Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041228b.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence surged nearly ten points to 102.3 in December. Consensus expectations had been for a reading of 94.0. The latest was the highest Confidence reading since July.
Jobs were viewed as hard to get by 26.4% of survey participants, down from levels near 28% during the prior three months. Jobs were viewed as plentiful by 19.4% of survey participants, the highest since July.
During the last twenty years there has been a 51% correlation between consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
The present situation index jumped 10.0% to 105.9 (+39.3% y/y). The index of consumer expectations also rose a strong 10.8% to 99.9 (-7.0% y/y), the highest level since July.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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</thead>
<tbody>
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<td class="firstcol">Consumer Confidence</td>
<td>102.3</td>
<td>92.6</td>
<td>7.9%</td>
<td>96.0</td>
<td>79.8</td>
<td>96.6</td>
</tr>
</tbody>
</table>
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The Conference Boards Index of Consumer Confidence surged nearly ten points to 102.3 in December. Consensus expectations had been for a reading of 94.0. The latest was the highest Confidence reading since July. Jobs were viewed as [...]

Improved Assessment of Job Market Raised Consumer Confidence

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041228b.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence surged nearly ten points to 102.3 in December. Consensus expectations had been for a reading of 94.0. The latest was the highest Confidence reading since July.
Jobs were viewed as hard to get by 26.4% of survey participants, down from levels near 28% during the prior three months. Jobs were viewed as plentiful by 19.4% of survey participants, the highest since July.
During the last twenty years there has been a 51% correlation between consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
The present situation index jumped 10.0% to 105.9 (+39.3% y/y). The index of consumer expectations also rose a strong 10.8% to 99.9 (-7.0% y/y), the highest level since July.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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</thead>
<tbody>
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<td class="firstcol">Consumer Confidence</td>
<td>102.3</td>
<td>92.6</td>
<td>7.9%</td>
<td>96.0</td>
<td>79.8</td>
<td>96.6</td>
</tr>
</tbody>
</table>
Strong Ending to Holiday Season Raised Chain Store Sales 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 28, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041228a.jpg" width="353">
Chain store sales surged 2.7% during Christmas week on top of two weeks of strong gain, according to the International Council of Shopping Centers (ICSC)-UBS survey. During the last three weeks chain store sales jumped 5.7%. That gain edged out the previous three week high for the series since its inception in 1989.
Despite these gains, average of sales so far in December is 0.1% below the prior month due to two huge w/w sales declines the end of November.
Consumers&#39; spending budgets benefited from another decline in gasoline prices which, for regular unleaded, fell 2.4 cents w/w to $1.791 per gallon (+21.2% y/y). For December, gasoline prices are 7.0% below November.
The latest Short Term Energy Outlook from the US Department of Energy is available <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">here</a>.
The leading indicator of chain store sales from ICSC edged up slightly in the latest period (+0.9% y/y).
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
During the last ten years there has been a 60% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">12/25/04</th>
<th scope="col">12/18/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>449.9</td>
<td>437.9</td>
<td>4.3%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
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Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223h.jpg" width="353">
In Q3, the UK experienced its largest current account deficit, &pound;8.8 billion, in 5-1/2 years. The balance gapped by &pound;3.3 billion from the second quarter. While the trade deficit continued to widen, the bigger source of the increase was a decrease in the surplus on income. This was due mainly to substantial dividend payments to foreign investors. Transfer payments abroad also increased, by &pound;0.5 billion, reflecting larger payments by both the government and private sectors.
The trade deficit itself set a record at &pound;10.3 billion, but the widening in the goods balance was a slim &pound;0.1 billion. The surplus on services narrowed by &pound;0.5 billion as exports retreated from an all-time high in Q2, and imports of services rose slightly. Conventional wisdom generally ties current account developments with changes in the balance of trade in goods. But as seen here, that input was trivial in Q3, while other factors in services and incomes generated the large current account deficit.
This combination of current flows well illustrates the openness of UK markets to dealings with foreign traders of both goods and various kinds of services and financing. This porousness is further shown by the wide swings on the other side of the balance of payments, the financial accounts. Net inflows of capital funds in Q2 had amounted to &pound;15.0 billion, the second highest ever. This financial balance retreated in Q3 to just under &pound;4.0 billion. Since the current account deficit widened, balance was achieved artificially with the &quot;net errors and omissions&quot; item, which swung from net outflow of &pound;7.9 billion to a net inflow of &pound;3.6 billion. As with the financial account in Q2, the net errors and omissions item in that period was one of the largest ever. It&#39;s hardly surprising that such major changes followed in Q3.

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<th scope="col" class="firstcol">Seasonally Adjusted, Billions of &pound;</th>
<th scope="col">Q3 2004</th>
<th scope="col">Q2 2004</th>
<th scope="col">Q3 2003</th>
Quarterly Averages
</tr>
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<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
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<tr>
<td class="firstcol">Current Account</td>
<td>-8.8</td>
<td>-5.8</td>
<td>-6.1</td>
<td>-4.6</td>
<td>-4.4</td>
<td>-5.6</td>
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<tr class="odd">
<td class="firstcol">Trade in Goods &amp; Services</td>
<td>-10.3</td>
<td>-9.6</td>
<td>-8.3</td>
<td>-8.0</td>
<td>-7.8</td>
<td>-6.9</td>
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<tr>
<td class="firstcol">Income</td>
<td>+4.4</td>
<td>+6.1</td>
<td>+4.6</td>
<td>+5.8</td>
<td>+5.5</td>
<td>+2.9</td>
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<td class="firstcol">Current Transfers</td>
<td>-2.9</td>
<td>-2.4</td>
<td>-2.5</td>
<td>-2.5</td>
<td>-2.1</td>
<td>-1.7</td>
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<tr>
<td colspan="7">Not Seasonally Adjusted</td>
</tr>
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<td class="firstcol">Capital Account</td>
<td>+0.3</td>
<td>+0.6</td>
<td>+0.3</td>
<td>+0.3</td>
<td>+0.2</td>
<td>+0.3</td>
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<td class="firstcol">Financial Account</td>
<td>+3.9</td>
<td>+15.0</td>
<td>+4.2</td>
<td>+3.7</td>
<td>+2.6</td>
<td>+6.0</td>
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<td class="firstcol">Net Errors &amp; Omissions*</td>
<td>+3.6</td>
<td>-7.9</td>
<td>+1.1</td>
<td>+0.6</td>
<td>+1.6</td>
<td>-0.7</td>
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In Q3, the UK experienced its largest current account deficit, £8.8 billion, in 5-1/2 years. The balance gapped by £3.3 billion from the second quarter. While the trade deficit continued to widen, the bigger source of the increase was [...]

Income, Services Flows Widen UK Current Account in Q3

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223a.jpg" width="353">
Initial unemployment insurance claims bounced up 17,000 to 333,000 last week following the sharp 45,000 drop the week prior. Consensus expectations had been for 335,000 claims.
The latest figure is for the December survey period of nonfarm payrolls and claims fell a slight 2,000 (-0.6%) from the November survey period.
The four week moving average of initial claims rose to 340,000 (-7.6% y/y).
During the last ten years there has been a (negative) 82% correlation between the level of initial claims and the y/y change in payroll employment.
Continuing claims for unemployment insurance fell another 9,000 and added to the deepened 57,000 decline the prior week.
The insured rate of unemployment remained at 2.2%, where it&#39;s been since early October.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">12/18/04</th>
<th scope="col">12/11/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">Initial Claims</td>
<td>333</td>
<td>316</td>
<td>-8.0%</td>
<td>402</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,721</td>
<td>-16.9%</td>
<td>3,531</td>
<td>3,570</td>
<td>3,018</td>
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Initial unemployment insurance claims bounced up 17,000 to 333,000 last week following the sharp 45,000 drop the week prior. Consensus expectations had been for 335,000 claims. The latest figure is for the December survey period of [...]

Initial Unemployment Insurance Claims Bounced Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223f.jpg" width="353">
Sales of new single-family homes fell 12.0% to 1.125M last month from an upwardly revised level in October. Consensus estimates had been for a decline in sales to 1.200M. 
Sales fell throughout the country except in the South where they recovered 13.6% (11.5% y/y) following a sharp decline in October.
The median price of a new single family home slipped 8.2% m/m to $206,300 (-0.4% y/y).

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E904/@E90401/@E90401.HTM">Homes Sales (000s, AR)</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">New Single-Family</td>
<td>1,125</td>
<td>1,278</td>
<td>3.6%</td>
<td>1,089</td>
<td>976</td>
<td>907</td>
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Sales of new single-family homes fell 12.0% to 1.125M last month from an upwardly revised level in October. Consensus estimates had been for a decline in sales to 1.200M. Sales fell throughout the country except in the South where [...]

New Home Sales Softer

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223g.jpg" width="353">
The University of Michigan&#39;s reading of consumer sentiment for the full month of December rose to 97.1, up 4.6% from November. Consensus expectations had expected 95.7.
During the last ten years there has been a 75% correlation between the level of consumer sentiment and the y/y change in real PCE.
Consumers&#39; reading of current economic conditions rose 1.9% m/m but consumer expectations jumped 6.7%.
Sentiment amongst families earning less than $50,000 per year surged 9.5% m/m (5.3% y/y. Consumer sentiment amongst families earning more than $50,000 per year fell slightly m/m but rose 2.0% y/y.
The University of Michigan survey is not seasonally adjusted.The mid-month survey 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.
&quot;Consumer Sentiment and the Media&quot; from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2004/el2004-29.pdf">here</a>.

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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">Dec</th>
<th scope="col">Mid-Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">Consumer Sentiment</td>
<td>97.1</td>
<td>95.7</td>
<td>92.8</td>
<td>4.9%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>106.7</td>
<td>106.3</td>
<td>104.7</td>
<td>10.0%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>90.0</td>
<td>88.8</td>
<td>85.2</td>
<td>1.2%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
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The University of Michigan's reading of consumer sentiment for the full month of December rose to 97.1, up 4.6% from November. Consensus expectations had expected 95.7. During the last ten years there has been a 75% correlation [...]

U.S. Consumer Sentiment Rose Throughout December

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223e.jpg" width="353">
Personal income rose a moderate 0.3% last month following the unrevised 0.6% spurt in October. Consensus expectations had been for a 0.2% rise.
The gain in wages &amp; salaries eased to 0.2% (+4.6% y/y) after the 0.6% surge in October. Factory sector wages eked out a 0.1% (1.1% y/y) gain after falling 0.1% the prior month.
Personal disposable income rose 0.3% (4.9% y/y), half the gain in October. Disposable income growth adjusted for inflation was stable m/m at 0.2% (2.2% y/y).
Personal consumption eased as well, growing 0.2%, one quarter the rise in October. A 2.4% decline in durable goods spending reflected a 3.4% m/m drop in total sales of light motor vehicles. Spending on nondurables also eased, up 0.4% after a 1.6% spike in October. However, services spending picked up and grew 0.6% (5.6% y/y), up from the 0.4%-0.5% range of the prior three months.
The PCE chain price index rose just 0.1%, reflecting the recent decline in gasoline prices. Less food &amp; energy prices rose 0.1% (1.5% y/y), the average for the last eight months.
&quot;Open Mouth Operations: A Swiss Case Study&quot; of a central bank&#39;s impact on the slope of the yield curve from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20050101/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
<tbody>
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<td class="firstcol">Personal Income</td>
<td>0.3%</td>
<td>0.6%</td>
<td>4.9%</td>
<td>3.2%</td>
<td>1.8%</td>
<td>3.5%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.2%</td>
<td>0.8%</td>
<td>6.1%</td>
<td>5.2%</td>
<td>4.6%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>0.3%</td>
<td>0.1%</td>
<td>1.3%</td>
<td>1.4%</td>
<td>2.0%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1%</td>
<td>0.4%</td>
<td>2.6%</td>
<td>1.9%</td>
<td>1.4%</td>
<td>2.1%</td>
</tr>
</tbody>
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Personal income rose a moderate 0.3% last month following the unrevised 0.6% spurt in October. Consensus expectations had been for a 0.2% rise. The gain in wages & salaries eased to 0.2% (+4.6% y/y) after the 0.6% surge in October. [...]

U.S. Personal Income Rebounded

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223d.jpg" width="353">
Durable goods orders rebounded 1.6% following a 0.9% decline in October that was twice the advance indication. The Consensus expectation had been for a 0.6% gain. Less transportation, orders fell 0.8% (+11.8% y/y) and added to a 1.3% decline in October.
Transportation equipment orders rose 8.2% reflecting a 41.9% spurt in aircraft &amp; parts orders. Primary metals orders rose 3.9% (+23.6% y/y) but orders for fabricated metals eased 0.4% (+12.5% y/y).
Nondefense capital goods orders surged 8.1% m/m led by a 64.2% jump in aircraft. Excluding aircraft, orders rose 1.8% and recouped about half of the decline in October. A 4.6% (9.8% y/y) rise in orders for electrical equipment &amp; appliances led the gain, however, that was offset by a 4.2% decline (+12.6% y/y) in orders for computers &amp; electronic products, off for the second consecutive month. Machinery orders fell as well by 3.3% (+16.3% y/y).
Unfilled orders rose 1.2% (9.2% y/y), double the gain in October. Shipments fell for the second month in the last three so the rise in unfilled orders pulled the ratio of backlogs to shipments up sharply.
Inventories of durable goods surged 1.0% (8.3% y/y) after the 0.9% October gain which was revised up sharply. The inventory to shipments ratio rose to its highest level in a year.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223b.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223c.jpg" width="353">

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>1.6%</td>
<td>-0.9%</td>
<td>9.7%</td>
<td>2.6%</td>
<td>-1.7%</td>
<td>-10.5%</td>
</tr>
<tr>
<td class="firstcol">Nondefense Capital Goods</td>
<td>8.1%</td>
<td>-3.4%</td>
<td>21.2%</td>
<td>5.6%</td>
<td>-7.2%</td>
<td>-15.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Excluding Aircraft</td>
<td>1.8%</td>
<td>-4.1%</td>
<td>14.3%</td>
<td>6.6%</td>
<td>-7.1%</td>
<td>-12.9%</td>
</tr>
</tbody>
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Durable goods orders rebounded 1.6% following a 0.9% decline in October that was twice the advance indication. The Consensus expectation had been for a 0.6% gain. Less transportation, orders fell 0.8% (+11.8% y/y) and added to a 1.3% [...]

U.S. Durable Goods Orders Rebounded

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Real GDP eased 0.3% SAAR (+2.1% y/y) during the first quarter of 2025 after increasing 2.4% in Q4’24 and 3.1% in Q3’24. A 0.4% increase had been expected in the Action Economics Forecast Survey. It was the first decline since Q1 2022.

Foreign trade subtracted 4.83 percentage points from growth last quarter as imports surged 41.3% (13.4% y/y) ahead of tariffs, which began to come into effect in the first quarter. The rise followed a 1.9% decline in Q4’24. Exports rose 1.8% (3.0% y/y) after easing 0.2% in Q4. Inventories added 2.25 percentage points to growth after subtracting 0.84 percentage point from Q4 growth.

Real final sales to domestic purchasers grew 2.3% (2.9% y/y) in Q1 after rising 3.0% in Q4. Personal consumption expenditures rose 1.8% (3.1% y/y) following a 4.0% gain. Durable goods spending fell 3.4% (+5.3% y/y) after surging 12.4% in Q4. Motor vehicle purchases declined 11.1% (+5.5% y/y) after strengthening 19.7% in Q4. Spending on home furnishings & appliances gained 1.5% (6.1% y/y) following a 5.4% rise. Recreational goods & vehicle outlays rose 2.5% (7.0% y/y) last quarter after a 13.9% Q4 increase.

Nondurable goods outlays rose 2.7% (3.0% y/y) following 3.1% growth in Q4. Apparel spending increased 6.7% (2.5% y/y) following a 5.0% rise. Food & beverage buying gained 2.5% (2.3% y/y) after a 1.8% increase. Gasoline & fuel oil purchases increased 4.6% (3.4% y/y) after falling 2.0% in Q4.

Spending on services increased 2.4% last quarter (2.7% y/y) after a 3.0% gain. Outlays on housing & utilities increased 3.4% (1.8% y/y) after rising 1.1% in Q4. Health care expenditures rose 4.0% (4.8% y/y) following a 4.7% strengthening. Transportation outlays increased 5.3% (4.6% y/y) after a 3.7% rise while recreation spending rose 4.7% (2.8% y/y) following a 4.5% rise. Restaurant & hotel expenditures declined 2.1% (+0.5% y/y) following a 2.8% rise. Financial services expenditures rose 1.9% (2.0% y/y) after a 3.1% Q4 increase.

Business fixed investment increased 9.8% (3.6% y/y) following a 3.0% decline in Q4. Expenditures on structures rose 0.4% (-0.4% y/y) after a 2.9% increase. Expenditures on producers’ durable equipment jumped 22.5% (8.0% y/y) after falling 8.7%.  Outlays on information processing equipment soared 69.3% (18.9% y/y) following a 7.3% decline. Industrial equipment investment fell 1.4% (-0.3% y/y) after easing 0.9%. Intellectual property product spending rose 4.1% (1.8% y/y) following a 0.5% decline. 

Residential structures investment increased 1.3% (-0.1% y/y) in Q1 after a 5.5% Q4 rise.

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Government spending fell 1.5% (+2.4% y/y) after a 3.1% Q4 rise. Federal government expenditures declined 5.1% (+2.9% y/y) after rising 4.0% in Q4. National defense expenditures declined 8.0% (+4.0% y/y) after increasing 4.8% in Q4. State & local government spending rose 0.8% (2.1% y/y) following a 2.5% rise.

The GDP price index rose 3.7% (2.6% y/y) after increasing 2.3% in Q4. It was the largest increase since Q4’22. A 2.4% increase had been expected. The PCE chain price index increased 3.6% (2.5% y/y) following a 2.4% rise. The PCE price index excluding food and energy rose 3.5% (2.8% y/y) after increasing 2.6% in Q4. The business fixed investment price index rose 0.4% (1.8% y/y) after 1.5% rise. The residential price index strengthened 3.9% (3.2% y/y) after a 1.9% rise while the government price index increased 4.7% (2.8% y/y) following a 2.1% rise.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Decline in GDP is first in three years.
- Foreign trade subtracts substantially ahead of tariffs.
- Domestic final demand growth weakens.
- Price index strengthens with higher core PCE prices.

U.S. GDP Unexpectedly Declines in Q1’25; Prices Strengthen

Michael J. Moran

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High-side readings on the price indexes for personal consumption expenditures in January and February caused some concern about emerging price pressure, especially with some policies of the Trump administration possibly adding to the upward force. However, March brought notable relief, with the headline price index falling slightly (-0.04%). A marked decline in energy prices was helpful (-2.7%), but core prices also were subdued, increasing less than 0.1%.  Year-over-year changes were still above the Fed’s target of 2%, but only barely so for the headline measure (2.3%). The core index backed away from the reading of 3.0% in February, but the latest reading of 2.7% was in line with observations in the past year, and still uncomfortably above target.

Consumers roused from a winter slumber in March, with nominal outlays increasing 0.7%. With inflation restrained, real outlays also posted a gain of 0.7%. Spending on durable gods stood out, with real outlays advancing 3.2%. Real outlays for both nondurable goods and services rose 0.4%, a solid pace. Signs of life were certainly welcome after an average decline of 0.1% in January and February. The March rebound left growth of 1.8% (annual rate) in the first quarter.

The brisk increase in spending in March was supported by a solid gain in personal income (0.5% in both nominal and real terms). Growth in wage income was firm at 0.5%, while proprietors’ income was robust with a gain of 1.8% (not annualized!). The farm sector led the advance in proprietors’ income, but the nonfarm sector also was strong (0.6%).

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- Price pressure eases.
- Spending rebounds after two soft months.

Personal Income, Consumption, and Prices in March

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The Pending Home Sales Index, a forward-looking home sales measure based on contract signings, from the National Association of Realtors rose 6.1% to 76.5 (-0.6% y/y) during March after rising a little-revised 2.1% in February. These changes followed a 4.6% January decline.

The rise in March sales occurred as the rate on a 30-year mortgage eased to an average 6.65% from 6.84% in February. This rate was well above a low of 2.68% averaged in December 2020.

Pending home sales were up in most regions of the country. Sales in the Midwest rose 4.9% (1.4% y/y) last month after rising 1.8% in February. Sales in the South increased 9.8% (-0.4% y/y) following a 5.8% February rise. Sales in the West improved 4.8% (-2.0% y/y) after falling 3.0% in February. Sales in the Northeast were off 0.5% (-3.0% y/y) in March after falling 0.9% in February.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- Sales rise to highest level in four months.
- Strength is evident throughout most of country.

U.S. Pending Home Sales Surge in March

Sandy Batten

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The employment cost index (ECI) for civilian workers, arguably the most accurate measure of labor compensation in the United States, rose 0.9% q/q (3.6% y/y) in Q1, the same quarterly increase as in last year’s Q4, according to the Bureau of Labor Statistics. The quarterly gains have fluctuated between 0.8% and 1.0% for the past six quarters. The Action Economics Forecast Survey had expected a 0.9% q/q increase and a 3.5% y/y gain.

Wages and salaries for civilian workers rose 0.8% q/q (3.5% y/y) in Q1, down from 1.0% q/q in Q4. This tied the Q3 2024 quarterly rise as the smallest increase since Q2 2021. It was also the smallest y/y increase since Q2 2021. Benefits increased by an outsized 1.2% q/q (3.9% y/y) in Q1 versus 0.8% q/q in Q4. This is the largest quarterly gain since Q2 2022. In general, employment cost gains remain above the pace observed prior to the pandemic but are slowing gradually.

Private industry workers’ compensation rose 0.8% q/q (3.4% y/y) in Q1, down from 0.9% q/q (3.6% y/y) in Q4. Wages and salaries for private industry workers increased 0.8% q/q (3.4% y/y) in Q1 versus 0.8% q/q (3.7% y/y) in Q4. The quarterly gain in Q1 tied that in Q3 2024 as the smallest increase since Q4 2020. Benefits for private industry workers jumped 1.2% q/q (3.6% y/y). the largest quarterly gain since Q2 2022. The acceleration in benefits in Q1 was primarily in service-producing industries.

Compensation in private goods-producing industries increased 1.0% q/q (3.2% y/y) in Q1, the largest quarterly gain in five quarters, versus a 0.7% q/q increase in Q4. Compensation in construction jumped 1.3% q/q, its largest quarterly increase since Q2 2022, up from a 0.6% q/q gain in Q4. Manufacturing compensation growth slowed to 0.7% q/q, its slowest quarterly advance since Q4 2020, from 0.8% q/q in Q4. Compensation in private service-producing industries increased 0.8% q/q (3.5% y/y), down slightly from a 0.9% q/q gain in Q4. Compensation in education and health services jumped 1.3% q/q, its largest quarterly gain since Q3 2023. In contrast, compensation in other services edged up 0.1% q/q in Q1, its smallest quarterly advance since before the pandemic.

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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- Compensation grew 0.9 q/q in Q1, the same pace as in Q4.
- Wage growth slowed to 0.8% q/q while benefits surged 1.2% q/q, their largest quarterly increase since Q2 2022.

Employment Cost Growth Steady in Q1 2025

Kathleen Stephansen, CBE

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The ADP National Employment Report indicated that nonfarm private sector payrolls rose 62,000 (1.4% y/y) during April after increasing 147,000 (1.4% y/y) during March, revised from 155,000. A 124,000 April rise in ADP employment had been expected in the Action Economics Forecast Survey.

Growth in median annual pay for "job stayers" eased to 4.5% y/y during April, from 4.6% y/y in March and from 4.7% y/y in the prior two months. Manufacturing sector pay grew 4.6% y/y during April, down from 4.8% y/y in March. Construction sector pay was unchanged at 4.7% y/y. Natural resource & mining sector pay grew 4.4% y/y. Financial sector pay rose 5.1% y/y, while education & health services pay rose 4.7% y/y. Leisure & hospitality pay also increased 4.7% y/y. Professional & business service sector pay increased 4.3% y/y as did trade, transportation & utilities pay. Information pay rose 4.1% y/y. Median annual pay for “job changers” rose 6.9% y/y after 6.7% y/y in March.

Small business hiring (less than 50 employees) rose 11,000 (0.6% y/y) after rising 18,000 (0.6% y/y) in March, revised down from 52,000. Employment at medium-sized firms (50-499,000 employees) rose 40,000 (1.1% y/y) after rising 43,000 (1.1% y/y). Large business hiring (500+ employees) rose 12,000 (3.4% y/y) in April, after rising 61,000 (3.6% y/y) in March, revised from 59,000.

Goods-producing employment rose 26,000 (1.3% y/y) in April, after rising 16,000 (1.3% y/y) during March, revised from 24,000. Manufacturing jobs rose 4,000 (-0.2% y/y) after rising 17,000 (-0.3% y/y) in March. The number of construction sector jobs rose 16,000 (3.4% y/y) in April, following a 2,000 (3.6% y/y) March increase, revised from 6,000. Natural resources & mining jobs rose 6,000 (2.8% y/y) in April after falling 3,000 (+1.9% y/y) in March.

The number of service-producing jobs rose 34,000 (1.4% y/y) during April, following a rise of 131,000 (1.4% y/y) in March. Professional & business services employment fell 2,000 (0.6% y/y) after rising 46,000 (0.7% y/y) in the prior month, revised from 57,000. Employment in the financial industry rose 20,000 (2.1% y/y) in April, after rising 38,000 (2.0% y/y) in March. Leisure and hospitality employment increased 27,000 (3.0% y/y), following a 23,000 (2.9% y/y) March increase, revised from 17,000. The number of education & health care jobs fell 23,000 (1.6% y/y) in April, following a 15,000 (1.8% y/y) rise in March, revised from 12,000. Information sector employment fell 8,000 (-0.1% y/y) after a rise of 3,000 (0.2% y/y) in March. The number of jobs in trade, transportation & utilities rose 21,000 (0.4% y/y) in April, after falling 4,000 (+0.4% y/y) in March, revised from a 6,000 fall. Employment in “other” services rose fell 1,000 (+3.2% y/y) following a 10,000 (3.4% y/y) rise in March, revised from 11,000.

By region, employment in the Northeast increased 10,000 (1.9% y/y) in April, following an increase of 95,000 (2.0% y/y) in March, revised from 89,000. Employment in the Midwest rose 42,000 (1.5% y/y) after a gain of 84,000 (1.4% y/y) in March, revised from 81,000. In the South, employment rose 3,000 (1.3% y/y) during April, after rising 10,000 (1.4% y/y) in March, revised from 27,000. In the West, employment rose 9,000 (0.6% y/y) after declining 43,000 (+0.6% y/y), revised from a 41,000 decline in March.

The ADP National Employment Report and Pay Insights data can be found in Haver's **USECON** database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's **AS1REPNA** database.

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- Employment increase is modest in both services & factory sectors.
- Wage growth for “job stayers” moderates.
- Small and medium-sized business employment slows.

Economy in Brief: 2004

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Improved Assessment of Job Market Raised Consumer Confidence

Improved Assessment of Job Market Raised Consumer Confidence

Income, Services Flows Widen UK Current Account in Q3

Initial Unemployment Insurance Claims Bounced Up

New Home Sales Softer

U.S. Consumer Sentiment Rose Throughout December

U.S. Personal Income Rebounded

U.S. Durable Goods Orders Rebounded