Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030321a.jpg" width="353">
The Consumer Price Index (CPI-U) rose last month slightly more than Consensus expectations for a 0.5% gain. The 0.6% increase was the largest for one month since January 2001.
The CPI less food and energy rose 0.1% (1.7% y/y). That was the lowest y/y gain since early 1966. (This y/y change is based on not seasonally adjusted data and differs slightly from the change based on adjusted data.)
Energy prices were strong again last month. So far in 2003 energy prices have risen 10.2%. Last month&#39;s strength was led by a 9.9% (43.2% y/y) increase in gasoline prices. Gasoline prices so far in March have risen another 6.0%. Fuel and utility prices rose 2.0% (5.8% y/y) led by a 14.2% (39.1% y/y) gain in fuel oil prices. Piped gas &amp; electricity prices rose 1.6% (4.7% y/y).
Core goods prices fell for the sixth consecutive month. Apparel prices fell 0.2%(-2.3% y/y). New and used vehicle prices fell 0.1% (-2.1% y/y). Prices for household furnishings and operation rose 0.2% (-0.7% y/y) for the second consecutive month.
The gain in core services prices moderated to 0.1% from 0.3% increases in the prior four months. Shelter prices were unchanged (2.7% y/y). Medical care services prices rose 0.2% (5.1% y/y) following a 0.1% January gain.Education and communication prices rose just 0.2% (2.3% y/y). Public transportation prices fell for the second consecutive month, down 0.4% (-1.8% y/y).
Food prices rose sharply led by strong gains in prices for cereals, meats and fruit.
The chained CPI which adjusts for shifts in consumer buying behavior rose 0.8%. It is similar to the PCE price deflator. The core price measure rose 0.3%, the most since August.
Analysis by the Federal Reserve Bank of Kansas City titled &quot;Implications of Structural Change in the US Economy for Pricing Behavior and Inflation Dynamics&quot; can be found <a href="http://www.kc.frb.org/Publicat/econrev/er03q1.htm#pricing">here</a>.
The Federal Reserve Bank of Richmond studies the Cyclical Behavior of Prices and Employee Compensation <a href="http://www.rich.frb.org/pubs/eq/search.cfm/article=177">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">Feb</th>
<th scope="col">Jan</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 class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>0.6%</td>
<td>0.3%</td>
<td>3.0%</td>
<td>1.6%</td>
<td>2.8%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.7%</td>
<td>2.3%</td>
<td>2.7%</td>
<td>2.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.1%</td>
<td>-0.3%</td>
<td>-1.5%</td>
<td>-1.1%</td>
<td>0.3%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.1%</td>
<td>0.3%</td>
<td>3.2%</td>
<td>3.8%</td>
<td>3.7%</td>
<td>3.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>5.9%</td>
<td>4.0%</td>
<td>22.0%</td>
<td>-5.9%</td>
<td>3.8%</td>
<td>16.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food &amp; Beverages</td>
<td>0.7%</td>
<td>-0.2%</td>
<td>1.4%</td>
<td>1.8%</td>
<td>3.1%</td>
<td>2.3%</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>0.8%</td>
<td>0.4%</td>
<td>2.8%</td>
<td>1.2%</td>
<td>2.1%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.3%</td>
<td>0.2%</td>
<td>1.5%</td>
<td>1.7%</td>
<td>&nbsp;1.9%</td>
<td>1.4%</td>
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The Consumer Price Index (CPI-U) rose last month slightly more than Consensus expectations for a 0.5% gain. The 0.6% increase was the largest for one month since January 2001. The CPI less food and energy rose 0.1% (1.7% y/y). That [...]

CPI Strong Due to Energy

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030320a.jpg" width="353">
Initial claims for unemployment insurance fell less than expected last week, down 0.9% from the prior week&#39;s level which was revised up. Expectations were for claims of 415,000. It was the second consecutive weekly decline in initial claims but they remained above the 400,000 level for the fifth straight week.
Claims in the latest week covered the March survey period for nonfarm payrolls. Initial claims were up 15,000 (3.7%) from the February survey period.
The four-week moving average of initial claims rose to 424,750, up 7.7% y/y. During the last ten years there has been a 72% correlation (inverse) between the level of initial claims and the three month growth in nonfarm payrolls.
Continuing claims for unemployment insurance rose 1.9% following little change the prior week which was revised down. It was the highest level for continuing claims since mid-November.
The insured rate of unemployment rose slightly to 2.8% from the prior week&#39;s level that was revised down from 2.8% to 2.7%.

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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">3/15/03</th>
<th scope="col">3/08/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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</thead>
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<td class="firstcol">Initial Claims</td>
<td>421.0</td>
<td>425.0</td>
<td>7.9%</td>
<td>405.0</td>
<td>405.8</td>
<td>299.8</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,548</td>
<td>0.1%</td>
<td>3,588</td>
<td>3,021</td>
<td>2,114</td>
</tr>
</tbody>
</table>
Leading Indicators Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 20, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030320c.jpg" width="353">
The Conference Board reported that the Composite Index of Leading Economic Indicators fell last month, as expected. The prior month&#39;s previously reported decline was revised to a slight gain.
Gains amongst the leaders&#39; component series narrowed significantly to 35%, the leanest breadth of gain since September. The percentage of leading components rising over a six month period rose slightly to a still-low 40%.
Higher initial claims for jobless insurance, lower stock prices and lower consumer expectations had the largest negative influences on theFebruary leading index. That was offset somewhat on the upside by a higher money supply. The influence of most other components was near zero.
The Leading index is based on eight previously reported economic data series and two that are estimated.
The coincident indicators were unchanged and remained in 1Q just 0.7% (AR) above the 4Q average. During the last twenty years there has been an 80% correlation between the quarterly change in the coincident indicators and quarterly growth in real GDP.
The ratio of coincident-to-lagging indicators rose just slightly by 0.1% for the second month. The ratio is an indicator of excess relative to actual economic performance.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world as well as a recent survey of consumer investment attitudes.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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<td class="firstcol">Leading</td>
<td>-0.4%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.2%</td>
<td>-0.9%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.0%</td>
<td>0.2%</td>
<td>1.0%</td>
<td>-0.2%</td>
<td>-0.4%</td>
<td>3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>-2.7%</td>
<td>-4.4%</td>
<td>-1.3%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Negative 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 20, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030320d.jpg" width="353">
The Philadelphia Fed&#146;s index of general business conditions weakened more than expected this month. It fell to -8.0 versus Consensus expectations for a decline to 0.0 from 2.3 in February. This was the first month negative since October.
The decline was in line with the fall in the Empire State Factory survey reported earlier this week.
During the last twenty years there has been a 68% correlation between the level of the Business Conditions Index and growth in real GDP. The correlation with quarterly growth in industrial production has been 78%.
Amongst the sub indexes new orders, employment and the length of the workweek fell significantly. Inventories and delivery lead times improved.
The business conditions index reflects a separate survey question, not the components.
Prices paid strengthened to the highest level since October 2000.
The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
The latest Business Outlook survey from the Philadelphia Fed can be found <a href="http://www.phil.frb.org/files/bos/bos0303.html">here</a>. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-8.0</td>
<td>2.3</td>
<td>9.2</td>
<td>7.7</td>
<td>-17.2</td>
<td>8.3</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>25.1</td>
<td>16.2</td>
<td>2.6</td>
<td>12.2</td>
<td>-0.9</td>
<td>27.2</td>
</tr>
</tbody>
</table>
U.S. Budget Deficit Deepened 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 20, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030320e.jpg" width="353">
The US budget last month came in near Consensus expectations for a $93.0 bil. deficit. The deficit deepened sharply from last year&#39;s figure. For the first five months of FY03, the federal government ran a deficit of $193.9 bil. versus a $147.1 bil. deficit during the first five months of FY02. 
Net receipts for the first five months of FY03 fell 8.2% versus last year. Individual tax payments fell 11.4%. Corporate income taxes were down 47.7%. Social insurance contributions were up 3.3%. 
Federal expenditures rose 7.6% versus last fiscal year&#39;s first five months. Defense spending was up 16.7%. Spending on health programs rose 10.0% and spending on education rose 16.6%. Spending on income security was up 14.3% as the unemployment rate remained high. On the weak side were Social Security outlays, up 4.3%, and interest expense which fell 7.4% y/y. 
Analysis of the President&#39;s latest budget proposal by the Congressional Budget Office is available <a href="ftp://ftp.cbo.gov/40xx/doc4080/Report.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/@E1/@E106/@E10602/@E10602.HTM">US Government Finance</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Feb &#39;02</th>
<th scope="col">FY2002</th>
<th scope="col">FY2001</th>
<th scope="col">FY2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$-96.3B</td>
<td>$11.1B</td>
<td>$-76.1B</td>
<td>$-157.8B</td>
<td>$127.3B</td>
<td>$236.4B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revenues</td>
<td>$89.5B</td>
<td>$187.9B</td>
<td>-8.6%</td>
<td>-6.9%</td>
<td>-1.7%</td>
<td>10.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Outlays</td>
<td>$185.8B</td>
<td>$176.8B</td>
<td>6.8%</td>
<td>7.9%</td>
<td>4.2%</td>
<td>5.1%</td>
</tr>
</tbody>
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Initial claims for unemployment insurance fell less than expected last week, down 0.9% from the prior week's level which was revised up. Expectations were for claims of 415,000. It was the second consecutive weekly decline in initial [...]

Initial Claims for Jobless Insurance Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030319a.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association rose another 4.4% last week. The index has surged 54.5% in just the last four weeks.
Applications to refinance rose 5.2% and have risen 72.6% during the last four weeks.
Mortgage applications for home purchase rose a slight 0.7% in the latest week but for the month of March so far have risen 5.1% from February.
Interest rates on a conventional 30-Year mortgage firmed. The contract rate rose to 5.61%. The effective rate (incl. points) rose to 5.91% last week and has averaged 5.82% this month versus 7.33% last March. The effective rate on a 15-year mortgage rose to 5.27% and has averaged 5.19% this month versus 6.87% last March.
For a description of the mortgage application indexes from the Mortgage Bankers Association click <a href="http://www.mbaa.org/news/index.cfm?STRING=http://www.mbaa.org/news/2003/wk0319.html">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">3/14/03</th>
<th scope="col">3/07/03</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
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<td class="firstcol">Total Market Index</td>
<td>1,673.4</td>
<td>1,603.1</td>
<td>799.7</td>
<td>625.6</td>
<td>322.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>347.3</td>
<td>345.0</td>
<td>354.7</td>
<td>304.9</td>
<td>302.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>9,387.0</td>
<td>8,920.9</td>
<td>3,388.0</td>
<td>2,491.0</td>
<td>438.8</td>
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</tbody>
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The index of mortgage applications compiled by the Mortgage Bankers Association rose another 4.4% last week. The index has surged 54.5% in just the last four weeks. Applications to refinance rose 5.2% and have risen 72.6% during the [...]

Mortgage Applications Surge Further

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030318c.jpg" width="353">
Business sentiment in Germany continued to improve in March from the very low level reached in December. The ZEW indicator of market sentiment regarding the economic outlook for the next six months rose to 17.7%, that is, the percentage of those with a positive outlook exceeded those with a negative outlook by 17.7%. The ZEW measure is often a precursor of the widely watched IFO indicator of business sentiment, as can be seen in the attached chart
In addition to tracking economic sentiment, the ZEW market survey also tracks the opinions of analysts and institutional investors regarding the outlook for stock and bonds. The balance of opinion between optimists and pessimists regarding financial markets is traditionally small. Over the past twenty years, the range of opinion on stocks was 9% to -1% and for bonds, 7.5% to -7.5%. In March, 2003, the indicator rose to 6.2% for stocks and declined to -4.1% for bonds. So far this year, opinions regarding the stock market outlook have remained optimistic while those regarding the bond market outlook have deteriorated.

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<th scope="col" class="firstcol">Balance of Opinions</th>
<th scope="col"></th>
<th scope="col"></th>
<th scope="col"></th>
<th scope="col"></th>
<th scope="col">% Chg</th>
<th scope="col"></th>
<th scope="col"></th>
<th scope="col"></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td>Mar</td>
<td>Feb</td>
<td>Jan</td>
<td>Dec&nbsp;</td>
<td></td>
<td>2002</td>
<td>2001</td>
<td>2000</td>
</tr>
<tr>
<td class="firstcol">ZEW</td>
<td>17.7</td>
<td>15.0</td>
<td>14.0</td>
<td>0.6</td>
<td>ZEW</td>
<td>42.5</td>
<td>-56.3</td>
<td>10.0</td>
</tr>
<tr class="odd">
<td class="firstcol">IFO</td>
<td>n.a.</td>
<td>87.3</td>
<td>87.4</td>
<td>85.9</td>
<td>IFO</td>
<td>-0.9</td>
<td>-9.5</td>
<td>6.0</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Stocks</td>
<td>6.2</td>
<td>5.7</td>
<td>6.0</td>
<td>6.1</td>
<td>Stocks</td>
<td>-0.2</td>
<td>1.0</td>
<td>-0.9</td>
</tr>
<tr>
<td class="firstcol">Bonds</td>
<td>-4.1</td>
<td>-3.3</td>
<td>-2.9</td>
<td>-1.9</td>
<td>Bonds</td>
<td>-4.6</td>
<td>3.1</td>
<td>1.4</td>
</tr>
</tbody>
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Business sentiment in Germany continued to improve in March from the very low level reached in December. The ZEW indicator of market sentiment regarding the economic outlook for the next six months rose to 17.7%, that is, the [...]

Business Sentiment in Germany: The Economy, Stock and Bonds

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030318b.jpg" width="353">
Housing starts fell more than expected last month. Total starts fell a sharp 11.0% from a downwardly revised January level. Starts had been expected to decline to 1.75 mil. units.
Single family starts fell 13.7% m/m from the near-record January level. Severe winter weather likely depressed activity. 
Multi-family starts rose a slight 1.9% following the steep 10.8% January drop. These starts have been moving sideways since 1997.
Building permits rose 0.4% following a 5.7% decline in January. Single family permits fell 6.8% after an unchanged January reading.

<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/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</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 class="odd">
<td class="firstcol">Total</td>
<td>1,622</td>
<td>1,822</td>
<td>-9.3%</td>
<td>1,709</td>
<td>1,603</td>
<td>1,573</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family</td>
<td>1,295</td>
<td>1,501</td>
<td>-12.0%</td>
<td>1,364</td>
<td>1,273</td>
<td>1,232</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi Family</td>
<td>327</td>
<td>321</td>
<td>3.5%</td>
<td>346</td>
<td>330</td>
<td>341</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,786</td>
<td>1,779</td>
<td>1.1%</td>
<td>1,717</td>
<td>1,639</td>
<td>1,598</td>
</tr>
</tbody>
</table>
Chain Store Sales Up Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 18, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030318a.jpg" width="353">
Chain store sales rose moderately last week for the third consecutive week according to the BTM-UBSW survey.
The 0.4% gain last week lifted the month of March so far 0.5% ahead of the February average.
During the last five years there has been a 63% correlation between the year-to-year percent change in these monthly chain store sales and the change in retail sales of general merchandise, apparel and furniture (GAF, 26% of total retail sales). That correlation is comparable to the 69% correlation between Same Store sales as published by Redbook Instinet Research and GAF sales.

<table border="0" cellspacing="0" width="100%">
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<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">3/15/03</th>
<th scope="col">3/08/03</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">Total Weekly Retail Chain Store Sales</td>
<td>410.0</td>
<td>408.2</td>
<td>0.6%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
FOMC Leaves Interest Rates Unchanged, Balance of Risks Uncertain 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 18, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030318d.jpg" width="353">
The Federal Reserve left the Federal Funds Target Rate unchanged at 1.25%, the lowest level since 1961. The decision was unanimous and as expected by most economists. 
The discount rate remained unchanged with primary credit available at 2.25%.
The press release which accompanied the Fed&#146;s action contained the following statement. &quot;While incoming economic data since the January meeting have been mixed, recent labor market indicators have proven disappointing. However, the hesitancy of the economic expansion appears to owe importantly to oil price premiums and other aspects of geopolitical uncertainties. The Committee believes that as those uncertainties lift, as most analysts expect, the accommodative stance of monetary policy, coupled with ongoing growth in productivity, will provide support to economic activity sufficient to engender an improving economic climate over time.&quot;
On the balance of risks, the Fed indicated that &quot;the Committee does not believe it can usefully characterize the current balance of risks with respect to the prospects for its long-run goals of price stability and sustainable economic growth.&quot;
<a href="http://www.federalreserve.gov/BoardDocs/Press/monetary/2003/20030318/default.htm">Here</a> is the complete text of the Fed&#39;s latest press release.
More analysis of the efficacy of US monetary policy from the Federal Reserve Bank of St. Louis click can be found <a href="http://research.stlouisfed.org/publications/mt/2003/cover3.pdf">here</a>.

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Housing starts fell more than expected last month. Total starts fell a sharp 11.0% from a downwardly revised January level. Starts had been expected to decline to 1.75 mil. units. Single family starts fell 13.7% m/m from the near- [...]

Housing Starts Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030317a.jpg" width="353">
The Federal Reserve Bank of New York reported that the Empire State Manufacturing Survey index of general business conditions fell below zero in March. The decline to -2.51 was right in line with Consensus expectations.
Diffusion indexes for all the subgroups fell and most were negative. The new orders, shipments and employment indexes each fell nearly 20 points, well into negative territory.
The index of prices paid fell sharply from the record level of February though the index level remained fairly positive.
The survey includes measures of business expectations six months ahead. This diffusion index for general business conditions fell sharply for the sixth consecutive month. The index level has only been lower in one month when it was negative in September 2001. Expectations for prices paid in six months fell to a still high 13.26.
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/index.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<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">Mar</th>
<th scope="col">Feb</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>-2.51</td>
<td>1.13</td>
<td>6.11</td>
<td>7.07</td>
<td>-13.81</td>
</tr>
</tbody>
</table>
Housing Market Index Down Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 17, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030317b.jpg" width="353">
The National Association of Home Builders Housing Market Index fell sharply in March. The one month drop in the index was roughly the same as the decline in October 2001 and dropped the index to its lowest since November of that year.
Surveys of market conditions for current as well as expected sales in six months both fell sharply. 
Traffic of prospective buyers fell sharply for the second month. This survey was taken after the President&#39;s Day snowstorm.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
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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<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">Mar</th>
<th scope="col">Feb</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>52</td>
<td>62</td>
<td>60</td>
<td>61</td>
<td>56</td>
<td>62</td>
</tr>
</tbody>
</table>
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The Federal Reserve Bank of New York reported that the Empire State Manufacturing Survey index of general business conditions fell below zero in March. The decline to -2.51 was right in line with Consensus expectations. Diffusion [...]

Empire State Factory Survey Below Zero in March

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030314c.jpg" width="353">
Finished producer prices surged in February. The jump followed strength the month prior. Consensus expectations were for a 0.6% gain.
Finished energy prices surged 7.4% (25.2% y/y), the most for any month since July 1990. Gasoline prices spiked 18.6% (73.9% y/y). Fuel oil prices rose 23.3% (94.0% y/y). Residential gas prices rose 3.2% (19.6% y/y). These energy product price series are NSA.
Finished food prices rose 0.6% (-0.1% y/y) following a 1.6% January jump. Meat prices have been strong.
Excluding food and energy prices were quite a bit weaker than expectations for a 0.1% increase. The 0.5% decline was the third monthly decline in the last four months.
Core finished consumer goods prices fell 0.5% (0.5% y/y) following a strong 0.9% January gain. Price declines were widespread in both durable and nondurable goods categories. Capital goods prices fell 0.4% (-0.4% y/y), the third decline in the last four months.
Intermediate goods prices nearly doubled their huge gain of the prior month and jumped the most for any one month since January 1980. Core intermediate prices also were strong rising the most since April 1995. 
Crude goods prices surged for a second month reflecting a 9.3% rise in energy prices. It was the seventh month of strong gain in crude energy prices. Food prices rose a moderate 0.7% (4.1% y/y) following a 5.2% January gain. Core crude prices spiked reflecting more strength in scrap metals prices.
For analysis by the Federal Reserve Bank of St. Louis of the PPI versus the CPI click <a href="http://research.stlouisfed.org/publications/net/2003/cover2.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</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 class="odd">
<td class="firstcol">Finished Goods</td>
<td>1.0%</td>
<td>1.6%</td>
<td>3.5%</td>
<td>-1.3%</td>
<td>2.0%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.5%</td>
<td>0.9%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>2.1%</td>
<td>1.3%</td>
<td>6.7%</td>
<td>-1.5%</td>
<td>0.4%</td>
<td>4.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.7%</td>
<td>0.3%</td>
<td>2.6%</td>
<td>-0.5%</td>
<td>-0.1%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>4.8%</td>
<td>6.9%</td>
<td>36.5%</td>
<td>-10.4%</td>
<td>0.3%</td>
<td>22.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>2.7%</td>
<td>1.0%</td>
<td>14.6%</td>
<td>3.8%</td>
<td>-10.0%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
Industrial Production Up Slightly 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 14, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030314b.jpg" width="353">
Industrial production rose as expected last month following an upwardly revised gain in January. The gains pulled output so far in 1Q 2.0% (AR) above 4Q02. Output fell at a 3.1% last quarter.
Output in the manufacturing sector fell 0.1% (0.9% y/y) following a January gain that was revised up slightly to 0.6%.
Excluding a 2.4% decline in motor vehicle and parts, factory output rose 0.1% (0.4% y/y), the second modest monthly gain following four months of decline. Appliance, furniture &amp; carpeting output rose 0.5% (-1.4% y/y) following a 1.8% decline in January that was much deeper than initially estimated. Computer output fell 0.6% (-6.5% y/y) following a 0.8% January decline that was revised from a small gain. 
Output of business equipment was unchanged (-2.3% y/y) following a 0.9% January gain. Output of information processing equipment rose 0.2% (1.2% y/y) following a January gain that was revised up sharply to 2.2%. Output of industrial equipment rose 0.3% (0.1% y/y) for the second month following four months of decline. 
Total capacity utilization was unchanged but factory sector utilization reversed half of the prior month&#39;s gain and fell to 73.4%.

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</table>
<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/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</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">Industrial Production</td>
<td>0.1%</td>
<td>0.8%</td>
<td>1.7%</td>
<td>-0.7%</td>
<td>-3.5%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>75.6%</td>
<td>75.6%</td>
<td>75.1%(2/02)</td>
<td>75.6%</td>
<td>77.3%</td>
<td>82.7%</td>
</tr>
</tbody>
</table>
Business Inventories Rose Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 14, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030314a.jpg" width="353">
Total business inventories rose slightly less than expected in January. Nevertheless, the gain continued a moderate rise in inventories that began last May.
Retail inventories rose strongly for the second month led by a 1.9% surge in motor vehicle inventories (18.9% y/y).
Nonauto retail inventories rose just slightly following two months of strong accumulation. Inventories at apparel stores jumped 1.7% (4.2% y/y) for the third monthly surge. Inventories at general merchandise stores fell 0.3% (3.7% y/y) after three months of strong accumulation.
Overall business sales jumped 1.2% (4.2% y/y) led by strength in wholesale and manufacturers&#39; sales.
The inventory-to-sales ratio eased to 1.36, equal to the levels of most of last year. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</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 class="odd">
<td class="firstcol">Total</td>
<td>0.2%</td>
<td>0.7%</td>
<td>2.2%</td>
<td>2.0%</td>
<td>-6.4%</td>
<td>5.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.7%</td>
<td>0.7%</td>
<td>7.7%</td>
<td>7.8%</td>
<td>-5.0%</td>
<td>6.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.1%</td>
<td>0.8%</td>
<td>3.0%</td>
<td>3.1%</td>
<td>-2.1%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>-0.2%</td>
<td>0.8%</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>-5.7%</td>
<td>6.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.0%</td>
<td>0.6%</td>
<td>-1.3%</td>
<td>-1.9%</td>
<td>-8.0%</td>
<td>4.5%</td>
</tr>
</tbody>
</table>
Consumer Sentiment Slumped Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 14, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030314d.jpg" width="353">
The Mid-March reading of Consumer Sentiment from the University of Michigan fell more than expected versus February. The 6.1% m/m decline to 75.0 was versus Consensus expectations for a reading of 78.0.
The index of current conditions and expectations both fell sharply.
Over the last 10 years there has been a 63% correlation between the level of consumer sentiment and the y/y change in real PCE. That correlation rose to 81% during the last five years.
The University of Michigan survey is not seasonally adjusted.It is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Mid-March</th>
<th scope="col">Feb</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">Consumer Sentiment</td>
<td>75.0</td>
<td>79.9</td>
<td>-21.6%</td>
<td>89.6</td>
<td>89.2</td>
<td>107.6</td>
</tr>
</tbody>
</table>
4Q Current Account Deficit Another Record 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 14, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030314e.jpg" width="353">
The US current account deficit deepened about as expected last quarter, but set a new record. The deficit in 3Q was revised slightly shallower. 
The deficit in goods trade deteriorated to $529.0B (AR) in 4Q02 versus a $484.4B deficit for all of last year and $427.2B in 2001. Exports of merchandise fell 5.0% last year following a 6.9% drop in 2001. Goods imports rose 1.8% vs. a 6.4% decline the year prior.
Services managed a $48.2B (AR) surplus last quarter and a $48.8B surplus for the year. That, however, was down from a peak services surplus of $90.4B in 1997. The US surplus in travel shrank to $11.0B last year from $21.4B in 1997. The balance on defense expenditures turned to a $7.4B deficit versus a $5.0B surplus in 1997.

<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/@EE/@EE01/@EE01.HTM">US Int&#39;l Balance of Payments</a></th>
<th scope="col">4Q &#39;02</th>
<th scope="col">3Q &#39;02</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 class="odd">
<td class="firstcol">Current Account Deficit</td>
<td>$136.9B</td>
<td>$126.3B</td>
<td>$95.1B</td>
<td>$503.4B</td>
<td>$393.4B</td>
<td>$410.3B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % of GDP</td>
<td>5.2%</td>
<td>4.8%</td>
<td>3.8%</td>
<td>4.8%</td>
<td>3.9%</td>
<td>4.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Deficit on Gds, Serv. &amp; Income</td>
<td>$122.8B</td>
<td>$113.3B</td>
<td>$81.5B</td>
<td>$447.4B</td>
<td>$343.9B</td>
<td>$356.9B</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>-1.3%</td>
<td>2.4%</td>
<td>5.7%</td>
<td>-5.1%</td>
<td>-9.6%</td>
<td>13.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>1.2%</td>
<td>1.4%</td>
<td>15.5%</td>
<td>2.4%</td>
<td>-8.4%</td>
<td>18.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Unilateral Transfers Deficit</td>
<td>$14.1B</td>
<td>$13.1B</td>
<td>$13.6B</td>
<td>$56.0B</td>
<td>$49.5B</td>
<td>$53.4B</td>
</tr>
</tbody>
</table>
</body>
</html>

Finished producer prices surged in February. The jump followed strength the month prior. Consensus expectations were for a 0.6% gain. Finished energy prices surged 7.4% (25.2% y/y), the most for any month since July 1990. Gasoline [...]

Producer Prices Surge, Core Prices Fall

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030313b.jpg" width="353">
Retail sales in February fell 1.6%, triple Consensus expectations for a 0.5% decline. Sales in January were revised up wholly due to a lessened decline in sales of motor vehicles and parts. 
Sales excluding motor vehicles and parts dealers fell 1.0% versus Consensus expectations for a 0.1% decline. That decline was in spite of a 2.7% jump in gasoline station sales.
Motor vehicle dealers&#39; sales slumped 3.4% following the prior month&#39;s 2.6% drop. Unit sales of light vehicles fell 4.7% last month to 15.45 mil.
Excluding autos and gasoline, retail sales plunged 1.4% (+1.9% y/y), the most since September 2001. Sales likely were depressed by the President&#39;s Day snowstorm.
Furniture, home furnishing and electronics store sales fell 1.0% (-1.2% y/y), the fourth decline in five months. Furniture sales fell 1.6% (-1.5% y/y) following a lessened decline in January. Sales at electronics and appliance stores fell 0.5% (-0.8% y/y).
Sales at general merchandise stores rose 1.2% (3.7% y/y) following a little-revised 0.5% January gain.
Apparel store sales rose plunged 3.6% (-1.5% y/y).Through January, apparel prices in the CPI were down 2.0% y/y including a 0.9% January decline.
Sales of building materials and garden equipment fell 7.5% (-1.9% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Feb</th>
<th scope="col">Jan</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"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>-1.6%</td>
<td>0.3%</td>
<td>2.6%</td>
<td>3.3%</td>
<td>3.9%</td>
<td>6.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>-1.0%</td>
<td>1.2%</td>
<td>3.6%</td>
<td>3.9%</td>
<td>3.4%</td>
<td>7.3%</td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">

</table>
Import Prices Strong 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 13, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030313c.jpg" width="353">
Prices for imported commodities rose 1.3% last month, in line with Consensus expectations. Strong January gains in both petroleum and nonpetroleum import prices were revised slightly up.
Petroleum import prices surged for the third consecutive month. Just yesterday, the price of West Texas Intermediate crude rose to $37.83/bbl. versus $35.87/bbl averaged in February. These prices hit a monthly average of $35.92 in July 1990.
Nonpetroleum import prices rose for the third consecutive month, however component increases in February failed to indicate strength. Prices of imported capital goods rose 0.1% (-1.6% y/y) and have changed little since October. Nonauto consumer goods prices rose 0.1% for the third month (-0.2% y/y). Imported motor vehicle prices rose 0.1% (+0.3% y/y). Imported food prices fell 0.7% following a sharp January rise.
Export prices rose a firm 0.4% for the second consecutive month led by strength in nonagricultural (1.5% y/y) commodities.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</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 class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>1.3%</td>
<td>1.6%</td>
<td>7.0%</td>
<td>-2.5%</td>
<td>-3.5%</td>
<td>6.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>8.2%</td>
<td>13.3%</td>
<td>75.0%</td>
<td>2.9%</td>
<td>-17.2%</td>
<td>66.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonpetroleum</td>
<td>0.4%</td>
<td>0.3%</td>
<td>1.6%</td>
<td>-2.4%</td>
<td>-1.5%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.4%</td>
<td>0.4%</td>
<td>2.2%</td>
<td>-1.0%</td>
<td>-0.8%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 13, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030313a.jpg" width="353">
Initial claims for unemployment insurance fell as expected last week, down 3.4% from the prior week&#39;s level which was revised up.
The four-week moving average of initial claims rose to 419,750, up 6.7% y/y. During the last ten years there has been a 72% correlation (inverse) between the level of initial claims and the three month growth in nonfarm payrolls.
Continuing claims for unemployment insurance rose 0.4% following a 4.2% gain the prior week which was revised down.
The insured rate of unemployment rose slightly to 2.8% from the prior week&#39;s level that was revised down.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">3/08/03</th>
<th scope="col">3/01/03</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">Initial Claims</td>
<td>420.0</td>
<td>435.0</td>
<td>5.3%</td>
<td>405.0</td>
<td>405.8</td>
<td>299.8</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,496</td>
<td>-1.3%</td>
<td>3,588</td>
<td>3,021</td>
<td>2,114</td>
</tr>
</tbody>
</table>
</body>
</html>

Retail sales in February fell 1.6%, triple Consensus expectations for a 0.5% decline. Sales in January were revised up wholly due to a lessened decline in sales of motor vehicles and parts. Sales excluding motor vehicles and parts [...]

Retail Sales Much Weaker Than Expected

Blue Chip forecasters expect US to lead aggressive policy rate cuts over coming year—apart from Japan

Ratio of job openings to the number unemployed in the US now below pre-pandemic level

U.S. layoffs not showing as much cooling in labor markets as unemployment rate

While goods prices have moderated, service price inflation remains elevated and sticky

Since Jan 2023, BCEI US outlook has improved, worsened for Japan and the euro area

Persistent negative US economic surprises leading to big rate-cut expectations

Germany is Euro area weakling

Flash PMIs show good start to Q3 in US; loss of momentum in the euro area

Chinese economy on downtrend could threaten global economy

Working age population labor force participation near all-time high as retirements increase

Blue Chip forecasters look for widespread policy rate cuts just ahead

Flash June PMIs point to a widespread slowdown apart from the US

Announcement of snap French election is causing concern across Europe

The UK economy’s post-pandemic under-performance relative to its pre-pandemic trend

US Beveridge Curve back to near pre-pandemic levels

Negative economic surprises in the US but positive in Europe, especially the UK

Latest PMIs show US losing momentum while RoW is gaining momentum

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

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The NFIB Small Business Optimism Index declined to 91.2 during August after rising to 93.7 in July, according to the Small Business Economic Trends survey conducted by the National Federation of Independent Business. The index held steady y/y but has improved from a March low of 88.5. Eight of the 10 index components declined last month. The NFIB Small Business Uncertainty Index increased to 92 in August. It remained higher than its recent low of 65 in November 2023.

The outlook for business conditions in the next six months deteriorated in the latest survey. The net balance of respondents expecting the economy to improve fell to -13% in August from -7% in July but remained higher than a record-low of -61% in June 2022. Expected real sales fell to a net -18% in August, a five-month low. The latest reading as increased from a low of -29% in July 2022. A steady net -16% of respondents reported higher nominal sales in the past three months, down from the most recent positive reading of 1% in May 2022.

Plans to make capital outlays increased to 24% in August following three straight months at 23%. This reading was up from its recent low of 20% in March but remained below a high of 31% in October 2021. Plans to expand business fell to 4% in August after rising to 5% in July and holding at 4% for the prior four consecutive months. Expected credit conditions deteriorated to -8% in August, after three consecutive months at -7, and remained below its high six months ago.

On the labor front, 56% of respondents reported few or no qualified workers to fill job openings in August, up from 49% in July and the highest percentage since September of last year. These readings were below a high of 61% in May 2022. A net 13% planned to increase employment in August, below the most recent high of 18% in November of last year and a peak of 32% in August 2021.

Overall earnings trends deteriorated sharply last month to the weakest reading since March 2020, falling to -37% in August from -30% in July.

On the pricing front, the net percent raising their average selling prices declined to 20% in August, down from 22% in July and below a high of 66% in March of 2022. The percentage planning to raise prices edged higher to 25% in August from 24% in July but remained well below a high of 52% in March 2022.

Wage inflation held steady as a net 33% of respondents raised compensation during the last three months, the same as in July but below 38% reported in the June survey. Compensation peaked at 50% in January 2022. A net 20% of firms planned to raise worker compensation in the next three months, up from 18% in July but below a high of 32% in October 2022.

Inflation continued to be the single most important issue facing small businesses, as reported by 24% of NFIB members in August. The quality of labor was the second most important concern as reported by 21% of members. Other major concerns were taxes, 13%, the cost of labor, 9%, and government requirements, 8%.

According to the Small Business Administration, there are 33 million small businesses in the United States, which employ 62 million workers. The NFIB surveys anywhere from 500 to 2000 respondents each month and the typical firm employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver’s **SURVEYS** database.

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- Expectations for economy & sales decline.
- Employment plans weaken but job openings surge.
- Prices ease but expectations edge higher.

U.S. NFIB Small Business Optimism Index Backpedals in August

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Retail gasoline prices for all grades weakened to $3.36 per gallon (-14.7% y/y) in the week ended September 9 from $3.41 per gallon in the previous week. Prices were below the late-April high of $3.79 per gallon and at the lowest level since the second week of February. They also were below the all-time high of $5.11 in the week ended June 13, 2022. Prices are increased, however, versus the low of $3.18 per gallon in the third week of December. Retail prices for on-highway diesel fuel declined to $3.56 per gallon (-21.7% y/y) last week compared to $3.63 in the prior week. These prices reached a high of $4.63 per gallon in the third week of September of last year.

The average price of West Texas Intermediate crude oil weakened to $69.33 per barrel (-20.5% y/y) in the week ended September 6 from $75.97 per barrel in the prior week. Prices roughly equaled the lowest level since the last week of June 2023 and were lower than the $91.45 high in the last week of September 2023. They peaked at $142.46 per barrel in the week of July 4, 2008. Yesterday, the price of West Texas Intermediate crude oil was $68.71 per barrel. The price of European Brent crude oil fell to $75.25 per barrel (-17.6% y/y) in the week ended September 6 compared to $80.83 in the prior week. The price of Brent has recently ranged from a low of $73.55 in the week ended June 30, 2023 to a high of $127.40 in the week ended June 10, 2022. Yesterday, the price was $72.37 per barrel.

Natural gas prices averaged $2.04/mmbtu (-19.0% y/y) in the week ended September 6 compared to $1.90 in the prior week. Prices recently touched a high of $2.73/mmbtu in the second week of June and they remained above their low of $1.40/mmbtu in the second week of March. Prices reached a high of $9.56/mmbtu averaged in the last week of August 2022. Yesterday, the price of natural gas was $2.03/mmbtu.

Gasoline demand increased 0.9% y/y in the four weeks ended August 30 after improving 1.1% y/y in the four weeks ended August 23. Demand for all petroleum products weakened 1.6% y/y in the last four weeks after falling 2.9% y/y in the previous period. Crude oil input to refineries rose 0.3% y/y in the four weeks ended August 30 after a 0.4% y/y decline during the previous four-week period.

Gasoline inventories rose 2.1% y/y in the week of August 30 after rising 0.5% y/y in the prior week. Inventories of residual fuel oil fell 2.3% y/y after declining 1.9% y/y in the previous week. Crude oil inventories, including the Strategic Petroleum Reserve, rose 4.0% y/y in the week of August 30, the same as during the prior week.

Measured in days’ supply, gasoline inventories were 24.0 days in the week ended August 30 following 23.9 days one week earlier. The recent low was 23.4 days in the week of June 30, 2023. Crude oil inventories fell to 25.0 days in the week of August 30. These compare to a recent high of 31.9 days in the week of March 3, 2023 and a low of 25.0 days in the week of September 1, 2023.

These data are reported by the Energy Information Administration of the U. S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** and **USENERGY** databases.

- Gasoline prices fall to seven-month low.
- Crude oil prices decline sharply.
- Natural gas prices rise slightly.

U.S. Gasoline & Crude Oil Prices Decline in Latest Week

Robert Brusca

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Inflation of the European Monetary Union in August rose by 0.2% compared with 0.3% gain in July and a 0.2% rise in June. The three-month inflation rate at 2.5%, however, is part of a slow progression higher that compares to a 2.2% annual rate over six months and a 2.1% annual rate over 12 months, a moderate but clear accelerating pattern.

**Country level trends**
The four largest countries in the monetary union also are exhibiting patterns that suggest or that outright demonstrate, inflation acceleration at least based on headline measures. Germany is the largest monetary union economy and is a slight exception with a 2.2% inflation rate over three months, down from 2.5% over six months but up from 2.1% over 12 months. France demonstrates inflation rising from 2.2% over 12 months to a pace of 2.4% over six months to a strong 3.6% over three months. In Italy, inflation transitions from a low 1.3% over 12 months to a 3% pace over six months, to another strong pace of 3.7% over three months. Spain is the true exception with inflation well behaved across most of the cohorts at 2.3% over 12 months, an elevated pace but not by much, especially when compared to a 0.7% pace over six months that only ticks up to a 0.8% annual rate over three months.

**Monthly results by country**
The inflation process among these four large countries is still somewhat mercurial as August showed declines in inflation in Germany and Italy on a month-to-month basis while Spain's inflation was flat. On the face of it, this is good news; however, July brought an increase in prices of 0.8% month-to-month in Italy, 0.5% in Germany, 0.4% in France with a moderate 0.2% gain in Spain. So whatever the three-month pace is, it's the product of some fairly erratic monthly numbers and therefore not yet something that we can consider to be very reliable.

**Core inflation**
Core inflation is a different story. Here we get core or at least an ex-energy reading from Germany, Italy, and Spain. The August readings are contained with German ex-energy inflation up by 0.2%, Italian core inflation up by 0.1% and Spain’s core inflation up by 0.3%. These are decelerations from stronger gains in July across the board. And two of these three countries also had larger increases in June than they had in August. Looking at the progression of core inflation for Germany, the 12-month ex-energy rate is 2.5%, the six-month pace is 2.6%, and the three-month pace is 2.4%; all pretty steady stuff. Italy shows core inflation at 2.4% over six months and 12 months that moves up to 3.1% over three months. Spain shows core inflation at 2.7% over 12 months, up to 2.8% over six months and up to 4.3% over three months.

The performance of Brent oil prices explains the headline/core difference as oil prices fell over these progressively longer periods; over shorter periods oil prices have fallen faster tending to push headline inflation down faster over these short horizons contributing to the illusion of inflation deceleration. Even so, deceleration is not a pattern that is detectable in headline inflation for these countries.

The bottoms line here is that core inflation is still stuck and too high and that is too much evidence of inflation accelerating even in the face of easing oil prices for monetary policy to seek further accommodation.

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As we peruse the inflation trends, we find they are accompanied by output trends that are erratic even more than they are weak. Median output among the early reporting EMU members in July shows a gain of 1.0% compared to a gain of 0.4% in June. These contrast to a 0.5% drop in May. Median output among this group falls by 3.7% annualized over three months, rises by 1.5% annualized over six months, and falls by 0.9% over 12 months. And output is falling on the median measure in the quarter-to-date (early in Q3). Still, we also see output trends accelerate more than they decelerate across countries in June and July with a proportion of about 60% accelerating to 40% not accelerating.  Over three months, that full period shows acceleration in only about one third of reporters; output accelerates in half the reporters over six months and for two-thirds of them over 12 months.

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**Mixed, as well as, mixed-up trends**
On balance, the performance of inflation and industrial output in the EMU is mixed. Over three months the output trend is especially hard to pin down with declines of 26.5%, 18.3% and 17% annualized for some reporters juxtaposed to increases of 23.7% annualized, 18.4% annualized and 11.1% annualized- and, of course, more. In such a mixed constellation of growth rates, it is hard to discern trend. However, Portugal, the Netherlands, France and Germany, each reporter shows declines in each of the broader sequential periods- they also show deterioration is worsening. Belgium, Finland and Ireland, a decidedly smaller class of economy, all show persistent IP expansion and acceleration. The quarter-to-date shows declines outnumber increases across EMU members by two-to-one. Still, a lot of these trends are rooted in sharp declines logged in July. The gyrating three-month growth rates also are important contributors to growth results over six months and 12 months. When three-month growth rates are turbulent, they tend to impart their turbulence across the timeline.

For now there is more weakening in this report that I would like to see, but it also is still a mixed report. PMI data remind us that while manufacturing has been weak there has been countervailing strength in services to support growth. The failure of inflation data to clearly fall into line and weaken also is suggestive of a more mixed real sector economic performance. With such data trends in progress, central banks are likely to continue to play the waiting game.

Europe

Core Inflation in Key EMU Members: Mostly Above Target and Not Falling

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Consumer credit outstanding strengthened $25.5 billion (1.9% y/y) in July after rising $5.2 billion in June, revised from $8.9 billion, and increasing $11.7 billion in May, revised from $13.9 billion. It was the largest runup in loan balances since November 2022. A $10.2 billion increase had been expected in the Action Economics Forecast Survey. The ratio of consumer credit outstanding to disposable personal income stood basically unchanged at 24.3% in July, a ratio that has drifted lover the last two years.

Revolving credit outstanding, which includes credit cards, rose $10.6 billion in July (6.6% y/y) following a $0.4 billion decline in June and an $8.5 billion May rise. Revolving credit outstanding held by depository institutions rose 7.2% y/y, down from a high of 17.0% y/y growth in August 2022. Revolving credit held by finance companies fell 8.3% y/y while revolving credit held by credit unions rose 6.3% y/y in July, below the 16.4% y/y peak in February 2022.

Nonrevolving credit outstanding increased $14.8 billion (0.3% y/y) in July after increasing $5.6 billion in June and rising $3.2 billion in May. Nonrevolving credit held by banks fell a lessened 1.8% y/y while finance company credit rose 3.8% y/y. Credit union nonrevolving balances was fairly steady y/y, off from 20.3% y/y growth in January 2023. Federal government balances rose 0.2% y/y to $1.49 trillion.

The value of student loans outstanding totaled $1.75 trillion at the end of June, down 0.9% y/y, and there was $1.56 trillion in motor vehicle loans at the end of June, up 1.8% from a year earlier.

The consumer credit figures from the Federal Reserve Board are break-adjusted and calculated by Haver Analytics. The breaks in the series in 2005, 2010 and 2015 are the result of the incorporation of data from the Census and the Survey of Finance Companies, as well as changes in the seasonal adjustment methodology. The consumer credit data are available in Haver’s **USECON** database. The Action Economics forecast figures are contained in the **AS1REPNA** database.

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- Revolving credit outstanding rebounds.
- Nonrevolving credit gain almost triples.

U.S. Consumer Credit Usage Surges in July

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Wholesale trade inventories increased 0.2% (0.4% y/y) during July after holding steady in June, revised from 0.2%, and an unrevised 0.5% May gain. The increase compared to a 0.3% rise expected in the Informa Global Markets Survey and compared to a 0.3% gain in the advance report issued two weeks ago.

Durable goods inventories edged 0.1% higher last month (2.6% y/y) following a 0.2% decline. Machinery inventories, the largest sector, fell 0.3% (+12.0% y/y) while motor vehicles & parts, the second largest grouping, edged 0.1% higher (11.8% y/y). Electrical equipment inventories rose 0.5% (-4.0% y/y). Inventories of nondurable goods increased 0.5% (-3.2% y/y) following a 0.4% rise. Drug inventories, which make up a quarter of nondurable inventories, rose 2.5% (4.4% y/y). Grocery inventories, the second largest category, eased 0.6% (-2.3% y/y). Petroleum inventories dropped 1.7% (-9.1% y/y). Apparel inventories edged 0.1% higher (-15.1% y/y) and chemical inventories weakened 0.5% (-8.8% y/y).

Sales at the wholesale level strengthened 1.1% (2.9% y/y) in July after a 0.3% June decline, revised from -0.6%. A 0.2% July rise had been expected in the Action Economics Forecast Survey.

Durable goods sales increased 0.5% in July (3.2% y/y) after a 0.6% increase. Sales of electrical equipment, the largest sector, rose 0.2% (9.7% y/y), the same as in June. Professional and commercial equipment sales, which includes computers, jumped 1.2% (6.0% y/y), while vehicle sales rose 0.4% (5.4% y/y). Nondurable product sales improved 1.6% (2.6% y/y) after declining 1.6% in June. Petroleum product sales, the largest category, rose 3.9% (1.3% y/y). Drug store sales jumped 1.5% (9.3% y/y) while grocery store sales gained 0.3% (2.8% y/y). Sales of apparel jumped 2.5% (3.7% y/y) while chemical sales declined 0.9% (-2.9% y/y). Paper sales rose 0.9% (-2.1% y/y).

The inventory-to-sales (I/S) ratio at the wholesale level eased to 1.35 in July from 1.36 in June and has been moving sideways for the last year.

The I/S ratio for durable goods was minimally changed at 1.80. The machinery ratio declined to 3.09 while motor vehicles rose to 1.89. The I/S ratio for nondurable goods eased to 0.94, down from 1.01 early last year. The petroleum industry I/S ratio slipped to 0.32, and the drug industry moved up to 1.02. Apparel's I/S ratio of 2.19 stood below its 2.67 level one year earlier.

The wholesale trade figures are available in Haver's **USECON** database. The expectations figure for inventories is contained in the **MMSAMER** database. Expectations for sales are from the **AS1REPNA** database.

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- Inventory gain extends trend of moderate accumulation.
- Jump in sales concentrates in nondurables.
- Inventory-to-sales ratio continues sideways movement.

Economy in Brief: March 2003

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