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>


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The retail price for a gallon of regular gasoline increased nearly fifteen cents last week to $3.94 per gallon, according to the U.S. Department of Energy survey.So far this year gasoline prices have risen nearly one dollar. [...]

U.S. Gasoline Prices Near $4.00 per Gallon, Crude Oil Doubled

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080528a.jpg" width="353">
April new orders for durable manufactured goods dipped 0.5% after slipping a little revised 0.3% during March. Consensus expectations had been for a 1.1% decline in April.
Outsized weakness in orders for transportation equipment accounts for much of this year&#39;s weakness in new orders. Overall, orders in the transportation sector this year are down 18.7% led by a 34.1% drop in orders for nondefense aircraft. Orders for motor vehicles &amp; parts also are down 10.6% YTD. Less the transportation sector altogether, durable goods orders actually rose 2.5% last month and have risen 2.1% so far this year.
Orders for nondefense capital goods fell 1.4% during April and that completely offset a 1.4% March gain. Here again, however, the latest decline stems from the transportation sector. Less aircraft, nondefense capital goods orders rose 4.2% in April and that recovered declines during the prior three months. Since yearend these orders have risen 1.4%. During the last ten years there has been an 80% correlation between the y/y gain in nondefense capital goods orders and the rise in equipment &amp; software spending in the GDP accounts. The correlation with capital goods shipments is, as one would expect, a larger 92%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080528e.jpg" width="353">
Orders for machinery were strong last month and rose 4.2% (14.5% y/y). Year-to-date machinery orders rose 2.5% after last year&#39;s 0.6% uptick.Orders for computers &amp; related products, however, slipped 1.5% and are down 0.5% so far this year. New orders for communications equipment rose 2.2% last month but likewise are down 2.1% in 2008. Also, to the upside were April primary metal orders. They surged 2.8% and are up 6.8% this year.
Overall shipments of durable goods surged 1.2% last month and less the transportation sector shipments also rose a firm 1.3%. Less transportation shipments have risen 1.9% this year after last year&#39;s 0.3% uptick.
Inventories of durable goods rose 0.5% during April and year-to-date inventories have increased 2.4% following last year&#39;s 3.5% rise. Less transportation, inventories rose 0.4% last month and by 1.7% this year, about the same as during all of 2007.
Has Inventory Volatility Returned? A Look at the Current Cycle from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/current_issues/ci8-5.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>-0.5%</td>
<td>-0.3%</td>
<td>-3.4%</td>
<td>1.4%</td>
<td>6.2%</td>
<td>10.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>2.5%</td>
<td>1.7%</td>
<td>3.0%</td>
<td>-0.3%</td>
<td>9.1%</td>
<td>9.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-1.4%</td>
<td>1.4%</td>
<td>-4.8%</td>
<td>3.5%</td>
<td>9.4%</td>
<td>17.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>4.2%</td>
<td>-1.0%</td>
<td>2.4%</td>
<td>-2.7%</td>
<td>10.7%</td>
<td>11.6%</td>
</tr>
</tbody>
</table>
</body>
</html>

April new orders for durable manufactured goods dipped 0.5% after slipping a little revised 0.3% during March. Consensus expectations had been for a 1.1% decline in April. Outsized weakness in orders for transportation equipment [...]

U.S. April Durable Goods Orders Off Less Than Expected; Rose Excl Transportation

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: May 2008

Jump to:

U.S. Initial Claims for Jobless Insurance Ticked Up

U.S. 1Q'08 GDP Revised Up Slightly, Profits Rose

U.S. 1Q'08 GDP Revised Up Slightly, Profits Rose

German Export and Import Prices Show Mixed Trends: Pick Your Horizon

French Household Confidence Remains in Steep Fall

U.S. Chain Store Sales Weak Again

U.S. Gasoline Prices Near $4.00 per Gallon, Crude Oil Doubled

U.S. April Durable Goods Orders Off Less Than Expected; Rose Excl Transportation