Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021218a.jpg" width="353">
The U.S. foreign trade deficit improved more than expected in October. September&#39;s deficit was revised lower due to lessened imports. Consensus expectations had been for a October deficit of $36.5B. Declines in exports and imports likely were influenced by the dock workers strike.
Exports fell for the third consecutive month due to across the board component declines. Capital goods exports plunged 2.5% (5.4% AR, YTD). Exports of foods, feeds and beverages fell a hefty 4.0%, the third consecutive monthly decline. Auto exports fell for the fourth month in five. Nonauto consumer goods exports rose following two months of decline (1.1% AR, YTD).
Imports fell for the third month in four also due to across the board component declines. Capital goods imports fell a huge 6.0% (-1.7% AR, YTD), the fourth consecutive monthly decline. Imports of nonauto consumer goods also plunged, down 4.9% for the third monthly decline in four. Imports of industrial supplies and materials rose despite a decline in the refiner&#39;s acquisition cost of imported crude oil. The cost of crude oil fell to $26.74 in October from $27.14 in September.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE03/@EE03.HTM">Foreign Trade</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Deficit</td>
<td>$35.1B</td>
<td>$37.1B</td>
<td>$30.8B(10/01)</td>
<td>$358.3B</td>
<td>$378.7B</td>
<td>$262.2B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>-1.0%</td>
<td>-0.4%</td>
<td>5.7%</td>
<td>-6.2%</td>
<td>11.2%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>-2.4%</td>
<td>-1.1%</td>
<td>8.0%</td>
<td>-6.0%</td>
<td>18.3%</td>
<td>10.9%</td>
</tr>
</tbody>
</table>
Mortgage Applications Back Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 18, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021218b.jpg" width="353">
The index of mortgage applications, compiled by the Mortgage Bankers Association, last week recovered all of the prior week&#39;s sharp decline.
Mortgage applications to refinance surged as interest rates fell for the second consecutive week.
The recent contract rate on a conventional 30 year mortgage was 5.91% versus 6.09% at the end of November.
Mortgage applications for home purchase surged and recovered most of the prior week&#39;s decline.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">12/13/02</th>
<th scope="col">11/08/02</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>985.5</td>
<td>992.3</td>
<td>625.6</td>
<td>322.7</td>
<td>352.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>379.9</td>
<td>333.3</td>
<td>304.9</td>
<td>302.7</td>
<td>275.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>4,507.6</td>
<td>4,825.6</td>
<td>2,491.0</td>
<td>438.8</td>
<td>795.2</td>
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</tbody>
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The U.S. foreign trade deficit improved more than expected in October. September's deficit was revised lower due to lessened imports. Consensus expectations had been for a October deficit of $36.5B. Declines in exports and imports [...]

U.S. Trade Deficit Improved

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021217f.jpg" width="353">
Inflation in the United Kingdom as measured by the Retail Price index rose 2.7% in November from a year ago, the sharpest rise since January 2001. Prices of housing expenditures, which rose 6.4%, and gasoline and oil, which rose 4.1%, accounted for much of the increase. 
In conducting its monetary policy, the Bank of England focuses on the less volatile &#147;all items less mortgage interest&#148; component of the index. The Bank&#146;s current target rate for this measure is 2.5%. The &#147;all items less mortgage interest&#148; index rose 2.8% in November from a year ago and was the sharpest rise since November 1997. It was also the first time since January 2002 that the rise exceeded the target rate. In its latest quarterly report on inflation, the Bank predicted that inflation would remain above its target for most of next year, suggesting that any changes in the current base rate of 4% are more likely to be on the upside.

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<th scope="col" class="firstcol">Retail Price Index (Annual % Changes)</th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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</thead>
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<td class="firstcol">All items</td>
<td>2.0%</td>
<td>2.0%</td>
<td>2.7%</td>
<td>1.8%</td>
<td>2.9%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">All items ex mortgage interest</td>
<td>2.8%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>2.3%</td>
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Inflation in the United Kingdom as measured by the Retail Price index rose 2.7% in November from a year ago, the sharpest rise since January 2001. Prices of housing expenditures, which rose 6.4%, and gasoline and oil, which rose 4.1%, [...]

Inflation in the U.K. and Implications for Monetary Policy

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021217b.jpg" width="353">
The Consumer Price Index (CPI-U) rose just 0.1% last month. The gain was as expected. Excluding food and energy, prices also rose as expected and the rise was equal to the YTD average.
Tobacco prices (-0.0%) fell for the second consecutive month. The core CPI less tobacco rose 0.2% (2.0% y/y).
Price discounting was widespread last month. Household furnishings and operation prices fell 0.1%, the sixth monthly decline this year. Apparel prices also fell (-0.4%) after being unchanged the month prior. New and used vehicle prices were down for the second consecutive month.
Services prices were mixed. Shelter prices rose 0.3% following the 0.2% gain in the prior month. Public transportation prices rose 0.9% following two months of decline. Medical care services prices rose 0.6%, just below the elevated October reading. Education prices were flat for the second month. Recreation prices were flat for the second month in three.
Energy prices fell last month led by a 0.2% decline in gasoline prices, the first since May. Fuel and utility prices were unchanged owing to a decline in piped gas &amp; electricity prices
For analysis of health care costs and coverage by the St. Louis Federal Reserve click <a href="http://research.stlouisfed.org/publications/net/2002/cover11.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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</thead>
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<td class="firstcol">Total&nbsp;</td>
<td>0.1%</td>
<td>0.3%</td>
<td>2.3%</td>
<td>2.8%</td>
<td>3.4%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.0%</td>
<td>2.7%</td>
<td>2.4%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.3%</td>
<td>-0.1%</td>
<td>-1.6%</td>
<td>0.3%</td>
<td>0.5%</td>
<td>0.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.5%</td>
<td>3.7%</td>
<td>3.3%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>-0.2%</td>
<td>1.9%</td>
<td>8.1%</td>
<td>3.7%</td>
<td>16.9%</td>
<td>3.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food &amp; Beverages</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.2%</td>
<td>3.1%</td>
<td>2.3%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&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"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a></td>
<td>-0.1%</td>
<td>0.2%</td>
<td>1.9%</td>
<td>2.1%</td>
<td>2.0%</td>
<td>NA</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.0%</td>
<td>0.2%</td>
<td>1.5%</td>
<td>1.9%</td>
<td>&nbsp;1.4%</td>
<td>NA</td>
</tr>
</tbody>
</table>
Housing Starts Rose More Than Expected 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 17, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021217d.jpg" width="353">
Housing starts rose slightly more than expected last month. The 2.4% m/m rise partially recouped an 8.4% October decline that was revised slightly shallower. Total starts were up 7.2% versus last December.
Single family starts rose a modest 0.9% m/m following a 5.1% October decline. Year to date, single family starts were up 7.4% versus last December. 
Multi-family starts rose 10.0% following two months of sharp decline. Year to date, multi family starts were up 6.2% versus last December.
Building permits reversed all of the prior month&#39;s gain and fell 2.7% m/m. The decline was all due to lower multi family permits. Single family permits rose a slight 0.1% following three months of strong gain. The level of single family permits was near the record high of this past February.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,697</td>
<td>1,657</td>
<td>5.8%</td>
<td>1,603</td>
<td>1,573</td>
<td>1,647</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family</td>
<td>1,390</td>
<td>1,378</td>
<td>12.0%</td>
<td>1,273</td>
<td>1,232</td>
<td>1,306</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi Family</td>
<td>307</td>
<td>279</td>
<td>-15.4%</td>
<td>330</td>
<td>341</td>
<td>341</td>
</tr>
</tbody>
</table>
Industrial Production Up Slightly 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 17, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021217c.jpg" width="353">
Industrial production rose just slightly last month versus Consensus expectations for a 0.2% gain. It was the first monthly rise in output since July. October&#39;s decline was lessened and prior month&#39;s figures were revised up. Production was up 2.5% (AR) year to date.
Output in the manufacturing sector rose 0.1% following two months of decline. Factory production was up 2.3% (AR) year to date.
Output of motor vehicles and parts (5.2% AR, YTD) rose 3.9% for the first gain in four months. Output of appliance, furniture &amp; carpeting rose 0.8%, but it was only the second monthly rise since May. Apparel output rose 0.4% but was down 4.2% (AR) year to date. 
Output of business equipment fell 0.5% (-3.0% AR, YTD), the fourth decline in five months. Output of information processing equipment rose for the second consecutive month (-1.1% AR, YTD). 
Capacity utilization rose slightly and is off the lows of late last year, but remains down considerably from prior years. Capacity again rose 0.1%(1.1% AR, YTD) as it has since early last year.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Industrial Production</td>
<td>0.1%</td>
<td>-0.6%</td>
<td>1.8%</td>
<td>-3.5%</td>
<td>4.7%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>75.6%</td>
<td>75.5%</td>
<td>75.1%(11/01)</td>
<td>77.3%</td>
<td>82.7%</td>
<td>82.4%</td>
</tr>
</tbody>
</table>
Chain Store Sales Recovered Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 17, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021217a.jpg" width="353">
Chain store sales surged 1.9% last week according to the BTM-UBSW survey. The gain recovered most, but not all, of the prior week&#39;s 2.3% plunge.
Since early October, weekly sales have been volatile but essentially have moved sideways.
December sales so far were 1.0% below the November average.
The BTM Leading Indicator of chain store sales collapsed in early December and was 1.6% (-1.2% y/y) below November.
During the last ten years there has been a 48% correlation between the year-to-year percent change in monthly chain store sales and the change in GAF retail sales. That correlation rose to 63% during the last five years.

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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">12/14/02</th>
<th scope="col">12/07/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>400.1</td>
<td>392.8</td>
<td>4.5%</td>
<td>2.1%</td>
<td>3.4%</td>
<td>6.7%</td>
</tr>
</tbody>
</table>
Crude Oil Prices Surge to $30.00 per Barrel 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 17, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021217e.jpg" width="353">
Prices have surged $5.00/bbl for West Texas Intermediate crude oil since the mid-November lows. A labor strike in Venezuela has crippled the country&#39;s oil output.
Wholesale gasoline prices have similarly surged, rising nearly $0.15 per gallon, or 19%, since late November. Fuel oil prices also have risen sharply.
Wholesale natural gas prices have more than doubled this year.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/daily/@D3/@D306/@D30604/@D30604.HTM">Daily Crude Oil Prices</a></th>
<th scope="col">12/16/02</th>
<th scope="col">11/18/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">West Texas Intermediate Crude Oil</td>
<td>$30.13</td>
<td>$26.73</td>
<td>56.7%</td>
<td>$25.97</td>
<td>$30.34</td>
<td>$19.34</td>
</tr>
</tbody>
</table>
</body>
</html>

The Consumer Price Index (CPI-U) rose just 0.1% last month. The gain was as expected. Excluding food and energy, prices also rose as expected and the rise was equal to the YTD average. Tobacco prices (-0.0%) fell for the second [...]

CPI Weak, As Expected

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021216a.jpg" width="353">
The Empire State Manufacturing Survey reported that the index of general business conditions improved in December and was positive for a second month. Modest deterioration had been expected by some forecasts.
Diffusion indexes for new orders, shipments and the length of the average employee workweek improved sharply. The index of prices paid fell for the second month.
The survey includes measures of business expectations, six months ahead. The diffusion index for general business conditions fell to the lowest level since January. Expectations for orders and shipments fell sharply.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question, not the components.
For the latest Empire State Manufacturing Survey report, click <a href="http://www.newyorkfed.org/rmaghome/regional/mfg_survey/12_2002.pdf">here</a>

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General business conditions (diffusion index)</td>
<td>10.60</td>
<td>9.70</td>
<td>-1.83</td>
<td>6.96</td>
<td>-14.97</td>
</tr>
</tbody>
</table>
NAHB Housing Index Firm Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 16, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021216b.jpg" width="353">
The National Association of Home Builders index of new home sales rose for December although the strong reading for November was revised slightly lower. The latest rise was to the highest level since November 2000.
Surveys of market conditions for current sales rose slightly but expected conditions in six months fell slightly. 
Traffic of prospective buyers fell moderately to the midpoint of the range prevailing this year.
For a description of the housing market index from the National Association of Home Builders, visit the <a href="http://www.nahb.org/generic.aspx?sectionID=134&amp;genericContentID=532">NAHB website</a>.

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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>65</td>
<td>64</td>
<td>57</td>
<td>61</td>
<td>56</td>
<td>62</td>
</tr>
</tbody>
</table>
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The Empire State Manufacturing Survey reported that the index of general business conditions improved in December and was positive for a second month. Modest deterioration had been expected by some forecasts. Diffusion indexes for new [...]

Empire State Factory Survey Improved Further in December

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021213b.jpg" width="353">
Finished producer prices were weaker than expected last month and fell 0.4%. Consensus expectations were for no change. It was the first decline in prices since July.
Excluding food and energy prices also were weaker than expectations for no change. The 0.3% decline similarly was the first drop since July. Core producer prices were down 0.1% (AR, YTD).
Finished energy prices fell for the first month since June (11.6% AR, YTD). Gasoline prices fell 11.6% (54.1% AR), reversing all of the prior month&#39;s jump, and fuel oil prices slumped 10.7% (45.1% AR, YTD). Residential gas prices also were strong for the second consecutive month (8.1% AR, YTD). These energy product price series are NSA.
Core finished consumer goods prices fell 0.3% (0.2% AR, YTD). Consumer durables prices fell 0.7% and reversed all of the October jump as prices for passenger cars and household appliances fell. Other consumer durables prices were tame. Core nondurable goods prices rose 0.1% (1.3% AR, YTD. Capital goods prices fell 0.2% (-0.5% AR, YTD) as computer prices continued to decline.
Food prices rose 0.3%, but it was only the second monthly rise since mid-year.
Intermediate goods prices fell for the first month since February as energy prices fell. Core intermediate prices rose just 0.1% for the third consecutive month (1.8% AR, YTD). 
Crude goods prices were again strong (26.0% AR, YTD) reflecting higher energy prices. Other commodities prices reflected in the core crude price measure were strong reflecting higher scrap copper and aluminum prices. Steel scrap prices fell sharply for the second consecutive month.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.4%</td>
<td>1.1%</td>
<td>0.9%</td>
<td>2.0%</td>
<td>3.7%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.3%</td>
<td>0.5%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>1.3%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-0.1%</td>
<td>0.7%</td>
<td>2.4%</td>
<td>0.4%</td>
<td>4.9%</td>
<td>0.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>-0.1%</td>
<td>2.6%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>5.1%</td>
<td>3.4%</td>
<td>14.7%</td>
<td>0.3%</td>
<td>22.8%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.4%</td>
<td>0.9%</td>
<td>11.6%</td>
<td>-9.9%</td>
<td>7.3%</td>
<td>-4.7%</td>
</tr>
</tbody>
</table>
Business Inventory Accumulation Continued 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 13, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021213c.jpg" width="353">
Total business inventories rose as expected in October. September&#39;s gain in inventories was revised up slightly due to raised figures for retail inventories.
Retail inventories (7.4% YTD, AR) were strong for the second consecutive month led by a 3.0% jump in motor vehicle inventories, the second strong gain in a row.
Nonauto retail inventories (1.8% YTD, AR) fell for the first monthly decline since March. Inventories of furniture &amp; home furnishings were unchanged following earlier strength (10.1% YTD, AR). Inventories at apparel stores slumped 1.2% (1.7% YTD, AR). At general merchandise stores inventories rose a modest 0.2% (-0.9% YTD, AR) for the second consecutive month.
Overall business sales rose 0.4% (4.2% YTD, AR).
The inventory-to-sales ratio fell slightly to 1.36 from an upwardly revised September level. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.2%</td>
<td>0.6%</td>
<td>-0.6%</td>
<td>-6.3%</td>
<td>5.6%</td>
<td>5.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.7%</td>
<td>1.3%</td>
<td>5.3%</td>
<td>-5.0%</td>
<td>6.1%</td>
<td>7.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>-0.4%</td>
<td>0.7%</td>
<td>0.7%</td>
<td>-2.0%</td>
<td>4.1%</td>
<td>5.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>-0.3%</td>
<td>0.4%</td>
<td>-3.0%</td>
<td>-5.5%</td>
<td>6.6%</td>
<td>6.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.0%</td>
<td>0.2%</td>
<td>-4.4%</td>
<td>-8.0%</td>
<td>4.5%</td>
<td>3.1%</td>
</tr>
</tbody>
</table>
Consumer Sentiment Up in Early December 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 13, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021213a.jpg" width="353">
The preliminary December reading of Consumer Sentiment from the University of Michigan rose more than Consensus expectations for a rise to 85.0. Sentiment has rebounded 7.9% during the last two months.
Indexes of current conditions and expectations both rose.
Over the last 10 years there has been a 40% correlation between the annual change in consumer sentiment and the change in stock prices.That correlation rose to 62% during the last five years
The University of Michigan survey is not seasonally adjusted.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Prelim. Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Sentiment</td>
<td>87.0</td>
<td>84.2</td>
<td>-2.0%</td>
<td>89.2</td>
<td>107.6</td>
<td>105.8</td>
</tr>
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Finished producer prices were weaker than expected last month and fell 0.4%. Consensus expectations were for no change. It was the first decline in prices since July. Excluding food and energy prices also were weaker than expectations [...]

Producer Prices Fall

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021212a.jpg" width="353">
Retail sales rose last month in line with Consensus expectations for a 0.4% gain. October sales were revised up due to slightly stronger gains in auto and nonauto sales. Total retail sales were up at a 2.7% annual rate YTD through November.
Sales excluding motor vehicles and parts dealers rose quite a bit more than expectations for a 0.2% gain. Year to date nonauto retail sales were up at a 4.9% annual rate through November.
Furniture and home furnishing store sales rose 1.6% (3.4% YTD, AR) following strong results in the prior four months which were revised higher. The November gain reflected a huge 2.3% rise in furniture sales and a 0.9% rise in electronics and appliances sales.
Sales at general merchandise stores rose 0.3% adding to a 1.2% gain in October. Year to date sales were up at a 4.5% rate through November.
Apparel store sales fell a sharp 1.3% (1.1% AR, YTD) following a huge 5.5% gain in October.
Motor vehicle dealers&#39; sales fell a slight 0.1%, the third monthly decline in a row. The decline may have reflected price discounting. Unit sales of light vehicles rose 3.8% last month to 16.04 mil.
Sales at gasoline service stations rose 0.4%.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>0.4%</td>
<td>0.1%</td>
<td>2.1%</td>
<td>3.9%</td>
<td>6.7%</td>
<td>8.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>0.5%</td>
<td>0.8%</td>
<td>5.0%</td>
<td>3.4%</td>
<td>7.3%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">

</table>
Import Prices Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 12, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021212c.jpg" width="353">
Prices for imported commodities fell much more than Consensus expectations for a 0.1% decline. October figures were little revised.
Petroleum import prices fell sharply and by the most since back to back double digit declines last Fall. Still, petroleum prices are up at a 51.6% rate since December. So far in December the price of Arab Light crude oil has run slightly higher than the $22.20/bbl averaged in November.
Nonpetroleum import prices rose slightly following the slight October drop (0.3% YTD, AR).
Prices of imported capital goods were unchanged following two down months. Nonauto consumer goods prices fell for the second month in three and imported motor vehicle prices also were down.
Export prices rose slightly (1.3% YTD, AR). Food prices rose strongly, reversing the prior month&#39;s steep drop. Other export prices either fell or were tame.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>-1.0%</td>
<td>0.0%</td>
<td>2.4%</td>
<td>-3.5%</td>
<td>6.5%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-10.0%</td>
<td>0.3%</td>
<td>37.5%</td>
<td>-17.2%</td>
<td>66.5%</td>
<td>34.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonpetroleum</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-1.5%</td>
<td>1.0%</td>
<td>-1.4%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>1.0%</td>
<td>-0.8%</td>
<td>1.6%</td>
<td>-1.3%</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Surged 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 12, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021212b.jpg" width="353">
Initial claims for unemployment insurance surged more than expected last week. Aberrant seasonal adjustment factors were cited by the Labor Department as the reason for recent volatility.
The four-week moving average of initial claims rose to 387,250, down 10.9% y/y.
Continuing claims for unemployment insurance fell a sharp 4.8% w/w following a like decline the prior week.
The insured rate of unemployment fell to 2.6%, the lowest level since September 2001.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">12/07/02</th>
<th scope="col">11/30/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>441.0</td>
<td>358.0</td>
<td>7.3%</td>
<td>405.8</td>
<td>299.8</td>
<td>297.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,284</td>
<td>-10.2%</td>
<td>3,021</td>
<td>2,114</td>
<td>2,186</td>
</tr>
</tbody>
</table>
3Q Current Account Deficit Narrowed 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 12, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021212d.jpg" width="353">
The US current account deficit came in slightly below expectations last quarter, but remained near a record level. The deficit in 2Q was revised shallower. 
The deficit in goods, services and income trade eased slightly but remained near the record. The deficit in goods and services trade deteriorated to a new record. The deficit in the income balance eased slightly.
Foreign ownership of assets in the US rose by $148.5B versus a gain of $204.3B in 2Q and a peak rate of $302.5B early last year. Direct investment into the US improved slightly last quarter but remained at a level not seen since the mid-1990s.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">US Int&#39;l Balance of Payments</a></th>
<th scope="col">3Q &#39;02</th>
<th scope="col">2Q &#39;02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account Deficit</td>
<td>$127.0B</td>
<td>$127.6B</td>
<td>$91.3B</td>
<td>$393.4B</td>
<td>$410.3B</td>
<td>$292.9B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % of GDP</td>
<td>4.8%</td>
<td>4.9%</td>
<td>3.6%</td>
<td>3.8%</td>
<td>4.5%</td>
<td>3.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Deficit on Gds, Serv &amp; Income</td>
<td>$113.8B</td>
<td>$114.6B</td>
<td>$79.0B</td>
<td>$343.9B</td>
<td>$356.9B</td>
<td>$244.1B</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>2.5%</td>
<td>4.8%</td>
<td>1.1%</td>
<td>-9.6%</td>
<td>13.6%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>1.6%</td>
<td>8.3%</td>
<td>9.8%</td>
<td>-8.4%</td>
<td>18.9%</td>
<td>10.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Unilateral Transfers Deficit</td>
<td>$13.2B</td>
<td>$13.0B</td>
<td>$12.4B</td>
<td>$49.5B</td>
<td>$53.4B</td>
<td>$48.8B</td>
</tr>
</tbody>
</table>
Mortgage Refinancing Drops 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 12, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021212e.jpg" width="353">
The index of mortgage applications, compiled by the Mortgage Bankers Association, plunged last week. The decline reversed the run-up in early November and dropped total applications 35% below the early October high.
Mortgage applications to refinance collapsed, leaving them 45% below the early October high yet still up versus last year.
Mortgage applications for home purchase have remained relatively firm.. The recent contract rate on a conventional 30 year mortgage was 5.95%, up modestly from the low.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">12/06/02</th>
<th scope="col">11/01/02</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>862.7</td>
<td>1,030.5</td>
<td>625.6</td>
<td>322.7</td>
<td>352.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>358.8</td>
<td>369.5</td>
<td>304.9</td>
<td>302.7</td>
<td>275.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>3,793.8</td>
<td>4,875.1</td>
<td>2,491.0</td>
<td>438.8</td>
<td>795.2</td>
</tr>
</tbody>
</table>
</body>
</html>

Retail sales rose last month in line with Consensus expectations for a 0.4% gain. October sales were revised up due to slightly stronger gains in auto and nonauto sales. Total retail sales were up at a 2.7% annual rate YTD through [...]

Retail Sales Rose Moderately

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021211a.jpg" width="353">
The Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) rose 1.5% last month, more than recovering the prior two month&#39;s declines.
At the end of last month, the level of the weekly leading index was up to its highest level since July. The indicator&#39;s six-month growth rate rose to-1.8% versus -4.5% hit in October.
Construction of the ECRI Leading Index differs from the Index of Leading Economic Indicators published by the Conference Board. Nevertheless there has been an 80% correlation between the annual percent change in the two over the last 20 years.
The components of the index are money supply plus stock &amp; bond mutual funds, the JOC-ECRI industrial materials price index, mortgage applications, bond quality spreads, stock prices, bond yields, and initial jobless insurance claims.
The median lead of the ECRI index at business cycle peaks has been 10.5 months and at cycle troughs 3.0 months. The sideways movement of the leading index in 2002 may or may not signal something about the economy&#39;s growth rate.
For more on ECRI and the Weekly Leading Index click <a href="http://www.businesscycle.com/">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/weekly/@W8/@W801/@W801.HTM">ECRI</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Leading Index</td>
<td>118.8</td>
<td>117.0</td>
<td>1.8%</td>
<td>-5.1%</td>
<td>0.9%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) rose 1.5% last month, more than recovering the prior two month's declines. At the end of last month, the level of the weekly leading index [...]

ECRI Leading Indicators Recover

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021210b.jpg" width="353">
The Federal Reserve left the Federal Funds Target Rate unchanged at 1.25%. The action was as expected by most economists at the 22 primary dealers, bond firms that trade directly with the central bank. 
The brief press release which accompanied the Fed&#146;s action contained the following statement. &quot;The Committee continues to believe that this accommodative stance of monetary policy, coupled with still robust underlying growth in productivity, is providing important ongoing support to economic activity.&quot;
The complete text of the Fed&#39;s latest press release can be viewed <a href="http://www.federalreserve.gov/BoardDocs/Press/monetary/2002/20021210/default.htm.">here</a>.
A review of US monetary policy from 1987 to 2001 by the Federal Reserve Bank of Richmond can be viewed at the <a href="http://www.rich.frb.org/pubs/eq/search.cfm/article=170">Richmond Fed website</a>.
Further discussion by the Richmond Fed of expectations and the term structure of interest rates can be found <a href="http://www.rich.frb.org/pubs/eq/search.cfm/article=173">here</a>.

Chain Store Sales Weak Post Thanksgiving 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 10, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021210a.jpg" width="353">
Chain store sales fell 2.3% last week according to the BTM-UBSW survey. The post Thanksgiving plunge may have been exacerbated by the late timing of the holiday. Icing and snow in the Northeast also have been cited by some retailers as factors behind weak sales.
The one week decline in sales was the largest in two years. In 2000, sales similarly collapsed post Thanksgiving and only recovered when aggressive price discounts at Christmas salvaged the season.
The drop followed a 0.3% rise the prior week and lowered the sales index to its lowest in a year. December sales began the month 1.9% below the November average.
The BTM Leading Indicator of chain store sales rose late last month and the November monthly average was 0.7% (0.8% y/y) above October.
During the last ten years there has been a 48% correlation between the year-to-year percent change in monthly chain store sales and the change in GAF retail sales. That correlation rose to 63% during the last five years.

<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">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">12/07/02</th>
<th scope="col">11/30/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>392.8</td>
<td>402.0</td>
<td>2.0%</td>
<td>2.1%</td>
<td>3.4%</td>
<td>6.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Federal Reserve left the Federal Funds Target Rate unchanged at 1.25%. The action was as expected by most economists at the 22 primary dealers, bond firms that trade directly with the central bank. The brief press release which [...]

FOMC Leaves Interest Rates Unchanged

Sticky services prices behind sticky overall PCE inflation

Flash April PMIs point to slower growth in the US but a pickup in Europe and Japan

Outlook strengthens for US while it weakens for other major economies

Crude petroleum prices are having a big impact on inflation expectations

Inflation surprising to upside in the US; by contrast to the downside in the euro area

 Gross Domestic Income is catching up with GDP

FOMC expects GDP growth above trend over the next three years

US core CPI inflation has begun to reaccelerate

Fiscal-policy aided factory building in the U.S. provided an unusually large boost to growth last year

US consumers much more optimistic than those in the Euro area and the UK

  Job openings take a step down in 2024

Fed's super core services inflation measure pushing up core rate

Blue Chip forecasters expect significant monetary easing this year except in Japan

Euro area economy stagnating while US grows above trend

Chinese and Japanese equity markets are diverging markedly

Chinese population declines in 2023 for second consecutive year

Outlook for US GDP growth on the rise; declining in euro area, Japan and China

There are still 1.4 job openings for every unemployed person in the US

US PCE inflation over the past six months has slowed to the Fed's 2% target

FOMC think rate hikes are done and looks for 75bps of decline in 2024

Weaker economic data surprises pushing down US interest rates

Recent disinflation has been widespread across Europe and North America

Recent decline in US inflation expectations helping to lower interest rates

China is losing its luster as foreign direct investment heads out

Blue Chip forecasters think Fed will be tighter for longer

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Nonfarm payrolls increased 175,000 (1.8% y/y) in April after rising 315,000 in March, revised from 303,000, and 236,000 in February, revised from 270,000. Expectations had been for a 250,000 rise in the Action Economics Forecast Survey. The three-month average change of 242,000 is the slowest since December of	 last year.

Average hourly earnings increased 0.2% in April after an unrevised 0.3% March gain and a 0.1% uptick in February, revised from 0.2%. The 3.9% y/y earnings increase remains below the 5.9% high in March 2022. It is the weakest rise since June 2021.

The unemployment rate, measured in the household survey, rose to 3.9% and reversed its decline to 3.8% in March. An unchanged 3.8% had been expected. Household employment rose 25,000 after increasing 498,000 in March. The labor force rose 87,000 after a 469,000 March gain. The overall unemployment rate, including workers who were marginally attached & working part-time for economic reasons edged up to 7.4%. It was the highest rate since November 2021.

In the **payroll survey**, private-sector employment increased 167,000 (1.7% y/y) in April after rising 243,000 in March. Construction sector employment increased 9,000 (3.3% y/y) last month following a 40,000 March gain. Factory sector jobs rose 8,000 (0.1% y/y) after falling 4,000. Mining & logging sector jobs fell 3,000 (+0.3% y/y) during April after rising 3,000 in March.

Private service-producing sector employment improved 153,000 in April (1.7% y/y) after a 204,000 March rise. Increases varied greatly amongst service sector categories. Education & health service jobs rose 95,000 (4.3% y/y) after rising 88,000 in March while leisure & hospitality employment rose 5,000 (2.3% y/y) after a 53,000 gain. Trade, transportation & utilities employment gained 52,000 (0.7% y/y) after rising 31,000 while financial activities jobs rose 6,000 (0.5% y/y) after rising 5,000 in March. Information sector employment fell 8,000 (-1.4% y/y) following a 4,000 gain and professional & business service jobs decreased 4,000 (0.5% y/y) after a 10,000 March rise. Within that category, the number of temporary jobs fell 16,400 (-6.0% y/y) and have fallen consistently since a March 2022 high.

Government sector payrolls improved a negligible 8,000 last month (2.8% y/y) after increasing 72,000 in March. Local government jobs held steady (2.4% y/y) after rising 51,000 in March and state government employment rose 6,000 (3.7% y/y) after an 11,000 gain. The number of federal government jobs increased 2,000 (2.9% y/y) following a 10,000 rise.

The 0.2% rise in private-sector average hourly earnings reflected a 0.2% gain (5.1% y/y) in the goods-producing sector which followed a 0.6% improvement in March. Earnings in construction strengthened 0.6% (5.2% y/y) while factory sector earnings eased 0.1% (+4.8% y/y). In the private services-sector, earnings rose 0.2% last month (3.7% y/y) after a 0.3% gain. Information sector earnings edged 0.1% higher (3.4% y/y) following a 0.4% improvement. Financial sector earnings increased 0.4% (6.0% y/y) for the third straight month. Private education & health services earnings rose slightly (2.8% y/y) after holding steady in March. Trade, transportation and utilities pay rose 0.1% (3.4% y/y) in April after a 0.2% rise.

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The length of the average workweek in the private sector eased to 34.3 hours in April after rising to 34.4 hours in March. The workweek in the goods-producing sector fell to 39.7 hours, down from a five-month high of 39.9 hours in March. The construction sector average workweek fell to 38.7 hours from 39.3. The factory sector workweek held steady at 40.0 hours for the third straight month while the average workweek in the private service sector was 33.3 hours, also for the third consecutive month. The aggregate weekly hours index in the private sector, a key indicator of production and income, eased 0.1% in April (1.7% y/y) after rising 0.4% in both of the prior two months.

In the **household survey**, the jobless rate climbed to 3.9% as the size of the labor force rose more quickly than employment. The labor force participation rate held steady at 62.7%. The rate for teenagers declined to 37.6%, while for individuals aged 20-24 it rose to 72.4%. For rate for workers aged 25-54, it edged higher to 83.5% but for workers 55 and over, it fell slightly to 38.4 hours.

The employment/population ratio for all workers slipped to 60.2% in April, standing slightly below where it was twelve months earlier. It remained below its high of 61.1% in February, 2020 just prior to the pandemic.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- Job increase slows to weakest in just over one year.
- Earnings increase moderates.
- Jobless rate moves up as employment increase is negligible.

U.S. Payroll Employment & Wage Growth Moderate in April; Jobless Rate Edges Up

Andrew Cates

**Consensus interest rate forecasts**
Despite heightened concerns about the potential for lower US interest rates in the coming months, recent forecasts still show a broad consensus that an easing cycle will unfold in the period ahead across most major economies. The latest Blue Chip Financial Forecasts survey, for instance, indicates that policy rate reductions of approximately 100 basis points are anticipated from the Fed over the next 12 months. Additionally, the European Central Bank and the Bank of England are expected to implement cumulative cuts of 166 and 111 basis points, respectively, during the same timeframe. In contrast, Japan is expected to see further rate hikes, specifically an increase of 17 basis points over the year ahead.

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**US data surprises and 2 year bond yields**
The anxiety in financial markets about the Fed’s scope to lower interest rates can be largely traced to the US economy’s resilience – and its tight labour market in particular – together with sticky inflation. The former, however, namely economic resilience, has arguably being challenged in recent days by some, though by no means all, US data releases. These include, for example, a weaker-than expected consumer confidence report and ISM survey of manufacturing. Citigroup’s US growth surprise index has, against that backdrop, turned sharply lower.

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**US and euro area data surprises versus the euro**
A corresponding trend has also unfolded in the FX market. While US data have been a little more disappointing this contrasts with euro area data, which have been more resilient. Yet, thanks to still-firm US/Europe yield differentials, the US dollar has remained fairly resilient versus the euro (see chart 3).

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**Japan’s economy**
This week’s disappointing retail sales data from Japan could call into question the scope for further policy rate hikes from the Bank of Japan (BoJ) in the coming months. Retail sales specifically slowed to 1.2% y/y in March from 4.7% in February. That slowdown, moreover, was broadly-based, with reduced sales activity seen across various product categories.

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**Airport traffic in China**
The latest monthly dataflow from China have been a little more upbeat but that was not the message from this week’s official PMI surveys for April. Other less widely monitored data are also yielding sobering messages about the current economic environment. For instance, while aircraft movements at Beijing Airport have risen from their low points, they still remain well below pre-COVID pandemic levels (see chart 5). Similarly, specific data on cargo volumes and passenger traffic lead to the same conclusion.

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**Global warming and water levels**
Finally, on more structural matters, climate change continues to generate profound shifts in the economic landscape, influencing everything from agricultural productivity to energy markets and global supply chains. One manifestation of these shifts is low water levels in many areas and for example, in the Panama Canal. More specifically Gatun Lake has seen prolonged drought conditions, exacerbated by the El Niño phenomenon and broader climate change anomalies. The drought has resulted in lower-than-average rainfall and delayed rainy seasons, leading to reduced water availability not only for canal operations but also for over half of Panama's population relying on this water source. To that supply chain point above, the canal has also had to reduce the number of ships it can accommodate per day.

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Lingering concerns about the US Fed's inclination to lower interest rates in coming months have continued to unsettle financial markets over the past few days. That said, comments from Fed Chair Powell after this week’s FOMC meeting have calmed some of those nerves. In our charts this week we delve into the latest Blue Chip consensus on policy rates across the world’s major economies (chart 1). We also compare market expectations for US policy rates, inferred from 2-year Treasury yields, with a trend toward more negative US data surprises in recent days (chart 2). In addition we contrast that more negative US growth trend with the relative resilience of the euro area dataflow and some recent downward pressure on the EUR/USD exchange rate (chart 3). Turning to Asia, we assess Japan's economy with a focus on some recent disappointing retail sales data (chart 4), and provide insights into China's economic activity through aircraft movements at Beijing Airport (chart 5). Finally, and with a nod to climate change and its impact, we look at reduced water levels on the Panama Canal and how these contrast with above-average land and sea temperatures over the past few years (chart 6).

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Charts of the Week: Policy Surprises Versus Data Surprises

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The U.S. trade deficit in goods and services (BOP basis) of $69.4 billion in March compared to a $69.5 billion in February, revised from $68.9 billion, and an unrevised $67.6 billion in January, according to the U.S. Census Bureau. The deficit remained nearly the largest since April 2023 which was $72.2 billion. A $69.1 billion deficit had been expected in the Action Economics Forecast Survey. Exports fell 2.0% and were roughly unchanged y/y, reversing a 2.2% February rise. Imports declined 1.6% (+3.1% y/y) in March, following three straight months of moderate gain.

The deficit in goods trade (BOP basis) increased to $92.5 billion in March from $91.7 billion in February. Goods exports fell 2.9% (-2.8% y/y) after rising 2.8% in February. Imports of goods declined 1.6% (+2.5% y/y) following three straight monthly increases. The services trade surplus increased to $23.1 billion in March from $22.2 billion in February but remained down from a peak surplus of $25.2 billion last August. Services exports eased 0.2% (+6.0% y/y) following four consecutive monthly increases. Services imports declined 1.7% (+5.4% y/y) after rising 4.7% in February.

The real (inflation-adjusted) goods trade deficit (customs value; chained 2017 dollars), widened to $88.6 billion in March, the largest deficit since April of last year, from $87.4 billion in February. Real exports of goods declined 3.2% (-0.7% y/y) after rising 2.0% in February. Real imports of goods fell 1.5% (+2.5% y/y) after three straight monthly increases. In the first quarter of this year, a widening of the trade deficit (net exports) subtracted 0.86 percentage points from GDP growth after adding 0.25 percentage points to growth in Q4 2023.

The customs value goods trade deficit widened to $91.5 billion in March from $90.5 billion in February. The latest figure compared to a $91.8 billion deficit in the advance report released on April 25. Customs value exports fell 3.0% (-1.7% y/y) in March after a 2.8% February increase. Automotive vehicles, parts & engines rose 0.6% (-1.7% y/y) while nonfood consumer goods excluding autos declined 1.8% (-5.1% y/y). Capital goods exports excluding autos weakened 3.7% (+3.1% y/y) while exports of industrial supplies & materials fell 3.0% (-4.1% y/y). Foods, feeds & beverages exports were off 8.2% (-1.5% y/y).

Customs value imports of goods declined 1.6% (+2.6% y/y) in March after increasing for three straight months. Automotive vehicles, parts & engines imports fell 11.1% (+6.1% y/y) while capital goods imports excluding autos rose 0.1% (7.4% y/y). Foods, feeds & beverage imports declined 3.5% (+5.2% y/y). Imports of industrial supplies & materials fell 2.9% (-7.0% y/y) but nonfood consumer goods excluding autos rose 4.8% (4.1% y/y). Meanwhile, petroleum imports declined 2.5% and were unchanged y/y in March, following a 1.6% February rise. Nonpetroleum imports weakened 1.5% (+2.8% y/y) following three straight monthly increases.

The rise in services exports reflected a 0.7% increase (12.4% y/y) in personal, cultural & recreational services and a 1.3% decline (+24.9% y/y) in travel services exports. Exports of construction services declined 1.3% (+2.6% y/y) while government goods & services exports declined 0.9% (-23.0% y/y). The increase in services imports was due to construction services imports which rose 1.0% (35.1% y/y) but travel services imports fell 2.6% (+21.7% y/y). Imports of transport services declined 5.8% (-0.1% y/y) while charges for the use of intellectual property eased 0.1% (+3.2 y/y) in March.

The U.S. goods trade deficit with China widened to a seasonally adjusted $24.1 billion in March from $21.9 billion in February. Exports fell 3.6% (-10.3% y/y) while imports rose 4.8% (unchanged y/y). The goods trade deficit with the European Union deepened to $19.5 billion from $17.6 billion in February as exports fell 3.4% (-6.4% y/y), off for the third straight month, and imports rose 1.8% (4.2% y/y). The trade deficit with Japan narrowed to a seasonally adjusted $5.3 billion in March after narrowing to $6.2 billion in the previous month. Exports declined 1.9% (+3.0% y/y) while imports fell 8.7% (-2.2% y/y).

The international trade data, including relevant data on oil prices, can be found in Haver's **USECON** database. Detailed figures on international trade are available in the **USINT** database. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- Exports and imports both fall.
- Adjusted for inflation, goods trade deficit increases to eleven-month high.
- Goods trade deficits with China & Europe deepen.

U.S. Trade Deficit Deepens in March

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The Commerce Department reported that inventories in the factory sector remained unchanged (0.6% y/y) during March after a 0.2% February rise. Transportation equipment inventories held steady (6.9% y/y). Furniture inventories increased 0.3% (-4.4% y/y) while electrical equipment inventories dropped 0.4% (-0.5% y/y). Amongst nondurable goods industries, petroleum inventories were 0.5% higher (2.6% y/y) and plastics & rubber inventories rose 0.2% (-4.8% y/y). These changes were accompanied by a 0.5% rise (-1.7% y/y) in apparel. Basic chemical inventories were unchanged (-0.6% y/y) for a second consecutive month while paper product inventories gained 0.2% (-2.6% y/y).

Orders to all manufacturers improved 1.6% (1.7% y/y) in March following a 1.2% February rise. The gain was led by a 2.6% rise (1.2% y/y) in durable goods orders, as commercial aircraft surged 30.6% (-50.9% y/y) in. New orders excluding transportation gained 0.5% (1.6% y/y). Orders for nondurable goods (which equal shipments) rose 0.6% (2.1% y/y). The rise reflected a 1.5% increase (4.9% y/y) in shipments from oil refineries and a 0.7% gain (2.1% y/y) in basic chemicals. Orders for textile products declined 1.4% (-1.7% y/y) and apparel orders fell 0.2% (-1.9% y/y). Orders for food products rose 0.2% (-0.3% y/y). Paper product shipments held steady (-2.0% y/y).

Unfilled orders improved 0.4% in March (9.1% y/y) and, excluding the transportation sector, they eased 0.1% (-0.9% y/y). Backlogs of electrical equipment slipped 0.1% (+0.7% y/y). Unfilled orders in the machinery sector eased 0.3% (-3.9% y/y) and unfilled orders for transportation equipment rose 0.7% (15.5% y/y). Unfilled orders of furniture rose 0.6% (-5.6% y/) and fabricated metals backlogs were off 0.1%, unchanged y/y.

The factory sector figures are available in Haver's **USECON** database.

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- Inventories levels are flat.
- Order improvement led by aircraft.
- Unfilled orders rise.

U.S. Factory Inventories Hold Steady While Orders Rise in March

Kathleen Stephansen, CBE

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Nonfarm business sector productivity increased 0.3% (SAAR) during Q1’24, following upwardly revised gains of 3.5% in Q4’23 and 4.6% in Q3’23. The rises in productivity were originally reported as being 3.4% in Q4 and 4.4% in Q3. Expectations had been for a 0.8% rise in the Action Economics Forecast Survey. On a year-on-year comparison, Q1 productivity rose 2.9%, up from 2.7% in Q4 and 2.4% in Q3. The y/y gain was the quickest since 2020. Real value-added output rose 1.3% (SAAR) (3.2% y/y) in Q1 from a 3.8% (3.3% y/y) gain in Q4.

Hours-worked in the nonfarm business sector rose 1.0% (0.3% y/y) in Q1 from a 0.2% (0.6% y/y) rise in Q4. Nonfarm hourly compensation increased 5.0% (4.7% y/y) in Q1 from a 3.5% gain (5.2% y/y) in Q4. Adjusted for price inflation, real compensation per hour rose 1.1% (1.5% y/y) in Q1, following a 0.8% (1.9% y/y) rise in Q4.

Weaker productivity brought an acceleration in unit labor costs to 4.7% (1.8% y/y) in Q1 after a 0.0% (2.4%) rise in Q4. The Action Economics Forecast Survey called for a 2.3% quarterly rise in unit labor costs.

In the manufacturing sector, real output per hour slowed to a rise of 0.2% (1.2% y/y) last quarter after a gain of 2.4% (0.9% y/y) in Q4. Manufacturing output was unchanged over the quarter (-0.1% y/y) after declining 1.0% (-0.2% y/y) in Q4. Hours-worked declined 0.2% (-1.3% y/y) in Q1 after a drop of 3.3% (-1.1% y/y) in Q4.

Compensation per hour in manufacturing slowed to a gain of 3.4% (6.3% y/y) last quarter following a rise of 6.8% (6.7% y/y) in Q4. Real compensation declined 0.4% (3.0% y/y) in Q1, after a rise of 4.0% (3.4% y/y) in Q4. Unit labor costs in manufacturing slowed to a rise of 3.2% (5.0% y/y) in Q1 following a gain of 4.2% (5.8% y/y) the prior quarter.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

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- Productivity slows in Q1.
- Unit labor costs rise sharply.
- Slowdown in factory productivity and unit labor cost growth.

Economy in Brief: 2002

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