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>
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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

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: May 2003

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