Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080929c.jpg" width="353">
The Euro Area&#39;s Economic Sentiment Indicator fell another 0.8 points in September, continuing a virtually uninterrupted decline since May 2007. The index now stands at 87.7 compared to the long-term average of 100. The indicator, together with its three major components, Industrial, Consumer and Service Confidence measures, whose weights account for 90% of the indicator, are shown in the first chart. The components are measured in terms of percent balances.
Sentiment in the service sector has generally been more positive than that in the consumer and industrial sectors, but now even this indicator is barely positive at a balance of 0.2% in September. There was an insignificant increase of 0.3 points in September in the consumer indicator, which did little to reduce its short fall from last year. The indicator is still 17.3 points below September 2007. There was a substantial decline of 2.8 points in the Industrial confidence indicator in September. That indicator is now 14.7 points below September, 2007.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080929d.jpg" width="353">
Because of the volatility in the monthly sentiment indicator it is not a particularly good predictor of short-term economic activity. Three or six month moving averages smooth out some of the volatility and are therefore somewhat better predictors of the trend of activity. The second chart compares the month to month change in the sentiment indicator with the month to month changes in the three and six months moving averages. The longer term averages are clearly pointing to lower activity.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">EURO AREA&nbsp;&nbsp;</th>
<th scope="col">Sep 08</th>
<th scope="col">Aug&nbsp; 08&nbsp;</th>
<th scope="col">Sep&nbsp;&nbsp; 07&nbsp;</th>
<th scope="col">M/M % chg&nbsp;</th>
<th scope="col">Y/Y % chg&nbsp;</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">Economic Sentiment Indicator (Long Term Average =100)</td>
<td>87.7</td>
<td>88.5</td>
<td>103.4</td>
<td>-0.90</td>
<td>-17.50</td>
<td>108.4</td>
<td>106.3</td>
<td>97.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Industrial Confidence&nbsp; (% balance)</td>
<td>-12.1</td>
<td>-9.3</td>
<td>2.6</td>
<td>-2.8</td>
<td>-14.7</td>
<td>4.4</td>
<td>2.2</td>
<td>-7.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Confidence</td>
<td>-18.9</td>
<td>-19.2</td>
<td>-5.7</td>
<td>0.3</td>
<td>-13.2</td>
<td>-4.9</td>
<td>-9.1</td>
<td>-13.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Service Confidence</td>
<td>0.2</td>
<td>0.6</td>
<td>13.6</td>
<td>-0.4</td>
<td>-17.3</td>
<td>19.3</td>
<td>18.0</td>
<td>11.1</td>
</tr>
</tbody>
</table>
</body>
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The Euro Area's Economic Sentiment Indicator fell another 0.8 points in September, continuing a virtually uninterrupted decline since May 2007. The index now stands at 87.7 compared to the long-term average of 100. The indicator, [...]

Economic Sentiment in the Euro Area Declines Again in September

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080929a.jpg" width="353">
Nominal personal income recovered 0.5% during August. The increase followed a revised July decline of 0.6% after two months of gains boosted by $90B of government tax rebate checks. The August increase in personal income exceeded Consensus expectations for a 0.2% rise.
Disposable personal income fell 0.9% last month after a 0.8% July drop, because net taxes jumped 11.1% (3.3% y/y) in the absence of rebate checks.
Wage &amp; salary income increased 0.4% (4.2% y/y) after a 0.3% rise during July. The annualized three-month growth in wages recovered to 4.0%, it&#39;s fastest since December, but that was down from a 5.6% increase during 2007 and a 6.3% 2006 gain. Factory sector wages fell 0.2% (+1.1% y/y) and three-month growth ticked lower to 0.7%. Wages &amp; salaries in the private service-providing industries increased 0.5% (4.5% y/y) while three-month growth totaled 3.8%. That was a deceleration from last year&#39;s gain of 6.4%. Wages in the government sector rose 0.3% (5.1% y/y) and three-month growth amounted to 4.6%.
Interest income jumped another 1.2% (-0.1% y/y) following a 7.9% rise during all of 2007. Dividend income increased 0.6% (8.0% y/y) for the fourth consecutive month. Gains have decelerated after rising 12.4% last year and by 21.7% during 2006.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080929b.jpg" width="353">
Personal consumption expenditures was unchanged after the downwardly revised 0.1% July uptick. Adjusted for price inflation real spending also was unchanged last month but three-month growth in real spending dropped to negative 2.9% (AR) with real spending on motor vehicles down at a 19.7% rate during the last three months. Furniture spending fell 0.6% last month for the third consecutive monthly decline. Spending on clothing fell 1.2% and at a 13.1% rate during the last three months.
The PCE chain price index was unchanged as energy prices fell. Food prices, which have been notably strong, rose 0.6% (5.9% y/y) and at an 8.9% rate over the last three months. The core PCE price index increased a modest 0.2% and matched Consensus expectations. Three-month growth, however, rose to 3.3%. That was it&#39;s fastest rate of increase since late 2001. Apparel prices also were firm and posted a 0.7% (1.3% y/y) increase after the 2.2% rate of deflation reached this past March. Services prices rose 0.2% (3.8% y/y) as transportation costs rose 0.4% (5.5% y/y).
The personal savings rate halved to 1.0% from 1.9% in July, though that was up from a 0.5% saving rate last year.
The figures noted above are available in the Haver USECON and in the USNA databases.
Today&#39;s announcement by Fed Chairman Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/newsevents/press/other/20080929a.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a> (%)</th>
<th scope="col">August</th>
<th scope="col">July</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">Personal Income</td>
<td>0.5</td>
<td>-0.6</td>
<td>4.6</td>
<td>6.1</td>
<td>7.1</td>
<td>5.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Disposable Personal Income</td>
<td>-0.9</td>
<td>-0.8</td>
<td>4.8</td>
<td>5.5</td>
<td>6.4</td>
<td>4.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption</td>
<td>0.0</td>
<td>0.1</td>
<td>4.6</td>
<td>5.5</td>
<td>5.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>1.0</td>
<td>1.9</td>
<td>0.4 (Aug. &#39;07)</td>
<td>0.5</td>
<td>0.7</td>
<td>0.3</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.0</td>
<td>0.6</td>
<td>4.5</td>
<td>2.6</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.2</td>
<td>0.3</td>
<td>2.6</td>
<td>2.2</td>
<td>2.3</td>
<td>2.1</td>
</tr>
</tbody>
</table>
</body>
</html>

Nominal personal income recovered 0.5% during August. The increase followed a revised July decline of 0.6% after two months of gains boosted by $90B of government tax rebate checks. The August increase in personal income exceeded [...]

U.S. Income Recovered, Spending Was Unchanged

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080929a.jpg" width="353">
Nominal personal income recovered 0.5% during August. The increase followed a revised July decline of 0.6% after two months of gains boosted by $90B of government tax rebate checks. The August increase in personal income exceeded Consensus expectations for a 0.2% rise.
Disposable personal income fell 0.9% last month after a 0.8% July drop, because net taxes jumped 11.1% (3.3% y/y) in the absence of rebate checks.
Wage &amp; salary income increased 0.4% (4.2% y/y) after a 0.3% rise during July. The annualized three-month growth in wages recovered to 4.0%, it&#39;s fastest since December, but that was down from a 5.6% increase during 2007 and a 6.3% 2006 gain. Factory sector wages fell 0.2% (+1.1% y/y) and three-month growth ticked lower to 0.7%. Wages &amp; salaries in the private service-providing industries increased 0.5% (4.5% y/y) while three-month growth totaled 3.8%. That was a deceleration from last year&#39;s gain of 6.4%. Wages in the government sector rose 0.3% (5.1% y/y) and three-month growth amounted to 4.6%.
Interest income jumped another 1.2% (-0.1% y/y) following a 7.9% rise during all of 2007. Dividend income increased 0.6% (8.0% y/y) for the fourth consecutive month. Gains have decelerated after rising 12.4% last year and by 21.7% during 2006.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080929b.jpg" width="353">
Personal consumption expenditures was unchanged after the downwardly revised 0.1% July uptick. Adjusted for price inflation real spending also was unchanged last month but three-month growth in real spending dropped to negative 2.9% (AR) with real spending on motor vehicles down at a 19.7% rate during the last three months. Furniture spending fell 0.6% last month for the third consecutive monthly decline. Spending on clothing fell 1.2% and at a 13.1% rate during the last three months.
The PCE chain price index was unchanged as energy prices fell. Food prices, which have been notably strong, rose 0.6% (5.9% y/y) and at an 8.9% rate over the last three months. The core PCE price index increased a modest 0.2% and matched Consensus expectations. Three-month growth, however, rose to 3.3%. That was it&#39;s fastest rate of increase since late 2001. Apparel prices also were firm and posted a 0.7% (1.3% y/y) increase after the 2.2% rate of deflation reached this past March. Services prices rose 0.2% (3.8% y/y) as transportation costs rose 0.4% (5.5% y/y).
The personal savings rate halved to 1.0% from 1.9% in July, though that was up from a 0.5% saving rate last year.
The figures noted above are available in the Haver USECON and in the USNA databases.
Today&#39;s announcement by Fed Chairman Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/newsevents/press/other/20080929a.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a> (%)</th>
<th scope="col">August</th>
<th scope="col">July</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">Personal Income</td>
<td>0.5</td>
<td>-0.6</td>
<td>4.6</td>
<td>6.1</td>
<td>7.1</td>
<td>5.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Disposable Personal Income</td>
<td>-0.9</td>
<td>-0.8</td>
<td>4.8</td>
<td>5.5</td>
<td>6.4</td>
<td>4.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption</td>
<td>0.0</td>
<td>0.1</td>
<td>4.6</td>
<td>5.5</td>
<td>5.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>1.0</td>
<td>1.9</td>
<td>0.4 (Aug. &#39;07)</td>
<td>0.5</td>
<td>0.7</td>
<td>0.3</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.0</td>
<td>0.6</td>
<td>4.5</td>
<td>2.6</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.2</td>
<td>0.3</td>
<td>2.6</td>
<td>2.2</td>
<td>2.3</td>
<td>2.1</td>
</tr>
</tbody>
</table>
Economic Sentiment in the Euro Area Declines Again in September 
by <a href="/comment/Curley.html">Louise Curley</a> September 29, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080929c.jpg" width="353">
The Euro Area&#39;s Economic Sentiment Indicator fell another 0.8 points in September, continuing a virtually uninterrupted decline since May 2007. The index now stands at 87.7 compared to the long-term average of 100. The indicator, together with its three major components, Industrial, Consumer and Service Confidence measures, whose weights account for 90% of the indicator, are shown in the first chart. The components are measured in terms of percent balances.
Sentiment in the service sector has generally been more positive than that in the consumer and industrial sectors, but now even this indicator is barely positive at a balance of 0.2% in September. There was an insignificant increase of 0.3 points in September in the consumer indicator, which did little to reduce its short fall from last year. The indicator is still 17.3 points below September 2007. There was a substantial decline of 2.8 points in the Industrial confidence indicator in September. That indicator is now 14.7 points below September, 2007.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080929d.jpg" width="353">
Because of the volatility in the monthly sentiment indicator it is not a particularly good predictor of short-term economic activity. Three or six month moving averages smooth out some of the volatility and are therefore somewhat better predictors of the trend of activity. The second chart compares the month to month change in the sentiment indicator with the month to month changes in the three and six months moving averages. The longer term averages are clearly pointing to lower activity.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">EURO AREA&nbsp;&nbsp;</th>
<th scope="col">Sep 08</th>
<th scope="col">Aug&nbsp; 08&nbsp;</th>
<th scope="col">Sep&nbsp;&nbsp; 07&nbsp;</th>
<th scope="col">M/M % chg&nbsp;</th>
<th scope="col">Y/Y % chg&nbsp;</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">Economic Sentiment Indicator (Long Term Average =100)</td>
<td>87.7</td>
<td>88.5</td>
<td>103.4</td>
<td>-0.90</td>
<td>-17.50</td>
<td>108.4</td>
<td>106.3</td>
<td>97.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Industrial Confidence&nbsp; (% balance)</td>
<td>-12.1</td>
<td>-9.3</td>
<td>2.6</td>
<td>-2.8</td>
<td>-14.7</td>
<td>4.4</td>
<td>2.2</td>
<td>-7.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Confidence</td>
<td>-18.9</td>
<td>-19.2</td>
<td>-5.7</td>
<td>0.3</td>
<td>-13.2</td>
<td>-4.9</td>
<td>-9.1</td>
<td>-13.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Service Confidence</td>
<td>0.2</td>
<td>0.6</td>
<td>13.6</td>
<td>-0.4</td>
<td>-17.3</td>
<td>19.3</td>
<td>18.0</td>
<td>11.1</td>
</tr>
</tbody>
</table>
</body>
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Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080926g.jpg" align="left" border="0" height="265" width="353">
The chart on the left shows German inflation has been soaring
and chopping around, then, recently it moved into a still-choppy but
lower range. Headline inflation is and has been decelerating. But core
inflation (only available thru August) is still accelerating. Of course
oil prices broke lower in this period but have since moved higher,
implying the headline rate&#8217;s improvement is still a bit suspect. Core
inflation over 3 months and 6 months shows some tendency to accelerate
but for both the German CPI definition as well as the HICP definition
through August year/year core inflation is below the 2% ceiling that
applies to the overall EMU HICP. That much is good news. But Germany is
also one of the EMU&#8217;s best inflation-controlled economies and it barely
skates under this barrier for core inflation so we can expect that the
news and trends for all of EMU are worse.
Energy prices continue to muck-up the inflation picture. Past
energy increases still elevate the 12-month headline rate to a pace
that makes the ECB somewhere between uncomfortable and embarrassed.
Money growth and credit growth in EMU continue to be strong. Yet the
growing US financial crisis and spreading economic weakness put the ECB
on the spot when it comes to policy decisions. We suspect inflation is
still the ECB&#8217;s dominant concern and wonder if it will be able to shift
its focus fast enough to cushion the blow on growth that the overly
strong euro and weakening global economies have in store for Europe.

<table border="0" cellspacing="0" width="100%">
<colgroup><col></colgroup>
<thead><tr>
<th colspan="8" scope="col"> German HICP and CPI</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">HICP Total</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>0.4%</td>
<td>1.5%</td>
<td>2.1%</td>
<td>3.0%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Core</td>
<td>#N/A</td>
<td>0.3%</td>
<td>0.3%</td>
<td>2.7%</td>
<td>1.7%</td>
<td>1.9%</td>
<td>2.3%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">CPI</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">All</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>0.3%</td>
<td>1.1%</td>
<td>2.3%</td>
<td>2.9%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI ex Food &amp; Energy</td>
<td>#N/A</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.3%</td>
<td>1.5%</td>
<td>1.8%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food</td>
<td>#N/A</td>
<td>0.4%</td>
<td>0.9%</td>
<td>5.5%</td>
<td>4.6%</td>
<td>7.0%</td>
<td>3.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Alcohol</td>
<td>#N/A</td>
<td>0.3%</td>
<td>-0.5%</td>
<td>-1.8%</td>
<td>0.5%</td>
<td>4.1%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing &amp; Shoes</td>
<td>#N/A</td>
<td>1.4%</td>
<td>-1.1%</td>
<td>1.2%</td>
<td>-1.4%</td>
<td>1.4%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Rent &amp; Utilities</td>
<td>#N/A</td>
<td>-0.2%</td>
<td>0.4%</td>
<td>2.6%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>1.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Health Care</td>
<td>#N/A</td>
<td>0.1%</td>
<td>0.2%</td>
<td>3.2%</td>
<td>2.4%</td>
<td>1.8%</td>
<td>1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Transport</td>
<td>#N/A</td>
<td>-1.3%</td>
<td>0.2%</td>
<td>-1.1%</td>
<td>2.9%</td>
<td>4.7%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Communication</td>
<td>#N/A</td>
<td>-0.4%</td>
<td>0.1%</td>
<td>-3.9%</td>
<td>-3.6%</td>
<td>-3.6%</td>
<td>-1.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Recreation &amp; Culture</td>
<td>#N/A</td>
<td>-0.1%</td>
<td>0.9%</td>
<td>3.3%</td>
<td>1.4%</td>
<td>0.4%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Education</td>
<td>#N/A</td>
<td>-1.1%</td>
<td>1.0%</td>
<td>-1.7%</td>
<td>-6.2%</td>
<td>3.4%</td>
<td>31.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Restaurant &amp; Hotel</td>
<td>#N/A</td>
<td>0.5%</td>
<td>0.3%</td>
<td>3.4%</td>
<td>2.7%</td>
<td>2.3%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other</td>
<td>#N/A</td>
<td>0.0%</td>
<td>0.1%</td>
<td>1.1%</td>
<td>1.5%</td>
<td>1.8%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Diffusion</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>45.5%</td>
<td>36.4%</td>
<td>36.4%</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Type:</td>
<td colspan="3">Diffusion: Current Compared to</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>--</td>
</tr>
<tr class="odd">
<td colspan="7" class="firstcol">Shaded regions are lagged by one
month due to missing month current observations</td>
<td></td>
</tr>
</tbody>
</table>
</body></html>

The chart on the left shows German inflation has been soaring and chopping around, then, recently it moved into a still-choppy but lower range. Headline inflation is and has been decelerating. But core inflation (only available thru [...]

German Inflation Behaves a Bit…

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080926f.jpg" align="left" border="0" height="265" width="353">
The small rise in French consumer sentiment comes as Q2 GDP is
revised to show a larger drop amid weakness across other Euro Area
countries. The rise in sentiment is somewhat like the improvement in US
consumer sentiment in September. Energy prices moved lower for a spell
and consumers usually react strongly to changes in energy prices. But
energy costs have since moved higher. The
overall French index stand in the lower five percent of its historic
range. Survey respondents say over the past 12 months their living
standards were in the bottom 2% compared to historic responses. For the
next 12 months they expect an improvement with responses that are in
the bottom 10 percentile of their historic range.
The spending environment is not very favorable for major
purchases with a rating only in the lower 8 percent of its historic
range or a ranking that is 221st out of a
possible 225.
Putting range percentiles aside over this period there are 225
months of observations. Seven of the key measures rank 221 or worse.
That is by ranking the readings we find they reside in the bottom two
percent among all observations (see table to identify those categories).
The bounce in the French household confidence reading is not
significant. It will have to show it can weather more storms ahead
instead of just react well when global oil prices fall.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" 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>
<td colspan="4">Since Jan 1990</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Sep 
08</td>
<td>Aug 
08</td>
<td>Ju 
08</td>
<td>Jun 
08</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr>
<td class="firstcol">Household Confidence</td>
<td>-44</td>
<td>-45</td>
<td>-47</td>
<td>-46</td>
<td>5.3</td>
<td>222</td>
<td>10</td>
<td>-47</td>
<td>57</td>
<td>-18</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Living
Standards</td>
</tr>
<tr>
<td class="firstcol">past 12 Mos</td>
<td>-80</td>
<td>-80</td>
<td>-82</td>
<td>-78</td>
<td>2.0</td>
<td>223</td>
<td>18</td>
<td>-82</td>
<td>100</td>
<td>-38</td>
</tr>
<tr>
<td class="firstcol">Next 12-Mos</td>
<td>-51</td>
<td>-54</td>
<td>-59</td>
<td>-57</td>
<td>10.8</td>
<td>222</td>
<td>15</td>
<td>-59</td>
<td>74</td>
<td>-19</td>
</tr>
<tr>
<td class="firstcol">Unemployment: Next 12</td>
<td>51</td>
<td>43</td>
<td>36</td>
<td>21</td>
<td>80.0</td>
<td>60</td>
<td>73</td>
<td>-37</td>
<td>110</td>
<td>29</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Price
Developments</td>
</tr>
<tr>
<td class="firstcol">Past 12Mo</td>
<td>44</td>
<td>54</td>
<td>61</td>
<td>63</td>
<td>83.5</td>
<td>7</td>
<td>64</td>
<td>-57</td>
<td>121</td>
<td>-16</td>
</tr>
<tr>
<td class="firstcol">Next 12-Mos</td>
<td>-54</td>
<td>-42</td>
<td>-30</td>
<td>-29</td>
<td>6.6</td>
<td>223</td>
<td>31</td>
<td>-60</td>
<td>91</td>
<td>-34</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Savings</td>
</tr>
<tr>
<td class="firstcol">Favorable to save</td>
<td>17</td>
<td>18</td>
<td>18</td>
<td>20</td>
<td>36.1</td>
<td>173</td>
<td>40</td>
<td>4</td>
<td>36</td>
<td>23</td>
</tr>
<tr>
<td class="firstcol">Ability to save Next 12</td>
<td>-16</td>
<td>-18</td>
<td>-20</td>
<td>-21</td>
<td>24.1</td>
<td>198</td>
<td>6</td>
<td>-23</td>
<td>29</td>
<td>-9</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Spending</td>
</tr>
<tr>
<td class="firstcol">Favorable for major purchase</td>
<td>-37</td>
<td>-38</td>
<td>-38</td>
<td>-37</td>
<td>8.6</td>
<td>221</td>
<td>16</td>
<td>-42</td>
<td>58</td>
<td>-13</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Financial
Situation</td>
</tr>
<tr>
<td class="firstcol">Current</td>
<td>8</td>
<td>7</td>
<td>7</td>
<td>8</td>
<td>23.8</td>
<td>172</td>
<td>24</td>
<td>3</td>
<td>21</td>
<td>12</td>
</tr>
<tr>
<td class="firstcol">Past 12 MOs</td>
<td>-34</td>
<td>-35</td>
<td>-36</td>
<td>-34</td>
<td>6.5</td>
<td>222</td>
<td>-5</td>
<td>-36</td>
<td>31</td>
<td>-17</td>
</tr>
<tr>
<td class="firstcol">Next 12-Mos</td>
<td>-18</td>
<td>-20</td>
<td>-21</td>
<td>-23</td>
<td>14.7</td>
<td>221</td>
<td>11</td>
<td>-23</td>
<td>34</td>
<td>-1</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">Number of
observations in the
period: 225</td>
</tr>
</tbody>
</table>
</body></html>

The small rise in French consumer sentiment comes as Q2 GDP is revised to show a larger drop amid weakness across other Euro Area countries. The rise in sentiment is somewhat like the improvement in US consumer sentiment in September. [...]

French Consumer Sentiment Makes a Small Bounce

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080926c.jpg" width="353">
The University of Michigan&#39;s reading of consumer sentiment in September jumped 11.6% though the gain was less than the 16.0% pop in the mid-month report. It still was the highest level since February and the gain to 70.3 contrasted with Consensus expectations for a reading of 70.0.
During the last ten years there has been a 47% correlation between the level of sentiment and the three-month change in real consumer spending.
The mean expected rate of inflation during the next year dropped to 4.6% with lower oil prices, though that was higher than a 3.9% expectation at mid-month. It was as high as 7.0% in May. During the next five years the expected inflation rate fell to 3.3%, the lowest level since mid-2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080926d.jpg" width="353">
The expectations component of consumer sentiment led the increase in the total with a 16.1% jump, but the rise still left the reading down slightly from one-year ago. Expectations for business conditions during the next year jumped yet they remained lower than last year. Expectations for conditions during the next five years rose firmly to their highest since February.The expected change in personal finances also recovered to the highest level in one year.
The current conditions index rose a moderate 5.6% for the month to the highest level since April. The view of current personal finances rose to their highest level since April but the sense of buying conditions for large household goods fell m/m, down 25.7% y/y.
The opinion of government policy, which apparently influences economic expectations, rose slightly from August (-26.6% y/y). Only seven percent of respondents thought that a good job was being done by government, an unchanged reading since April.
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database, with details in the proprietary UMSCA database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">September</th>
<th scope="col">Mid-September</th>
<th scope="col">August</th>
<th scope="col">Sept. 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">Consumer Sentiment</td>
<td>70.3</td>
<td>73.1</td>
<td>63.0</td>
<td>-15.7% </td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>75.0</td>
<td>76.5</td>
<td>71.0</td>
<td>-23.4</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>67.2</td>
<td>70.9</td>
<td>57.9</td>
<td>-9.3</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
</body>
</html>

The University of Michigan's reading of consumer sentiment in September jumped 11.6% though the gain was less than the 16.0% pop in the mid-month report. It still was the highest level since February and the gain to 70.3 contrasted [...]

Michigan Consumer Sentiment Rose With Lower Oil Prices

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080926a.jpg" width="353">
Second quarter &#39;08 U.S. real GDP growth was revised down slightly to 2.8% from the preliminary estimate of 3.3% growth. Despite the revision, last quarter&#39;s growth was the quickest since the third quarter of last year but it fell short of Consensus expectations for no revision to the earlier estimate.
A reduced estimate of growth in final sales to domestic purchasers was the source of the revision. It was taken down to a 1.3% rate of increase. The increase followed two quarters of no change in the level of domestic demand.
Real personal consumption grew a bit slower than estimated earlier, at 1.2% (1.3% y/y). The tax rebate checks presumably helped growth improve from the 0.9% figure averaged during the prior two quarters, but it seems to have been slight. Spending on autos &amp; light trucks fell at a 19.7% (-9.8% y/y) annual rate while spending on furniture &amp; other household equipment jumped at a 14.0% (7.0% y/y) rate. Spending on apparel surged at a 10.9% (3.6% y/y) rate. Growth in real PCE added 0.9 percentage points to 2Q real GDP growth after a 0.6 point add during 1Q. The 2Q addition was revised down from a 1.2% addition mostly due to a lowered figure for growth in services spending to 0.7% (1.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080926b.jpg" width="353">
Residential construction fell a bit less than estimated earlier. Nevertheless, the 13.3% annual rate of decline (-21.6% y/y) still subtracted 0.5 percentage points from 2Q GDP growth after subtractions exceeding 1.0 points during the prior two quarters.
Growth in business fixed investment was held roughly steady at 2.5% (4.2% y/y). These latest rates of growth are down sharply from 4.9% increases last year and growth above 7.0% during 2006 and 2005. Last quarter, equipment investment fell at a downwardly revised 5.0% (-0.3% y/y) rate while structures investment jumped at an upwardly revised 18.4% (13.9% y/y) rate.
Growth in corporate profits was revised lower to -14.3% (AR, -8.3% y/y). Profitability in the financial sector was reduced sharply to a 27.1% (-20.4% y/y) rate of decline which compared to an estimated 26.5% rate of advance estimated earlier. Conversely, the decline in domestic nonfinancial profitability was lessened to -2.1% (-12.6% y/y) but it was still the sixth drop in profits in the last seven quarters. Foreign sector profits fell at a deeper 22.8% rate (23.3% y/y).
An improved foreign trade deficit added a little-revised 2.9 percentage points to GDP growth. That was the largest addition since the third quarter of 1980. Exports grew at a 12.3% annual rate (11.0% y/y) while growth in imports fell about as estimated earlier at a 7.3% (-1.9% y/y) rate. That was the steepest quarterly rate of decline since the recession year of 2001.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080926e.jpg" width="353">
Inventory decumulation reduced 2Q GDP growth by a little changed 1.5 percentage points, still the largest subtraction in three years.
The GDP chain price index was little revised and grew at a 1.1% rate. The small increase was due to a 3.5% (-1.5% y/y) rate of decline in residential investment prices. That was the fourth decline in the last five quarters. The PCE price index grew at an unrevised, accelerated 4.3% (3.7% y/y) rate. Capital spending prices rose at an accelerated 2.3% rate (1.0% y/y).

<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">2Q &#39;08 (Final)</th>
<th scope="col">2Q &#39;08 (Preliminary)</th>
<th scope="col">2Q &#39;08 (Advance)</th>
<th scope="col">1Q &#39;08</th>
<th scope="col">2Q 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>2.8</td>
<td>3.3</td>
<td>1.9</td>
<td>0.9</td>
<td>2.1</td>
<td>2.0</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-1.4</td>
<td>-1.4</td>
<td>-1.9</td>
<td>-0.0</td>
<td>-0.4</td>
<td>-0.4</td>
<td>0.0</td>
<td>-0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>4.4</td>
<td>4.8</td>
<td>3.9</td>
<td>0.9</td>
<td>2.5</td>
<td>2.4</td>
<td>2.8</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>2.9</td>
<td>3.1</td>
<td>2.4</td>
<td>0.8</td>
<td>1.7</td>
<td>0.6</td>
<td>0.2</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>1.3</td>
<td>1.5</td>
<td>1.3</td>
<td>0.1</td>
<td>0.8</td>
<td>1.8</td>
<td>2.6</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>1.1</td>
<td>1.2</td>
<td>1.1</td>
<td>2.6</td>
<td>2.0</td>
<td>2.7</td>
<td>3.2</td>
<td>3.3</td>
</tr>
</tbody>
</table>


</html>

Second quarter '08 U.S. real GDP growth was revised down slightly to 2.8% from the preliminary estimate of 3.3% growth. Despite the revision, last quarter's growth was the quickest since the third quarter of last year but it fell [...]

U.S. 2Q'08 GDP Growth Lowered Slightly

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: September 2008

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Economic Sentiment in the Euro Area Declines Again in September

U.S. Income Recovered, Spending Was Unchanged

U.S. Income Recovered, Spending Was Unchanged

German Inflation Behaves a Bit…

French Consumer Sentiment Makes a Small Bounce

Michigan Consumer Sentiment Rose With Lower Oil Prices

U.S. 2Q'08 GDP Growth Lowered Slightly

U.S. 2Q'08 GDP Growth Lowered Slightly