Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030520c.jpg" width="353">
The French economy rose slightly in the first quarter of 2003 in contrast to the economies of Germany, Italy and the Netherlands where growth declined. In Germany and the Netherlands, the declines were the second in a row. 
The rise in the French growth rate can be attributed in part to the tax cuts put into effect in the fourth quarter of last year. Income taxes were reduced by 5% and nine million workers who didn&#146;t earn enough to pay income taxes received a one-time payment worth an average of 300 euros ($348). Private consumption expenditures rose 0.62% in the first quarter, the largest increase since the third quarter of 2001. Private gross fixed investment rose 0.35% in the first quarter after having declined throughout 2002. These increases together with a decline in imports were large enough to offset a decline of 0.69% in exports as the higher euro began to take its toll on the export trade.
The modest increase in French economic activity in the first quarter has not changed the prediction of the European Union&#146;s executive branch that the Euro-zone countries may fail to grow in the next two quarters.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Gross Domestic Product (Bil.Euros)</th>
<th scope="col">Q1 2003</th>
<th scope="col">Q4 2002</th>
<th scope="col">1Q/4Q</th>
<th scope="col">4Q/3Q</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">France</td>
<td>352.3</td>
<td>351.4</td>
<td>0.26</td>
<td>-0.06</td>
<td>1.24</td>
<td>2.09</td>
<td>4.24</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>496.7</td>
<td>497.8</td>
<td>-0.22</td>
<td>-0.03</td>
<td>0.22</td>
<td>0.75</td>
<td>3.09</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>260.7</td>
<td>266.9</td>
<td>-0.10</td>
<td>0.41</td>
<td>0.37</td>
<td>1.81</td>
<td>3.14</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td>91.7</td>
<td>92.0</td>
<td>-0.31</td>
<td>-0.18</td>
<td>0.25</td>
<td>1.26</td>
<td>3.31</td>
</tr>
</tbody>
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The French economy rose slightly in the first quarter of 2003 in contrast to the economies of Germany, Italy and the Netherlands where growth declined. In Germany and the Netherlands, the declines were the second in a row. The rise in [...]

French GDP Edges Up in the First Quarter of 2003

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030520a.jpg" width="353">
Chain store sales slipped another 0.1% last week following a 0.2% dip the prior week, according to the BTM-UBSW survey.
So far in May sales were 2.0% above the April average owing to a sharp 2.1% jump in the first week of the month.
During the last five years there has been a 60% correlation between the year-to-year percent change in chain store sales as tallied by BTM-UBSW and Redbook Instinet Research.
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.

<table border="0" cellspacing="0" width="100%">
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<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">5/17/03</th>
<th scope="col">5/10/03</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>416.5</td>
<td>416.9</td>
<td>2.7%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
U.S. April Budget Surplus Leanest Since 1995   
by <a href="/comment/Moeller.html">Tom Moeller</a> May 20, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030520b.jpg" width="353">
The US Government ran a budget surplus last month as it usually does during the April tax collection season. However, this year&#39;s April surplus was the leanest since 1995, a year when the budget deficit ultimately totaled $164B.
Consensus expectations had been for an April surplus of $50.0B.
Through April the Federal government&#39;s deficit totaled $201.6B, more than double last year&#39;s deficit through the first seven months of the fiscal year.
Net receipts for the first seven months of FY03 fell 5.4% versus last year. Individual tax payments fell 8.0% and corporate income taxes were down 28.7%. Social insurance contributions were up 1.7% and excise taxes were up 1.3%. 
Federal net expenditures rose 6.5% versus last fiscal year&#39;s first seven months. Defense spending was up 15.3%. Spending on health programs rose 10.6% and spending on education rose 20.0%. Spending on income security was up 10.6% and Medicare outlays rose 9.4%. On the weak side were Social Security outlays, up 4.0%, and interest expense which fell 6.8% y/y.
For recent analysis of US Federal Budget Estimates from the Bureau of Economic Analysis click <a href="http://www.bea.doc.gov/bea/ARTICLES/2003/03March/0303FedBudget.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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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">April</th>
<th scope="col">Mar</th>
<th scope="col">April &#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>$51.0B</td>
<td>$-58.7B</td>
<td>$67.2B</td>
<td>$-157.8B</td>
<td>$127.3B</td>
<td>$236.4B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revenues</td>
<td>$231.2B</td>
<td>$120.4B</td>
<td>-2.6%</td>
<td>-6.9%</td>
<td>-1.7%</td>
<td>10.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Outlays</td>
<td>$180.1B</td>
<td>$179.1B</td>
<td>5.8%</td>
<td>7.9%</td>
<td>4.2%</td>
<td>5.1%</td>
</tr>
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Chain store sales slipped another 0.1% last week following a 0.2% dip the prior week, according to the BTM-UBSW survey. So far in May sales were 2.0% above the April average owing to a sharp 2.1% jump in the first week of the month. [...]

Chain Store Sales Slipped Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030519b.jpg" width="353">
Data released last Friday show that GDP in Japan rose 0.01% in real terms in the first quarter of 2003 while in nominal terms it declined by 0.62%. The deflator, which has declined in every year since 1995 with the exception of 1997 declined by 3.85% in the first quarter. The attached chart shows the widening gap between the real and nominal GDP in Japan. 
Japan is in the throes of a vicious cycle of deflation where bad debts grow faster than the economic system&#146;s ability to deal with them. Over the past weekend the government announced that it would inject 2 trillion yen ($17 billion) into Resona, the country&#146;s fifth largest bank, to return it to solvency. Such measures may provide some short-term relief, but eventually more fundamental changes will have to be undertaken if the Japanese economy is to emerge from its deflationary cycle.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"></th>
<th scope="col">Q1 2003</th>
<th scope="col">Q4 2002</th>
<th scope="col">Q/Q</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">Nominal GDP (Trillion Yen)</td>
<td>496.1</td>
<td>499.3</td>
<td>-0.62</td>
<td>-0.92</td>
<td>-1.16</td>
<td>-0.78</td>
<td>0.14</td>
</tr>
<tr>
<td class="firstcol">Real GDP (1995 Trillion Yen)</td>
<td>543.6</td>
<td>543.5</td>
<td>0.01</td>
<td>2.50</td>
<td>0.46</td>
<td>0.82</td>
<td>2.13</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP Deflator</td>
<td>89.9</td>
<td>93.5</td>
<td>-3.85</td>
<td>-3.54</td>
<td>-1.69</td>
<td>-1.42</td>
<td>-1.94</td>
</tr>
</tbody>
</table>
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Data released last Friday show that GDP in Japan rose 0.01% in real terms in the first quarter of 2003 while in nominal terms it declined by 0.62%. The deflator, which has declined in every year since 1995 with the exception of 1997 [...]

Deflation Intensifies in Japan

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030519a.jpg" width="353">
The Conference Board reported that the Composite Index of Leading Economic Indicators rose 0.1% last month, as expected. Declines in the prior two months were unrevised.
Gains amongst the leaders&#39; component series improved sharply to 60%, the broadest breadth of one month gain since December of last year. The percentage of leading components rising over a six month period rose slightly to a still quite low 35%.
Improved consumer expectations had the largest positive influence on theApril leading index. Higher stock prices, a higher money supply and a wider yield curve also had significant positive contributions.
The Leading index is based on eight previously reported economic data series and two that are estimated.
The coincident indicators fell slightly and the six month growth rate, which is the latest month&#39;s level divided by the average of the prior twelve (AR), was a negligible 0.2%. 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 0.4% 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.

<table border="0" cellspacing="0" width="100%">
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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">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 class="odd">
<td class="firstcol">Leading</td>
<td>0.1%</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>2.1%</td>
<td>-0.9%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>-0.4%</td>
<td>3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.5%</td>
<td>-0.1%</td>
<td>-2.2%</td>
<td>-4.4%</td>
<td>-1.3%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
</body>
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The Conference Board reported that the Composite Index of Leading Economic Indicators rose 0.1% last month, as expected. Declines in the prior two months were unrevised. Gains amongst the leaders' component series improved sharply to [...]

Leading Indicators Rose Slightly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030516b.jpg" width="353">
The Consumer Price Index (CPI-U) fell 0.3%, the first monthly decline since December 2001. Consensus expectations had been for a 0.1% decline. Lower energy prices led the overall CPI lower but prices for most goods also fell.
The CPI less food and energy was unchanged for the second month. That reading also was weaker than Consensus expectations for a 0.1% uptick.
Energy prices fell 4.6% in April and reversed the 4.6% gain the prior month. Gasoline prices fell 8.3% and so far in May are down another 5.5% versus April. Fuel oil prices fell 11.8% (28.4% y/y). Piped gas &amp; electricity prices fell 0.5% (9.4% y/y).
Goods prices were down broadly last month, continuing a decline begun early in 2001. Core goods prices have fallen 2.7% since the March 2001 peak. Apparel prices fell 0.6%, down 10.9% since their peak in 1998. New and used vehicle prices fell 0.4%, down 4.2% since February 2001. Prices for household furnishings and operation fell 0.2% and are down 1.9% from the December 2001 peak. Even medical care commodities prices fell slightly last month.
Core services prices rose a slight 0.1% last month and are up at a 1.8% (AR) so far this year. Shelter prices rose 0.1% in April and 1.1% YTD (AR). Medical care services prices rose 0.3% and 1.9% YTD.Education and communication prices fell for the second consecutive month. Public transportation prices ticked 0.3% higher in April but are down 0.4% YTD.
The chained CPI which adjusts for shifts in consumer buying behavior fell 0.2%. It is similar to the PCE price deflator. The core price measure was unchanged.
Comments by Federal Reserve Board Governor Ben S. Bernanke on Deflation can be found <a href="http://www.federalreserve.gov//BoardDocs/speeches/2002/20021121/default.htm">here</a>.

<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/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</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>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>-0.3%</td>
<td>0.3%</td>
<td>2.2%</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>0.0%</td>
<td>1.5%</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>-0.3%</td>
<td>-0.1%</td>
<td>-1.7%</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>0.0%</td>
<td>2.8%</td>
<td>3.8%</td>
<td>3.7%</td>
<td>3.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>-4.6%</td>
<td>4.6%</td>
<td>12.8%</td>
<td>-5.8%</td>
<td>3.7%</td>
<td>16.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food &amp; Beverages</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>1.2%</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>-0.2%</td>
<td>0.6%</td>
<td>1.8%</td>
<td>1.3%</td>
<td>2.3%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.0%</td>
<td>0.3%</td>
<td>1.0%</td>
<td>1.8%</td>
<td>&nbsp;2.0%</td>
<td>1.4%</td>
</tr>
</tbody>
</table>
Housing Starts Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 16, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030516c.jpg" width="353">
Housing starts were weaker than expected last month. Total starts fell 6.8% from March (revised slightly down) to 1.63 mil. Consensus expectations had been for starts of 1.73 mil. units. Figures back to 2001 were revised slightly.
Single family starts fell 3.0% m/m, reversing about half of the gain the prior month. So far this year single family starts are up 2.2% from the 2002 average. 
Multi-family starts fell sharply last month, down 21.7%. Multi-family starts this year are down 8.4% versus 2002.
Building permits rose 1.2% last month but the gain just partially recovered a 5.5% March decline. Single family permits rose 1.2% in April and for 2003 so far are up 0.4% from last year.
An article by St. Louis Federal Reserve Bank President William Poole titled &quot;Housing in the Macroeconomy&quot; can be found <a href="http://research.stlouisfed.org/publications/review/03/05/Poole.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/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</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>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,630</td>
<td>1,748</td>
<td>2.7%</td>
<td>1,711</td>
<td>1,601</td>
<td>1,573</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family</td>
<td>1,356</td>
<td>1,398</td>
<td>6.4%</td>
<td>1,364</td>
<td>1,272</td>
<td>1,232</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi Family</td>
<td>274</td>
<td>350</td>
<td>-12.2%</td>
<td>347</td>
<td>330</td>
<td>341</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,708</td>
<td>1,688</td>
<td>2.8%</td>
<td>1,750</td>
<td>1,637</td>
<td>1,598</td>
</tr>
</tbody>
</table>
Consumer Sentiment Again Firmer Than Expected 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 16, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030516a.jpg" width="353">
The preliminary May reading of Consumer Sentiment from the University of Michigan rose 8.4% versus April. The reading of 93.2 was firmer than Consensus expectations for 86.0 and added to a 10.8% jump in sentiment in last month.
The index of current conditions fell 2.4% and has been flat for most of the year. The index of expectations jumped another 16.9% back to the monthly high of last year.
Over the last ten years there has been a 64% correlation between the level of consumer sentiment and the y/y change in real PCE. The correlation over the last five years has been 83%.
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-May</th>
<th scope="col">April</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>93.2</td>
<td>86.0</td>
<td>-3.8%</td>
<td>89.6</td>
<td>89.2</td>
<td>107.6</td>
</tr>
</tbody>
</table>
</body>
</html>

The Consumer Price Index (CPI-U) fell 0.3%, the first monthly decline since December 2001. Consensus expectations had been for a 0.1% decline. Lower energy prices led the overall CPI lower but prices for most goods also fell. The CPI [...]

Consumer Price Index Fell, Core Flat

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030515a.jpg" width="353">
Finished producer prices fell 1.9% in April, a record decline for any one month. Consensus expectations were for a 0.6% decline.
Lower finished energy prices, down 8.6%, accounted for much of the decline in the overall PPI. Gasoline prices fell 16.8% (12.7% y/y) following three months of strong gain. Fuel oil prices fell 27.7% (21.4% y/y). Residential gas prices dropped 4.0% (27.9% y/y). These energy product price series are NSA.
Excluding food and energy prices fell 0.9%, more than expectations for a -0.1% drop.
Core finished consumer goods prices fell 1.3% (-0.4% y/y). The decline was the largest since August 1993 and very much reflected the 8.4% drop in tobacco prices. Passenger car prices also fell 2.6% (-0.5% y/y). Many other durable consumer goods prices either rose slightly or were unchanged. Capital goods prices fell 0.5% (0.1% y/y).
Intermediate goods prices dropped sharply and the unchanged reading for core intermediate prices was the weakest of this year. 
Crude goods prices plunged 16.3%, a record decline for one month. Finished energy prices were off by almost one third but a 1.3% decline in core crude prices was the steepest since November 2001 and reflected declines in a broad range of commodity prices, mostly metals.

<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">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 class="odd">
<td class="firstcol">Finished Goods</td>
<td>-1.9%</td>
<td>1.5%</td>
<td>2.4%</td>
<td>-1.3%</td>
<td>2.0%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.9%</td>
<td>0.7%</td>
<td>-0.2%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-2.2%</td>
<td>2.0%</td>
<td>4.8%</td>
<td>-1.5%</td>
<td>0.4%</td>
<td>4.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.0%</td>
<td>0.2%</td>
<td>2.4%</td>
<td>-0.5%</td>
<td>-0.1%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-16.3%</td>
<td>13.3%</td>
<td>18.0%</td>
<td>-10.6%</td>
<td>0.3%</td>
<td>22.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-1.3%</td>
<td>1.0%</td>
<td>11.4%</td>
<td>3.8%</td>
<td>-10.0%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
Initial Jobless Insurance Claims Down Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 15, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030515c.jpg" width="353">
Initial claims for unemployment insurance fell slightly more than Consensus expectations for a decline to 425,000. Initial claims fell 3.0% w/w to 417,000. That added to a 5.1% decline the week earlier which was revised shallower. It was the third consecutive weekly decline which has totaled 9.2%.
The four-week moving average of initial claims fell to a still high 439,750 (5.4% y/y).
During the last ten years there has been an 81% (inverse) correlation between the level of initial jobless insurance claims and the y/y change in real GDP.
Continuing claims for unemployment insurance rose 3.3% w/w to the highest level since mid-November, 2001. The prior week&#39;s figure was revised down.
The insured rate of unemployment rose to 3.0%, again the highest level since mid-November, 2001.

<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">5/10/03</th>
<th scope="col">5/03/03</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>417.0</td>
<td>430.0</td>
<td>-0.2%</td>
<td>404.3</td>
<td>406.0</td>
<td>299.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,770</td>
<td>1.3%</td>
<td>3,575</td>
<td>3,022</td>
<td>2,114</td>
</tr>
</tbody>
</table>
Industrial Production Down Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 15, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030515b.jpg" width="353">
Industrial production fell about as expected last month. The 0.5% decline was the second in a row and versus Consensus expectations for a 0.4% decline. Revisions to prior months&#39; data were small.
Output in the manufacturing sector fell 0.6% (-0.7% y/y) and that added to modest 0.1% declines in the prior two months.
Higher output in selected high-technology industries, up 1.0% (9.3% y/y), offset declines in other industries. Excluding high-tech, factory output fell 0.7% (-1.3% y/y) in April following two months of 0.2% decline. Motor vehicle output fell sharply for the third straight month. 
Output of consumer goods fell 0.5% (-0.9% y/y) as appliance output was flat and nondurable consumer goods output was down for the second month.
Total capacity utilization fell sharply to 74.4%, the lowest level since June 1983. Factory sector utilization also fell to 72.5%, the lowest level since mid-1983.

<table border="0" cellspacing="0" width="100%">

</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">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">Industrial Production</td>
<td>-0.5%</td>
<td>-0.5%</td>
<td>-0.4%</td>
<td>-0.8%</td>
<td>-3.5%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>74.4%</td>
<td>74.8%</td>
<td>75.6%(4/02)</td>
<td>75.6%</td>
<td>77.3%</td>
<td>82.7%</td>
</tr>
</tbody>
</table>
Empire State Factory Survey Improved 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 15, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030515d.jpg" width="353">
The Empire State Manufacturing Survey index of general business conditions jumped 30 points and improved to 10.60. That was the first positive reading since February. The data were reported by the Federal Reserve Bank of New York. Consensus expectations for a reading of -2.0.
Diffusion indexes for all the subgroups improved with orders, shipments and employment each moving into positive territory and thus suggesting positive growth.
The index of prices paid fell sharply to 13.98 and reversed virtually all of the prior month&#39;s rise.
The survey includes measures of business expectations six months ahead. This diffusion index for general business conditions rose sharply to 55.61 led by improved expectations for new orders, shipments and employment. Expectations for capital expenditures surged to the highest level since last September.
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">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General business conditions (diffusion index)</td>
<td>10.60</td>
<td>-20.20</td>
<td>8.66</td>
<td>7.10</td>
<td>-13.02</td>
</tr>
</tbody>
</table>
Business Inventories Accumulate Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 15, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030515e.jpg" width="353">
Total business inventories again rose twice Consensus expectations. In March, inventories rose 0.4% versus expectations for a 0.2% gain. The turn to accumulation began early last year and has bolstered output in the factory sector.
Retail inventories rose sharply as they have since early last year. Inventories of motor vehicles and parts again surged and are up 20.1% y/y.
Nonauto retail inventories rose by 0.6% for the third month in four. Inventories at apparel stores rose 0.7% (7.4% y/y) for the fifth month of strong gain. Inventories at general merchandise stores jumped 1.2% (4.0% y/y). Inventories of furniture, home furnishings and electronics fell for the third consecutive month (4.3% y/y).
Overall business sales jumped 1.8% (5.6% y/y), following the 0.9% decline in February, led by across the board gains.
The inventory-to-sales ratio fell to 1.38 from an upwardly revised 1.40 in February. 

<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">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">Total</td>
<td>0.4%</td>
<td>0.7%</td>
<td>4.0%</td>
<td>2.1%</td>
<td>-5.4%</td>
<td>5.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.8%</td>
<td>1.1%</td>
<td>9.1%</td>
<td>7.6%</td>
<td>-2.9%</td>
<td>6.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.6%</td>
<td>0.6%</td>
<td>4.1%</td>
<td>2.5%</td>
<td>-1.2%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.5%</td>
<td>0.3%</td>
<td>2.2%</td>
<td>0.4%</td>
<td>-4.9%</td>
<td>6.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.0%</td>
<td>0.4%</td>
<td>0.4%</td>
<td>-1.9%</td>
<td>-8.0%</td>
<td>4.5%</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Improved Some 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 15, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030515f.jpg" width="353">
The Philadelphia Fed&#146;s index of general business conditions improved about as expected in May to -4.8 from -8.8 in April. Consensus expectations were for improvement to -4.0.
The decline contrasts with the much sharper rise in the Empire State Factory survey for May reported earlier today.
Amongst the sub indexes new orders, shipments, and employment each improved modestly but remained negative.
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%.
The business conditions index reflects a separate survey question, not the components.
A separate survey of expected business conditions eased slightly for the second month to 45.2 versus 50.9 last year and 32.4 in 2001.
The prices paid index fell sharply to 8.9, the lowest level since April of last year.
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/bos0503.html">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/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">May</th>
<th scope="col">April</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">General Activity Index</td>
<td>-4.8</td>
<td>-8.8</td>
<td>7.3</td>
<td>7.7</td>
<td>-17.2</td>
<td>8.3</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>8.9</td>
<td>22.8</td>
<td>16.5</td>
<td>12.2</td>
<td>-0.9</td>
<td>27.2</td>
</tr>
</tbody>
</table>
Housing Market Index Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 15, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030515g.jpg" width="353">
The National Association of Home Builders Housing Market Index moved moderately higher in May. The rise recovered a part of the sharp decline earlier this year.
The index of current market conditions rose to highest level since February. The index which measures expected sales in six months surged to about its high level of 2002.
Traffic of prospective buyers rose sharply and recovered much of the decline of the prior two months.
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>.

<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/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></th>
<th scope="col">May</th>
<th scope="col">April</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>56</td>
<td>52</td>
<td>60</td>
<td>61</td>
<td>56</td>
<td>62</td>
</tr>
</tbody>
</table>
</body>
</html>

Finished producer prices fell 1.9% in April, a record decline for any one month. Consensus expectations were for a 0.6% decline. Lower finished energy prices, down 8.6%, accounted for much of the decline in the overall PPI. Gasoline [...]

Producer Prices Down a Record Amount

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030514a.jpg" width="353">
Retail sales fell unexpectedly in April. A 0.1% dip was versus Consensus expectations for a 0.4% rise. The drop followed a 2.3% March gain that was revised up slightly from the advance report. 
Sales excluding motor vehicles and parts dealers fell 0.9% versus Consensus expectations for a 0.2% rise. The March gain in nonauto sales also was revised up.
Sales at gasoline service stations fell a sharp 5.9% owing to a 6.1% decline in retail gasoline prices. Excluding gasoline, nonauto retail sales fell 0.4% (+2.4% y/y) following a 1.6% gain in March, revised up from 1.2%.
Motor vehicle dealers&#39; sales rose 2.5% following a sharp 5.0% gain in March. Unit sales of light vehicles rose 1.9% last month to 16.50 mil. (AR).
Declines in sales were widespread last month but were most pronounced at apparel and accessory stores where sales fell 3.2% (-0.9% y/y). That followed a 3.0% March gain. Much of the weakness in these sales reflects lower prices that have been falling steadily since 1998.
Sales at general merchandise stores fell 0.6% (1.2% y/y) following a scant 0.1% March gain.
Furniture, home furnishing and electronics store sales dipped 0.1% (1.3% y/y) following an upwardly revised 2.8% March gain.

<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">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"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>-0.1%</td>
<td>2.3%</td>
<td>4.1%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>6.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>-0.9%</td>
<td>1.5%</td>
<td>2.8%</td>
<td>3.7%</td>
<td>2.9%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
Lower Oil Prices Pulled Import Prices Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 14, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030514b.jpg" width="353">
Prices for imported commodities fell 2.7% last month versus Consensus expectations for a 0.5% decline. The gain in prices in March was revised up slightly.
Petroleum import prices fell sharply last month, down 16.2% following a 0.1% March dip. So far in May the price of West Texas Intermediate crude has been around $26.50 versus $28.25/bbl averaged in April.
Nonpetroleum import prices fell 0.9%, reversing just about all of the 1.0% gain in March. Price weakness was across the board. Food prices fell 0.5% (6.1% y/y) and industrial supplies and materials fell 9.7% (10.2% y/y).
Prices of imported capital goods were unchanged (-1.5% y/y) and have been about unchanged since October. Nonauto consumer goods prices also were unchanged (-0.2% y/y) and have been flat since last year. Motor vehicle prices were flat (0.4% y/y) for the second month.
Export prices fell 0.1% following gains in the prior three months.

<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">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 class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>-2.7%</td>
<td>0.7%</td>
<td>2.3%</td>
<td>-2.5%</td>
<td>-3.5%</td>
<td>6.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-16.2%</td>
<td>-0.1%</td>
<td>15.9%</td>
<td>3.0%</td>
<td>-17.2%</td>
<td>66.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonpetroleum</td>
<td>-0.9%</td>
<td>1.0%</td>
<td>0.9%</td>
<td>-2.4%</td>
<td>-1.5%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>-1.0%</td>
<td>-0.8%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
Mortgage Applications Rose Further, Rates at Record Lows 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 14, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030514c.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association rose 13.7% last week and added to a 18.6% jump the week prior.
Applications to refinance took off again as interest rates fell. Refinancing applications rose 19.3% w/w following a 19.4% gain the week prior. Refi&#39;s were still down 22.8% from the March peak.
Interest rates on a conventional 30-Year mortgage fell to a record low with the effective rate at 5.55% versus 5.83% the prior week. The effective rate on a 15-year mortgage was 5.06%.
Applications for home purchase fell a slight 0.2% (16.5% y/y) following a 16.9% jump the week prior.
During the last ten years there has been a 52% 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 $178,300 (-3.1% y/y). The average size of an application for home purchase fell to $192,000 (+4.2% y/y). The average size of an application to refinance slumped 4.0% to $172,000 (-6.2% y/y). March figures were revised down.
Visit the Mortgage Bankers Association site at <a href="http://www.mbaa.org/">www.mbaa.org.</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">5/02/03</th>
<th scope="col">4/25/03</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>1,246.6</td>
<td>1,050.8</td>
<td>799.7</td>
<td>625.6</td>
<td>322.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>416.0</td>
<td>356.0</td>
<td>354.7</td>
<td>304.9</td>
<td>302.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>6,077.8</td>
<td>5,092.0</td>
<td>3,388.0</td>
<td>2,491.0</td>
<td>438.8</td>
</tr>
</tbody>
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Retail sales fell unexpectedly in April. A 0.1% dip was versus Consensus expectations for a 0.4% rise. The drop followed a 2.3% March gain that was revised up slightly from the advance report. Sales excluding motor vehicles and parts [...]

Retail Sales Dip

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The ZEW indicator of economic sentiment that often foreshadows movements in the broader and more closely watched IFO measures of German business confidence rose minimally in May but is still at low levels. The ZEW indicator of economic sentiment measures the difference between those participants in the survey with a positive outlook on the economy over the next six months and those with a negative outlook. In May this indicator rose to 18.7% from 18.4% in April. The ZEW indicators are based on a small sample of some 300 analysts and institutional investors and the economic sentiment measure is volatile. The attached chart shows the ZEW indicator of Business Sentiment and the IFO balance of business expectations over the next six months.
The ZEW market survey also tracks the opinions of analysts and institutional investors regarding the outlook for stocks and bonds. The outlook for stocks has improved and that for bonds has become less negative.

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<th scope="col" class="firstcol"></th>
<th scope="col">May 2003</th>
<th scope="col">April 2003</th>
<th scope="col">March 2003</th>
<th scope="col">Feb 2003</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">ZEW Indicators</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Economic Sentiment (% balance)</td>
<td>18.7</td>
<td>18.4</td>
<td>17.7</td>
<td>15</td>
<td>45.3</td>
<td>2.8</td>
<td>59.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Bonds (% balance)</td>
<td>-3.9</td>
<td>-4.3</td>
<td>-4.1</td>
<td>-3.3</td>
<td>4.3</td>
<td>0.3</td>
<td>-2.8</td>
</tr>
<tr>
<td class="firstcol">Stocks (% balance)</td>
<td>6.6</td>
<td>5.8</td>
<td>6.2</td>
<td>5.7</td>
<td>7</td>
<td>7.3</td>
<td>6.3</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Ifo Indicators</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Business Climate</td>
<td>n.a.</td>
<td>86.6</td>
<td>88.1</td>
<td>88.9</td>
<td>89.1</td>
<td>89.8</td>
<td>99.3</td>
</tr>
<tr>
<td class="firstcol">Business Expectations</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Next 6 Months (% Balance)</td>
<td>n.a.</td>
<td>-12.1</td>
<td>-7.8</td>
<td>-5.6</td>
<td>-3</td>
<td>-15.3</td>
<td>5.9</td>
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The ZEW indicator of economic sentiment that often foreshadows movements in the broader and more closely watched IFO measures of German business confidence rose minimally in May but is still at low levels. The ZEW indicator of [...]

A Small Rise in German Business Confidence

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

Systemic stress on rise in Europe, less so in US

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The Conference Board's Index of Consumer Confidence declined 5.9% (-6.5% y/y) to 97.0 during April following a 1.6% March drop, revised from a 0.1% slip. A reading of 104.0 had been expected in the Action Economics Forecast Survey. These declines came after a 5.5% February fall and a 2.7% January rise. The latest level remains well below the high of 137.9 in October 2018.

The Present Situations Index fell 2.7% (-5.9% y/y) this month to 142.9 following a 0.5% March slip and February’s 4.7% decline. The Expectations Index fell 10.3% (-7.4% y/y) to 66.4, the lowest point since July 2022, after falling 3.0% in March and 6.4% in February.

An improved 20.6% of respondents characterized current business conditions as good in April, remaining below its high of 23.4% in June. Labor market readings deteriorated this month. The jobs gap, representing the difference between respondents indicating that jobs are plentiful and those saying jobs are hard to get, fell to 25.3% from 29.5% in March. The reading remained below the March 2022 high of 47.1%. Calculated by Haver Analytics, this series has a 64% correlation with the unemployment rate over the last ten years. The jobs plentiful measure fell to 40.2% from 41.7% and remained below the March 2022 high of 56.7%. The jobs hard-to-get measure of 14.9% compared to 12.2% in March and a recent high of 15.6% in October. The jobs not-so-plentiful reading fell to 44.9% from 46.1% in March and remained well above its 30.5% low in September 2021.

In April, a greatly lessened 12.8% of consumers believed that business conditions in six months would improve and a higher percentage of 19.9% believed they would worsen. A lessened 11.7% of respondents felt there would be more jobs in six months, down from a high of 41.2% in April 2020. This remains below a recent high of 20.0% in December of 2022. A lessened 15.4% expected income to increase in six months, down from 18.3% in December and below a high of 19.6% in October of 2022.

The expected inflation rate in twelve months of 5.3% compared to 5.3% in March. It remained below the 7.9% high in June 2022, but above the 4.4% low in January 2020.

A steady 53.8% of respondents felt that interest rates would be higher in twelve months, up from a low of 42.1% in January. A diminished 20.5% thought they would be lower. A lessened 46.3% of respondents believed that stock prices would be higher in twelve months. Roughly 27% thought stock prices would be lower in twelve months versus a high of 44.7% in July of 2022. The share of respondents planning to buy a home within six months declined to 4.9% from 5.2% and remained below the October 2022 high of 7.4%. The percentage of respondents planning to buy a major appliance fell sharply m/m to 41.2% and remained below a high of 52.4% in October 2022.

The Consumer Confidence data are available in Haver's **CBDB** database. The total indexes, which are indexed to 1985=100, appear in **USECON**, and market expectations are in **AS1REPNA**.

**How Do Households Respond to Income Shocks?** from the Federal Reserve Bank of Minneapolis is available [here](https://www.minneapolisfed.org/article/2024/wealth-moves-dramatically-with-income-shocks-with-implications-for-policy-and-theory).

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- Decline moves to roughly two-year low.
- Present situations and expected conditions decline.
- Inflation expectations remain steady.

U.S. Consumer Confidence Diminishes Greatly in April

Sandy Batten

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The MNI Chicago Business Barometer fell for the fifth consecutive month, to 37.9 in April, its second lowest reading since the pandemic and well below the critical 50 level that separates expansion from contraction. The Action Economics Forecast Survey had looked for the index to increase to 45.0 in April.

Haver Analytics calculates an ISM-adjusted version of this index that gives equal weights to each of the five key component subindexes. The headline index includes the same subindexes but with varying weights. This ISM-adjusted index fell to 41.0 in April, equaling the lowest reading in 15 years, from 44.0 in March. This index has been pointing to weak activity for quite a while, having been above the critical 50 level in only one month since August 2022.

All the subindexes remained below the critical 50 level in April with four of the five declining from March. Only the inventories subindex increased, rising to 45.8 from 39.5 in March. The production subindex declined 6.9 points to 35.5, its lowest reading since November 2022, with 14% of respondents reporting an increase and 35% reporting a decrease. The new orders subindex fell 5.1 points to 37.9, its lowest reading since November 2022, with 40% of respondents reporting a decline in orders. After having risen in March, the employment index fell 8.5 points to 38.6 in April, its lowest reading since February 2023. Twenty-eight percent of respondents reported a decline in employment while only 9% reported an increase. And the supplier deliveries subindex slipped 0.8 point to 47.3 in April, its third consecutive month below 50, indicating that delivery times are shortening.

Input prices continued to rise in April with the increase picking up pace. The index increased 6.7 points to 69.3, its highest reading since August 2023. Forty-seven percent of respondents reported paying higher prices in April vs. 35% in March while only 3% reported paying lower prices in April.

The Chicago Business Barometer is considered to be a leading indicator of the U.S. economy. A reading above 50 indicates expansion while one below 50 suggests contraction. Summary data are contained in Haver’s **USECON** database with detail including the ISM-style index in the **SURVEYS** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Index falls to the second lowest level since the pandemic and moved deeper into contraction territory.
- All component indexes remained below 50.
- The prices paid index rose to highest level since August 2023.

Chicago Business Barometer Unexpectedly Falls Again in April

Winnie Tapasanun

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U.S. house prices rose 1.2% m/m in February following a 0.1% easing in January (unrevised) and a 0.2% increase in December (+0.1% previously), according to the Federal Housing Finance Agency (FHFA) House Price Index. The February reading was the 17th m/m gain in 18 months. The February HPI at 423.00 was 50.0% above a low of 281.93 in May 2020. The year-on-year rate of increase accelerated to 7.0% in February, the highest since November 2022, after easing to 6.5% in January; it was up from 4.6% in February 2023 but down from a high of 18.9% in February 2022.

The month-on-month increases in house prices were evident in February (vs. January) in all of the nine census divisions. These included New England (3.0% vs. 0.2%), Middle Atlantic (2.6% vs. -0.3%), South Atlantic (1.4% vs. -0.8%), Pacific (1.3% vs. -0.02%), East South Central (1.2% vs. -1.0%), West North Central (1.1% vs. 1.5%), East North Central (0.9% vs. -0.1%), Mountain (0.4% vs. 0.1%), and West South Central (0.4% vs. 0.7%).

Year-on-year house prices continued to gain in February, with the pace of advance accelerating (vs. January) in six of the nine census divisions. These included Middle Atlantic (10.8% vs. 8.9%), New England (10.5% vs. 8.4%), East North Central (8.9% vs. 8.6%), West North Central (7.3% vs. 7.1%), South Atlantic (7.1% vs. 6.0%), and Pacific (6.6% vs. 5.1%). Meanwhile, house price growth decelerated y/y in February (vs. January) in the following three census divisions: West South Central (3.7% vs. 4.5%), Mountain (4.4% vs. 5.2%), and East South Central (4.9% vs. 5.2%).

The FHFA house price index is a weighted purchase-only index that measures average price changes in repeat sales of the same property. An associated quarterly index includes refinancing the same kind of properties. The indexes are based on transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included.

The FHFA data are available in Haver’s **USECON** database.

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- FHFA HPI +1.2% (+7.0% y/y) in Feb. vs. -0.1% (+6.5% y/y) in Jan.
- House prices rise m/m in nine census divisions, w/ the highest rate in New England (3.0%).
- House prices gain y/y in all of the nine regions, w/ the highest rate in Middle Atlantic (10.8%).

U.S. FHFA House Prices Rebound M/M in February, w/ the Highest Y/Y Rate Since Nov. ’22

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The employment cost index (ECI) for civilian workers rose 1.2% (4.2% y/y) during Q1’24 following a 0.9% Q4 increase, according to the Bureau of Labor Statistics. Earlier figures were revised. The latest increase was the strongest in four quarters, up from a 0.4% low in Q3’20. A 1.0% gain had been expected in the Action Economics Forecast Survey.

Wages and salaries for civilian workers rose 1.1% (4.3% y/y) in Q1, the same as in the prior two quarters. The increase was more than double its 0.4% low in mid-2020. Benefits rose 1.1% (3.8% y/y), up from 0.7% in Q4 and 0.9% in both of the quarters before that, and also more than double the Q2’21 low of 0.4%.

Private industry workers’ compensation rose 1.1% (4.1% y/y) in Q1 following two 0.9% increases. Wages and salaries for private industry workers increased 1.1% last quarter after two 1.0% gains. The 4.3% y/y increase was below the 5.6% high in Q2’22. Benefits for private industry workers rose 1.0% in Q1, up from 0.7% in Q4. Year-over-year, benefits were up 3.8% in Q1, down from a 5.1% rise in Q2‘22.

By industry sector, total compensation in goods-producing industries rose 1.1% (3.9% y/y) in Q1’24 following a 1.0% Q4 gain and 0.9% increases in the two prior quarters. In service-producing industries, total compensation increased 1.2% after rising 0.9% in Q4. The 4.2% y/y gain stood below a 5.2% y/y high which occurred throughout most of 2022.

The employment cost index measures the change in the cost of labor, free from the influence of employment shifts, across occupations and industries. It is provided by the Bureau of Labor Statistics and is available in Haver’s **USECON** database. Consensus estimates from the Action Economics Forecast Survey are in Haver’s **AS1REPNA** database.

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- Increase is largest in one year.
- Wages remain strong; benefits gain improves.
- Both goods-producing & service-sector compensation move higher.

U.S. Employment Cost Index Strengthens in Q1

Robert Brusca

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GDP in the European Monetary Area in the first quarter rose by 1.3% (saar), offsetting a 0.2% quarter-to-quarter decline in the fourth quarter and a 0.2% decline in the third quarter of 2023. All seven of the early reporters in the table show positive GDP growth in the first quarter unlike the fourth quarter when two of them, Germany and Ireland, showed declines in the fourth quarter of 2023. Growth rates decelerated in Belgium and Portugal in the first quarter with each of them posting growth rates that were only slightly slower than what they had logged in the fourth quarter of last year.

Much attention in the new set of European GDP releases, centers on Germany, which posted a 0.9% increase (at an annual rate) in the first quarter after falling at a 2% annual rate in the fourth quarter. Some news services report this as Germany having avoided recession and this is understandable considering the fixation that the financial press has for the ‘rule of thumb’ that claims that two consecutive quarters of GDP declining defines recession. In fact, that does not define a recession. It is only a ‘rule-of-thumb.’ While some call it a ‘technical definition of recession’ it, in fact, is not a ‘rule’ or a ‘definition’ and there is nothing technical about counting all the way from ‘one’ to ‘two.’

**Recession or not it looks like trouble...**
A closer look at the table shows more serious problems for Germany. If we move to the right-hand portion of the table, we present year-over-year growth rates that, instead of measuring growth from adjacent quarters and annualizing it, we're going to, in this part of the table, look at the raw percentage change and growth from the same quarter of one year ago. The result of that percentage change will be an actual annual -not just an annualized - calculation of growth. When viewed in that way, the growth rate in the first quarter of 2024 is -0.2%; in the fourth quarter of 2023 it's -0.2%, in the third quarter it's -0.1%, and in the second quarter of 2023 it is positive but only logging a growth rate of 0.1%. This is a period of weak German GDP; output has declined on balance over the last four quarters for three quarters in a row. And the quarter before that, when German GDP did not decline, it barely managed any increase at all.

**Recession or not, here I come?**
Whether this is a recession or not, it's going to depend on the judgment of economists who look closely at the German economy. It certainly is not going to be declared by a journalist who's going to look at just quarter-to-quarter growth that is simply going to be too narrowly focused to reveal what is going on in the underlying German economy. Performance certainly is disturbing despite the growth rate that's positive in the first quarter of 2024. Typically, when economists try to assess recessions, there are three metrics that are considered: one is how broad the decline in economic activity is, the second involves the depth of the decline that occurs, and the final metric is the length of the period of time over which this disruption Deacon of activity occurs. So, the three measures are: depth, duration, and breadth. Viewed in this way, the decline in German activity is broad because GDP is the broadest measure of economic activity; activity is declining year-over-year for three quarters in a row. That statement takes in both the category of breath and of length. We're talking about declines in GDP over full year periods that are occurring for three consecutive quarters. On the other hand, the intensity of the decline is only -0.2% for two of these annual periods and it's -0.1% for the other one. All these clearly are declines; they're not particularly severe. And since, at this point, Germany's long-term growth rate is not particularly high, the shortfall of these minor negative growth rates may not rise to the level of disruption that will cause the experts on Germany's economy to say that it is a recession. On the other hand, maybe it is.

Whatever you call it Germany’s economy is not doing well. Over this same span of time looking at growth in the European Monetary Area four-quarter growth in the first quarter of 2024 is only 0.4%. In the fourth quarter of last year it was only 0.1% and the third quarter of last year was only 0.1%. So once again while skirting the ‘popular definition’ of recession for these numbers, the European Monetary Union is showing extremely weak growth. On the other hand, the European Monetary Area also shows a decline in growth in the fourth quarter of 2023 and in the third quarter of 2023 which would trip that rule of thumb signal about it being in recession. Yet, its string of year-on-year growth rates is stronger than the string for Germany even though Germany doesn't trip that so-called ‘technical signal.’ This is a good reason not to get to bound up with the precise label that we put on the economy and whether we call it recession or not. Weakness is simply weakness. And is there a huge difference between a severe slowdown and a mild recession?

Ireland also posts a long string of negative growth rates. In the case of Ireland, these are fairly severe with one of them showing year-over-year growth falling 9.1%, which clearly would be a recession signal and certainly is in the context of all the other negative growth rates that Ireland is reporting. Ireland is a clear-cut recession case.

Quarterly data paints a kinder picture of developments in the monetary union as only Portugal and Belgium are decelerating and there are quarter-to-quarter growth rates in the first quarter with all the rest of the early reporting members showing acceleration. In the fourth quarter, only three countries decelerated compared to their third quarter growth rates. The important lesson here is that GDP growth across these countries in the monetary union as well as for the monetary union as a whole are not showing an intensification of the downward pressures that might be lingering in these economies. Instead, after a period of weakness, we're starting to see growth stabilize and accelerate.

The tendency is for acceleration and deceleration in year-over-year data are a little more concerning. The color coding and the table of growth rates occurs from a full precision calculation of the growth rate so growth rates that to the single-digit that appears in the table. The number may seem to be identical with an adjacent number, but may not be when they are taken to the next decimal point and that reflects why some growth rates that appear to be ‘unchanged’ are color-coded as decelerations in the table. In the first quarter, there are decelerations in France, Germany, Italy, and Portugal. There were three year-over-year decelerations in the fourth quarter; those came from the European Monetary Union as a whole, Germany, and Ireland. The third quarter saw the broadest decline across the Monetary Union with decelerations occurring in every country reporting in this table except Belgium. And the second quarter of 2023 saw deceleration occur in four of the reporting countries as well as in the European Monetary Union as a whole.

We also parsed the data in the table into the four largest economies in the EMU versus the other economies. On that basis, looking at the year-over-year data, the four largest economies do not show year-over-year declines in the last four quarters while the rest of the European Monetary Union shows declines in three of the last four quarters.

Compared to the European statistics, U.S. data are somewhat astonishing. U.S. growth year-over-year of 3% in the first quarter of 2024, 3.1% in the fourth quarter of 2023, 2.9% in the third quarter, and 2.4% in the second quarter of 2023. There's nothing like that among these countries. In the European Monetary Union, the closest to the U.S. result comes from Spain.

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Growth for these early reporters shows conditions in the European Monetary Union clearly have progressed from what they were. The depth of weakness occurred in the third quarter 2023 when deceleration was still very widespread and in some countries the extent of decline was severe. Minor weakness seems to have emerged from that phase of severe weakness, but weakness clearly is lingering, and it would still be too soon to say that the EMU is out of the woods as far as weak economic conditions are concerned. Of course, the European Central Bank is now in a different phase having gotten control of inflation and it's widely expected to be cutting interest rates around June of this year. However, that still will depend on how inflation develops, and we've already seen the United States make plans for rate cuts and then must take them off the table and go back into a hibernation mode for policy. It's not clear whether the ECB is going to be forced into that same strategy or whether it will continue to proceed with its rate cut option and if inflation reduction is going to remain on path. These are the conditions we'll be looking for in the future.

Economy in Brief: May 2003

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