Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030422a.jpg" width="353">
Chain store sales in the week leading up to Easter surged 1.9% according to the BTM-UBSW survey. The rise followed a 1.3% gain the prior week.
Sales so far in April are 0.1% above the March average. March sales finished 0.3% above February.
During the last ten years there has been a 59% correlation between the year-to-year percent change in these chain store sales and the change in nonauto retail sales less gasoline.
The BTM-UBSW retail chain-store sales index is constructed from the sales results reported by seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">4/19/03</th>
<th scope="col">4/12/03</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">Total Weekly Retail Chain Store Sales</td>
<td>415.6</td>
<td>407.8</td>
<td>2.3%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
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Chain store sales in the week leading up to Easter surged 1.9% according to the BTM-UBSW survey. The rise followed a 1.3% gain the prior week. Sales so far in April are 0.1% above the March average. March sales finished 0.3% above [...]

Chain Store Sales Surged for Second Week

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030421b.jpg" width="353">
The Conference Board reported that the Composite Index of Leading Economic Indicators fell 0.2% last month, as expected. The prior month&#39;s previously reported decline was revised slightly deeper.
Gains amongst the leaders&#39; component series improved slightly to 45%, but the breadth of gain amongst the leading series was revised narrower to just 30% in February. The percentage of leading components rising over a six month period rose slightly to a sub par 40%.
Lower building permits and higher initial claims for jobless insurance had the largest negative influences on theMarch leading index. 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, but were revised down in February. For 1Q, the coincident indicators rose 0.5% (AR) versus 4Q. 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 slightly to a new high. 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.

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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">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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<td class="firstcol">Leading</td>
<td>-0.2%</td>
<td>-0.5%</td>
<td>-0.4%</td>
<td>2.1%</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>0.7%</td>
<td>-0.2%</td>
<td>-0.4%</td>
<td>3.4%</td>
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<td class="firstcol">Lagging</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>-2.5%</td>
<td>-4.4%</td>
<td>-1.3%</td>
<td>2.8%</td>
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U.S. Budget Deficit a Record for First Six Months 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 21, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030421a.jpg" width="353">
The US budget deficit for the first six months of FY03 was the largest on record. At $252.65B, the federal government&#39;s red ink surpassed last fiscal year&#39;s first six months deficit of $131.92B.
The Congressional Budget Office forecasts a $286B deficit for this fiscal year.
Timing issues caused last month&#39;s deficit to narrow somewhat to $58.71B from $64.24B March last year. Consensus expectations had been for a deficit of $62.5B.
Net receipts for the first six months of FY03 fell 6.1% versus last year. Individual tax payments fell 6.8%. Corporate income taxes were down 43.1%. Social insurance contributions were up 1.8%. 
Federal expenditures rose 6.6% versus last fiscal year&#39;s first six months. Defense spending was up 12.7%. Spending on health programs rose 9.8% and spending on education rose 29.1%. Spending on income security was up 11.1% and Medicare outlays rose 10.4%. On the weak side were Social Security outlays, up 4.0%, and interest expense which fell 7.4% y/y.

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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">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#39;02</th>
<th scope="col">FY2002</th>
<th scope="col">FY2001</th>
<th scope="col">FY2000</th>
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<td class="firstcol">Budget Balance</td>
<td>$-58.7B</td>
<td>$-96.3B</td>
<td>$-64.2B</td>
<td>$-157.8B</td>
<td>$127.3B</td>
<td>$236.4B</td>
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<td class="firstcol">&nbsp; Revenues</td>
<td>$120.4B</td>
<td>$89.5B</td>
<td>8.2%</td>
<td>-6.9%</td>
<td>-1.7%</td>
<td>10.8%</td>
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<td class="firstcol">&nbsp; Outlays</td>
<td>$179.1B</td>
<td>$185.8B</td>
<td>2.1%</td>
<td>7.9%</td>
<td>4.2%</td>
<td>5.1%</td>
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The Conference Board reported that the Composite Index of Leading Economic Indicators fell 0.2% last month, as expected. The prior month's previously reported decline was revised slightly deeper. Gains amongst the leaders' component [...]

Leading Indicators Down for Second Month

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030417a.jpg" width="353">
Initial claims for unemployment insurance last week were much higher than Consensus expectations for 415,000. Claims rose 7.3% w/w to 442,000 and reversed virtually all of the prior period&#39;s decline. Claims in the prior week were revised up. The figures reflect benchmark revisions.
The recent level of initial jobless claims was just below the late-March high of 443,000. The four-week moving average of initial claims rose slightly to 424,750, -4.8% y/y.
The latest figure covers the survey period for April nonfarm payrolls and claims were about even with the March figure. During the last ten years there has been a 66% correlation (inverse) between the level of initial claims and the month to month change in nonfarm payrolls.
Continuing claims for unemployment insurance rose 2.2% w/w to the highest level since mid-November. The prior week&#39;s figure was revised up. During the last ten years there has been a 56% correlation (inverse) between the level of continued claims and the month to month change in nonfarm payrolls.
The insured rate of unemployment was 2.8% for the third consecutive week.

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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">4/12/03</th>
<th scope="col">4/05/03</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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<td class="firstcol">Initial Claims</td>
<td>442.0</td>
<td>412.0</td>
<td>-2.0%</td>
<td>404.3</td>
<td>406.0</td>
<td>299.7</td>
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<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,574</td>
<td>-3.5%</td>
<td>3,575</td>
<td>3,022</td>
<td>2,114</td>
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</table>
Philadelphia Fed Index Weak Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 17, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030417b.jpg" width="353">
The Philadelphia Fed&#146;s index of general business conditions weakened slightly more than expected in April to -8.8 from -8.0 in March. Consensus expectations were for a decline to -6.0.
The decline contrasts with sharp deterioration in the Empire State Factory survey for April reported earlier this week.
During the last twenty years there has been a 68% correlation between the level of the Philadelphia Fed Business Conditions Index and quarterly growth in real GDP. The correlation with quarterly growth in factory sector industrial production has been 80%.
Amongst the sub indexes new orders, shipments, and employment fell significantly and each is quite negative. The length of the workweek and inventories improved month to month but both remained negative. One-quarter of the firms surveyed in April indicated some decline in new orders due to the war in Iraq.
The business conditions index reflects a separate survey question, not the components.
A separate survey of expected business conditions fell slightly month to month to a still strong reading of 45.8 versus 50.9 last year and 32.4 in 2001.
Prices paid eased slightly versus March but remained near the highest level of the last two years.
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/media/newsreleases/041703.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">April</th>
<th scope="col">Mar</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">General Activity Index</td>
<td>-8.8</td>
<td>-8.0</td>
<td>10.4</td>
<td>7.7</td>
<td>-17.2</td>
<td>8.3</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>22.8</td>
<td>25.1</td>
<td>5.9</td>
<td>12.2</td>
<td>-0.9</td>
<td>27.2</td>
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</tbody>
</table>
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Initial claims for unemployment insurance last week were much higher than Consensus expectations for 415,000. Claims rose 7.3% w/w to 442,000 and reversed virtually all of the prior period's decline. Claims in the prior week were [...]

Initial Jobless Insurance Claims Near the High

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030416a.jpg" width="353">
The Consumer Price Index (CPI-U) rose slightly less than Consensus expectations for a 0.4% rise. The 0.3% increase again was boosted by higher energy prices.
The CPI less food and energy was unchanged for the first month since February 1999. The 1.3% (AR) gain in core prices during 1Q 2003 was the lowest since 3Q 1965.
Core services prices did not rise (with rounding) for the first time since December 1982 and rose just 2.6% (AR) last quarter. Shelter prices fell slightly (2.5% y/y) following an unchanged reading in February. Medical care services prices rose just 0.1% (4.7% y/y).Education and communication prices also fell slightly (2.6% y/y). Public transportation prices rose slightly (-0.9% y/y) but were down 1.0% for the quarter .
Apparel prices continued a decline begun in 1998, down in March by 0.4%(-3.5% y/y). New and used vehicle prices managed a 0.3% gain (-1.6% y/y). Prices for household furnishings and operation fell 0.5% (-1.2% y/y) and reversed all of the slight gains in the prior two months. Medical care commodities rose 0.4% (2.9% y/y).
Energy prices were strong again last month. Through March energy prices rose 15.3% versus yearend led by a 21.9% gain in gasoline prices, but so far in April gasoline prices are down 4.7% versus March. Fuel oil prices rose 9.0% (49.8% y/y). Piped gas &amp; electricity prices jumped 5.0% (9.8% y/y).
The chained CPI which adjusts for shifts in consumer buying behavior rose 0.6%. It is similar to the PCE price deflator. The core price measure rose 0.3%. These gains are the same as the not seasonally adjusted gains in the CPI-U.
Research from the Federal Reserve Bank of St. Louis titled Symmetric Inflation Risk can be found <a href="http://research.stlouisfed.org/publications/mt/2003/cover4.pdf">here.</a>

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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">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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<td class="firstcol">Total&nbsp;</td>
<td>0.3%</td>
<td>0.6%</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>0.0%</td>
<td>0.1%</td>
<td>1.7%</td>
<td>2.3%</td>
<td>2.7%</td>
<td>2.4%</td>
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<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-1.4%</td>
<td>-1.1%</td>
<td>0.3%</td>
<td>0.5%</td>
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<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.0%</td>
<td>0.1%</td>
<td>3.0%</td>
<td>3.8%</td>
<td>3.7%</td>
<td>3.3%</td>
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<td class="firstcol">&nbsp;Energy</td>
<td>4.6%</td>
<td>5.9%</td>
<td>23.0%</td>
<td>-5.8%</td>
<td>3.7%</td>
<td>16.9%</td>
</tr>
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<td class="firstcol">&nbsp;Food &amp; Beverages</td>
<td>0.2%</td>
<td>0.7%</td>
<td>1.4%</td>
<td>1.8%</td>
<td>3.1%</td>
<td>2.3%</td>
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<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a></td>
<td>0.6%</td>
<td>0.8%</td>
<td>2.9%</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>0.3%</td>
<td>1.4%</td>
<td>1.7%</td>
<td>&nbsp;1.9%</td>
<td>1.4%</td>
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</tbody>
</table>
Housing Starts Rose with Better Weather 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 16, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030416b.jpg" width="353">
Housing starts recovered slightly more than expected last month. Total starts rose 8.3% to 1.78 mil. from an upwardly revised February level. Consensus expectations had been for starts to rise to 1.70 mil. units.
Single family starts rose 7.7% m/m from a weather-depressed February (revised up), but for the quarter were down slightly versus 4Q02. 
Multi-family starts rose a sharp 10.6% following a moderate February gain. The 7.0% gain multi-family starts last quarter followed a 23.4% decline in 4Q02.
Building permits fell 7.0% last month and the decline left permits 10.7% below the peak of last December. Single family permits fell a more moderate 1.0% and are down 7.4% from the December peak.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">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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<td class="firstcol">Total</td>
<td>1,780</td>
<td>1,644</td>
<td>6.3%</td>
<td>1,709</td>
<td>1,603</td>
<td>1,573</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family</td>
<td>1,414</td>
<td>1,313</td>
<td>8.9%</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>366</td>
<td>331</td>
<td>-2.9%</td>
<td>346</td>
<td>330</td>
<td>341</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,685</td>
<td>1,811</td>
<td>3.4%</td>
<td>1,717</td>
<td>1,639</td>
<td>1,598</td>
</tr>
</tbody>
</table>
Housing Market Index Down Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 16, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030416c.jpg" width="353">
The National Association of Home Builders Housing Market Index remained depressed in April following sharp declines in the prior three months. Unchanged from March, the index of home builders&#39; sentiment remained at its lowest since November of 2001.
The index of current market conditions fell slightly to the lowest level since November 2001. The index which measures expected sales in six months rose and mostly recovered the sharp drop in March. 
Traffic of prospective buyers remained very depressed at the lowest level since November 2001.
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">April</th>
<th scope="col">Mar</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>
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<td class="firstcol">Composite Housing Market Index</td>
<td>52</td>
<td>52</td>
<td>61</td>
<td>61</td>
<td>56</td>
<td>62</td>
</tr>
</tbody>
</table>
Mortgage Applications Drop Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 16, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030416d.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association dropped 8.9% last week. It was the fourth consecutive weekly decline during which applications have fallen by almost one third.
Last week&#39;s decline again was led by a sharp decline in applications to refinance. Off 10.0% last week, refis are down 40.9% during the last four weeks.
Mortgage applications for home purchase fell 6.2% last week (11.5% y/y) and reversed much of the prior week&#39;s surge. During the last five years there has been a 63% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The average size of a mortgage loan application fell slightly to $178,600 (-2.2% y/y). The average size of an application for home purchase rose to $191,700 (+4.8% y/y).
Interest rates on a conventional 30-Year mortgage fell last week. The contract rate fell to 5.70% versus 5.80% the prior week and the effective rate (incl. points) fell to 5.99%. The effective rate on a 15-year mortgage fell to 5.40%.
Visit the Mortgage Bankers Association site at <a href="http://www.mbaa.org/">http://www.mbaa.org.</a>

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<colgroup><col><col><col><col><col></colgroup>
<thead>
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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">4/11/03</th>
<th scope="col">4/04/03</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 Market Index</td>
<td>1,134.6</td>
<td>1,246.1</td>
<td>799.7</td>
<td>625.6</td>
<td>322.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>376.1</td>
<td>400.8</td>
<td>354.7</td>
<td>304.9</td>
<td>302.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>5,546.7</td>
<td>6,162.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
<td>438.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The Consumer Price Index (CPI-U) rose slightly less than Consensus expectations for a 0.4% rise. The 0.3% increase again was boosted by higher energy prices. The CPI less food and energy was unchanged for the first month since [...]

CPI Up, Core Inflation Stable

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030415a.jpg" width="353">
Industrial production declined in February in Germany and Italy and decelerated in France.
The slowdown in activity in three of the major Euro-zone countries even before the outbreak of war in Iraq, which began on March 20th, suggests that the area is in for another year of slow growth. Growth in the area in 2002 was a mere 0.8%.
Since February, the war has had a further dampening effect on consumer and business plans, and forecasting entities have been lowering their estimates of growth.
The Bank of France now expects no growth in France in the second quarter instead of the slight improvement of 0.1% expected earlier.
The six German institutes that forecast the German outlook for the government have lowered their estimate of German growth in 2003 from 1.4% made last October to 0.5% currently.
<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030415b.jpg" width="353">
 
The executive branch of the European Union has lowered its forecast for growth in the Euro Zone as a whole to 1.0% from 1.8%.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/G10/@GQ/@GQ3/@GQ301/@GQ301.HTM">Industrial Production</a></th>
<th scope="col">Feb03</th>
<th scope="col">Jan03</th>
<th scope="col">M/M%</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">Italy (2000=100)</td>
<td>97.3</td>
<td>97.6</td>
<td>-0.3</td>
<td>-0.82</td>
<td>98.0</td>
<td>99.3</td>
<td>100.4</td>
</tr>
<tr>
<td class="firstcol">France (1995=100)</td>
<td>117.7</td>
<td>117.0</td>
<td>0.6</td>
<td>0.10</td>
<td>100.0</td>
<td>103.6</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany (1995=100)</td>
<td>111.8</td>
<td>112.6</td>
<td>-0.7</td>
<td>0.18</td>
<td>111.3</td>
<td>113.2</td>
<td>113.4</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
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</body>
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Industrial production declined in February in Germany and Italy and decelerated in France. The slowdown in activity in three of the major Euro-zone countries even before the outbreak of war in Iraq, which began on March 20th, suggests [...]

Declines and Deceleration in Industrial Production in Major Euro- Zone Countries Lead to Lower Growth Forecasts

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030415d.jpg" width="353">
Industrial production fell unexpectedly by 0.5% last month. Consensus expectations had been for a 0.2% decline. The preliminary report that output rose slightly in February was revised to show a slight decline. Despite these declines, output in 1Q rose 0.4% (AR) from 4Q02 due to a strong gain in January. Output fell at a 3.3% rate in 4Q02.
Output in the manufacturing sector fell 0.2% (0.1% y/y). The preliminary report of a 0.1% decline in February output was deepened to a 0.3% decline.
Excluding a 1.9% decline in motor vehicle and parts, down sharply for the second month, factory output was unchanged (-0.3% y/y) in March for the second month. Appliance, furniture &amp; carpeting output fell 0.6% (-1.6% y/y), the second decline this year. Computer, video and audio equipment output fell 0.1% (-1.3% y/y) following a 1.9% February decline. Nondurable consumer goods output fell 0.4% (-1.2% y/y) led by a sharp 1.6% drop in clothing output (-7.8% y/y). 
Output of business equipment fell 0.3% (-2.5% y/y) following a downwardly revised 0.3% February decline. Output of industrial equipment fell 0.8% (-0.2% y/y) following two months of gain. Output of information processing equipment rose 1.1% (0.4% y/y).
Total capacity utilization fell sharply to 74.8%, the lowest level since December 2001. Factory sector utilization also fell to 72.9%, the lowest level since mid-1983.

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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">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">Industrial Production</td>
<td>-0.5%</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>-0.8%</td>
<td>-3.5%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>74.8%</td>
<td>75.3%</td>
<td>75.3%(3/02)</td>
<td>75.6%</td>
<td>77.3%</td>
<td>82.7%</td>
</tr>
</tbody>
</table>
Empire State Factory Survey Fell Hard in April 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 15, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030415e.jpg" width="353">
The Empire State Manufacturing Survey index of general business conditions collapsed in April to -20.4. The decline was reported by Federal Reserve Bank of New York. The drop was to the lowest level since October 2001 and was much sharper than Consensus expectations for a reading of -2.0.
Diffusion indexes for all the subgroups fell sharply. The new orders index fell to -15.93, its lowest since October 2001. The employment index also fell sharply to -10.99.
The index of prices paid recouped all of the prior month&#39;s decline and rose to 26.53, a record high for this index.
The survey includes measures of business expectations six months ahead. This diffusion index for general business conditions rose sharply to 37.92 led by improved expectations for new orders, shipments and employment. Expectations for capital expenditures remained quite depressed.
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>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">April</th>
<th scope="col">Mar</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>-20.37</td>
<td>-2.77</td>
<td>14.62</td>
<td>7.10</td>
<td>-13.02</td>
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</tbody>
</table>
Chain Store Sales Recover 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 15, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030415c.jpg" width="353">
Chain store sales rose 1.3% last week according to the BTM-UBSW survey. The gain recouped most of the sharp declines in the prior two weeks.
April sales so far are 0.7% below the March average. March sales finished 0.3% above February after sales fell 0.7% in that month.
During the last ten years there has been a 57% correlation between the year-to-year percent change in these chain store sales and the change in nonauto retail sales less gasoline.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">4/12/03</th>
<th scope="col">4/05/03</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>407.8</td>
<td>402.5</td>
<td>1.7%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
</body>
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Industrial production fell unexpectedly by 0.5% last month. Consensus expectations had been for a 0.2% decline. The preliminary report that output rose slightly in February was revised to show a slight decline. Despite these declines, [...]

Industrial Production Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030414a.jpg" width="353">
Total business inventories rose twice Consensus expectations for a 0.3% gain. The 0.6% rise was the tenth consecutive monthly increase and that followed decumulation which extended through 2001 and into last year.
Retail inventories rose again, last month by 0.9%, and continued a trend toward accumulation that began in January 2002. Rising inventories of motor vehicles and parts have led that trend, up 1.8% in February and 18.4% y/y.
Nonauto retail inventories rose a solid 0.5% following slight decumulation in January. Inventories at apparel stores added 0.1% (6.0% y/y) to sharp gains in the prior three months. Inventories at general merchandise stores fell 0.3% (2.2% y/y) and January&#39;s rise was revised to a decline. Inventories of furniture, home furnishings and electronics fell for the second consecutive month (5.3% y/y) and are down slightly in the last four months.
Overall business sales fell 1.0% (4.1% y/y) following a sharp 1.3% gain in January. Both retail and manufacturers sales fell 1.5% in February.
The inventory-to-sales ratio rose to 1.38, the highest level since March 2002. 

<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">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>0.6%</td>
<td>0.3%</td>
<td>3.2%</td>
<td>2.1%</td>
<td>-6.2%</td>
<td>5.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.9%</td>
<td>0.6%</td>
<td>7.9%</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>0.5%</td>
<td>-0.0%</td>
<td>3.4%</td>
<td>3.1%</td>
<td>-2.1%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.3%</td>
<td>-0.0%</td>
<td>1.8%</td>
<td>0.4%</td>
<td>-4.9%</td>
<td>6.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.4%</td>
<td>0.1%</td>
<td>-0.3%</td>
<td>-1.9%</td>
<td>-8.0%</td>
<td>4.5%</td>
</tr>
</tbody>
</table>
</body>
</html>

Total business inventories rose twice Consensus expectations for a 0.3% gain. The 0.6% rise was the tenth consecutive monthly increase and that followed decumulation which extended through 2001 and into last year. Retail inventories [...]

Business Inventories Accumulate

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030411b.jpg" width="353">
Retail sales in March rose 2.1% and were much stronger than Consensus expectations for a 0.4% rise. The sales decline in February was lessened due to shallower declines in sales of building materials and apparel. Sales in 1Q rose at a 5.8% annual rate. 
Sales excluding motor vehicles and parts dealers rose 1.1% versus Consensus expectations for a 0.4% rise. Nonauto sales rose at a 6.0% rate in 1Q.
Sales at gasoline service stations fell slightly last month after five huge monthly gains. Excluding gasoline, nonauto retail sales rose 1.2% in March and were up at a 3.7% annual rate last quarter.
Motor vehicle dealers&#39; sales rose 5.3% and just about recouped the sharp declines in the prior two months. Unit sales of light vehicles rose 4.8% last month to 16.19 mil. (AR).
Furniture, home furnishing and electronics store sales recovered 0.9% in March following sharp declines in the three prior months. These sales fell at a 6.3% annual rate last quarter.
Sales at general merchandise stores rose 0.3% (4.1% y/y) for the fourth consecutive monthly gain.
Apparel store sales rose 1.1% (1.3% y/y) and a sharp decline in February was lessened to -1.4%.
Sales of building materials and garden equipment surged 7.9% (6.8% y/y). The steep decline in February was lessened to -5.8%.

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</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"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>2.1%</td>
<td>-1.3%</td>
<td>5.3%</td>
<td>3.3%</td>
<td>3.9%</td>
<td>6.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>1.1%</td>
<td>-0.6%</td>
<td>4.8%</td>
<td>3.9%</td>
<td>3.4%</td>
<td>7.3%</td>
</tr>
</tbody>
</table>
Producer Prices Surge 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 11, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030411c.jpg" width="353">
Finished producer prices surged 1.5% in March. The jump followed strong gains in each of the prior two months. Consensus expectations were for a 0.3% gain.
Finished energy prices surged 5.7% (26.5% y/y) and rose at a 54.0% annual rate in 1Q. Gasoline prices rose 6.9% (54.7% y/y) following double digit gains during the prior two months. Fuel oil prices rose 10.7% (85.5% y/y). Residential gas prices surged 13.5% (36.4% y/y). These energy product price series are NSA.
Finished food prices rose 0.1% (-0.6% y/y). It was the sixth consecutive monthly increase.
Excluding food and energy, prices were quite a bit stronger than expectations for no change. The 0.7% gain followed declines in six of the prior eight months.
Core finished consumer goods prices rose 0.7% (1.2% y/y) and recouped all of the prior month&#39;s 0.5% decline. The gain mostly reflected a 2.5% increase in passenger car prices. Other durable consumer goods prices fell as did prices for core consumer nondurables. Capital goods prices jumped 0.8% (0.4% y/y) mostly reflecting strength in ship and light truck prices.
Intermediate goods prices were strong again but the gain in core intermediate prices eased substantially. 
Crude goods prices surged by the most for any one month since January 2001. The gain did reflect a 30.5% jump in energy prices but also reflected a 1.0% jump in core crude prices, the fourth strong gain in five months.

<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/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</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 class="odd">
<td class="firstcol">Finished Goods</td>
<td>1.5%</td>
<td>1.0%</td>
<td>4.2%</td>
<td>-1.3%</td>
<td>2.0%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.7%</td>
<td>-0.5%</td>
<td>0.9%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>2.0%</td>
<td>2.1%</td>
<td>8.1%</td>
<td>-1.5%</td>
<td>0.4%</td>
<td>4.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.2%</td>
<td>0.7%</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>13.3%</td>
<td>4.8%</td>
<td>47.1%</td>
<td>-10.5%</td>
<td>0.3%</td>
<td>22.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>1.0%</td>
<td>2.7%</td>
<td>15.1%</td>
<td>3.8%</td>
<td>-10.0%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
Consumer Sentiment Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 11, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030411a.jpg" width="353">
The mid-April reading of Consumer Sentiment from the University of Michigan rose 7.2% versus March. The reading of 83.2 was versus Consensus expectations for 77.0 and follows improvement in the latter part of March.
The index of current conditions and of expectations both rose 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 82% 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.

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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-April</th>
<th scope="col">Mar</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>83.2</td>
<td>77.6</td>
<td>-10.5%</td>
<td>89.6</td>
<td>89.2</td>
<td>107.6</td>
</tr>
</tbody>
</table>
</body>
</html>

Retail sales in March rose 2.1% and were much stronger than Consensus expectations for a 0.4% rise. The sales decline in February was lessened due to shallower declines in sales of building materials and apparel. Sales in 1Q rose at a [...]

Retail Sales Surge

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: April 2003

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