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

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.

240502Z1.jpg

**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.

240502Z2.jpg

**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).

240502Z3.jpg

**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.

240502Z6.jpg

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).

<iframe style="border-radius:12px" src="https://open.spotify.com/embed/episode/1UGzrkribMM4URLI6yDhWG?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

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: March 2003

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