Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030113a.jpg" width="353">
The OECD Index of Leading Indicators rose in November for the first month since May as a result of improvement in Continental Europe and in the US. Leaders in the UK and Japan continued a recent decline.
Real economic growth in the Major Seven OECD countries improved in 3Q as a result of respectable growth in the UK, the US and in Japan.
In Germany, real GDP growth was modest as industrial production fell hard in October for the fourth month in five. Retail sales volumes staged a modest recovery in November (-1.9% y/y) from a sharp October drop and were flat in 3Q. Harmonized consumer prices fell 0.5% in November and are down 0.7% from a July peak.
In the UK, production was flat in October following two months of moderate decline. Retail sales values were unchanged in November (3.2% y/y). Consumer prices were flat in November following little change in the months prior.
Production in France was erratic last year and showed little change through October. The leading indicators rose in November following five months of decline. Retail sales volumes have been firm (+2.5% y/y) and consumer prices fell in November (+2.1% y/y).
Production in Japan fell in October (5.5% y/y) for the second consecutive month. Retail sales values rose 2.2% in November and have moved sideways since the Spring. Prices actually rose in November (-0.3% y/y) for the first month in five.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/OECDMEI/OECDMEI.HTM">OECD Main Economic Indicators</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">OECD Total - Leading Index (Trend Restored)</td>
<td>120.1</td>
<td>119.8</td>
<td>4.2%</td>
<td>-2.1%</td>
<td>3.7%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>3Q02</td>
<td>2Q02</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Total</td>
<td>3.1%</td>
<td>2.2%</td>
<td>2.3%</td>
<td>0.8%</td>
<td>3.8%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Major Seven - GDP (Mil. 95 US$, SAAR)</td>
<td>3.1%</td>
<td>1.8%</td>
<td>2.2%</td>
<td>0.7%</td>
<td>3.4%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">European Union - GDP (Mil. 95 US$, SAAR)</td>
<td>1.7%</td>
<td>1.7%</td>
<td>1.1%</td>
<td>1.6%</td>
<td>3.6%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Germany - GDP (Bil. 95 Euros, SAAR)</td>
<td>1.1%</td>
<td>0.6%</td>
<td>0.4%</td>
<td>0.7%</td>
<td>3.1%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; United Kingdom - GDP (Mil. 95 Pounds, SAAR)</td>
<td>3.8%</td>
<td>2.6%</td>
<td>2.1%</td>
<td>2.0%</td>
<td>3.1%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Japan - GDP (Bil. 95 Yen, SAAR)</td>
<td>3.0%</td>
<td>4.2%</td>
<td>1.5%</td>
<td>-0.9%</td>
<td>2.2%</td>
<td>0.7%</td>
</tr>
</tbody>
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The OECD Index of Leading Indicators rose in November for the first month since May as a result of improvement in Continental Europe and in the US. Leaders in the UK and Japan continued a recent decline. Real economic growth in the [...]

OECD Leaders On the Mend?

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030110a.jpg" width="353">
Nonfarm payrolls were quite weak last month, falling 101,000 instead of rising 20,000 as expected by Consensus estimates. The decline in November payrolls was about doubled (mostly due to lowered private services) but figures for October were revised up.
Last month&#39;s decline in payrolls was the third in four months, rounding out the weakest year for the US job market since 1991.
The one-month diffusion index for nonfarm payrolls was hardly changed at 45.5. November&#39;s level was revised down. The three month diffusion index fell to 42.8. These indices are leading indicators and suggest negative employment growth near term.
As expected, the unemployment rate held its high level of the month prior. Employment fell 273,000 (-0.1% y/y), the third consecutive large decline. The labor force fell 191,000 (0.2% y/y), also the third consecutive decline.
Amongst industries the number of factory sector jobs continued down, falling 65,000 (-3.5% y/y). It was the largest monthly percentage decline (0.4%) in manufacturing jobs since February. The one-month diffusion index for the factory sector dropped to 37.5, its lowest level since February and suggested further declines in factory sector jobs. Construction jobs rose a slight 3,000 (-1.4% y/y) following two months of decline. Jobs in service producing industries rose 42,000 (0.5% y/y), the second consecutive decline. Government employment rose 14,000 (1.2% y/y).
The length of the workweek fell slightly last month. For the quarter the workweek was up slightly versus 3Q. The index of aggregate hours worked (employment times hours worked) fell to the lowest level since July. The 4Q average was unchanged from 3Q.
Over the last ten years there has been a 53% correlation between the quarterly change in aggregate hours worked and real GDP. That correlation is down from 89% in the 1980s. The decline is due to the recent acceleration in productivity growth.
The 0.3% gain in average hourly earnings was as expected.
The nonfarm payroll employment figures are based on reports provided to the US Labor Department by businesses, while the figures from which the unemployment rate is derived are based on a survey of US households.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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<td class="firstcol">Payroll Employment</td>
<td>-101,000</td>
<td>-88,000</td>
<td>-0.1%</td>
<td>-0.9%</td>
<td>0.2%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-65,000</td>
<td>-57,000</td>
<td>-3.5%</td>
<td>-5.5%</td>
<td>-4.2%</td>
<td>-0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>34.1</td>
<td>34.2</td>
<td>34.1</td>
<td>34.2</td>
<td>34.2</td>
<td>34.4</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.2%</td>
<td>3.0%</td>
<td>3.2%</td>
<td>4.0%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>6.0%</td>
<td>6.0%</td>
<td>5.8%</td>
<td>5.8%</td>
<td>4.8%</td>
<td>4.0%</td>
</tr>
</tbody>
</table>
ECRI Leading Indicators Recover 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 10, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030110b.jpg" width="353">
The Weekly Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) rose sharply in the opening week of 2003.
The level of the leading index added to a slight gain in December. In November, the index rose meaningfully from the October low. Despite these gains, the six-month growth rate of the index remained negative at -2.4%.
Construction of the ECRI Leading Index differs from the Index of Leading Economic Indicators published by the Conference Board. Nevertheless there has been an 80% correlation between the annual percent change in the two over the last 20 years.
The components of the index are money supply plus stock &amp; bond mutual funds, the JOC-ECRI industrial materials price index, mortgage applications, bond quality spreads, stock prices, bond yields, and initial jobless insurance claims.
The median lead of the ECRI index at business cycle peaks has been 10.5 months and at cycle troughs 3.0 months. The sideways movement of the leading index in 2002 may or may not signal something about the economy&#39;s growth rate.
For more on ECRI and the Weekly Leading Index click <a href="http://www.businesscycle.com/">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/weekly/@W8/@W801/@W801.HTM">ECRI</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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<td class="firstcol">Leading Index</td>
<td>118.2</td>
<td>118.1</td>
<td>-1.1%</td>
<td>0.9%</td>
<td>-5.2%</td>
<td>1.0%</td>
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</tbody>
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Nonfarm payrolls were quite weak last month, falling 101,000 instead of rising 20,000 as expected by Consensus estimates. The decline in November payrolls was about doubled (mostly due to lowered private services) but figures for [...]

Nonfarm Payrolls Again Fell Unexpectedly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030109a.jpg" width="353">
Initial claims for unemployment insurance were lower than expected during New Year&#39;s week. Claims fell 19,000 from the prior week&#39;s level which was revised slightly higher. The incidence of two holidays in back to back weeks historically has generated volatility in these seasonally adjusted figures.
The four-week moving average of initial claims fell to 406,000, down 0.2% y/y.
Continuing claims for unemployment insurance rose 1.0%. The prior week&#39;s level was revised down slightly.
The insured rate of unemployment was 2.7% for the fifth week in six.

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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">1/04/03</th>
<th scope="col">12/28/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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</thead>
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<td class="firstcol">Initial Claims</td>
<td>389.0</td>
<td>408.0</td>
<td>-2.3%</td>
<td>405.0</td>
<td>405.8</td>
<td>299.8</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,445</td>
<td>0.0%</td>
<td>3,588</td>
<td>3,021</td>
<td>2,114</td>
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Initial claims for unemployment insurance were lower than expected during New Year's week. Claims fell 19,000 from the prior week's level which was revised slightly higher. The incidence of two holidays in back to back weeks [...]

Initial Claims for Unemployment Insurance Fell Slightly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030108a.jpg" width="353">
The index of mortgage applications, compiled by the Mortgage Bankers Association, jumped 24.3% in the opening week of 2003.
Mortgage applications to refinance popped 29.1%, up 55% from four weeks earlier. Through 3Q02, Freddie Mac reported that 45% of mortgage refinancings were for a loan amount that was 5% higher.
Interest rates on conventional 30 Year mortgages rose to 5.85% from the low of 5.69% one week earlier.
Mortgage applications for home purchase also rose strongly following two weeks of decline.
For analysis by the Federal Reserve of mortgage refinancing trends, click <a href="http://www.federalreserve.gov/pubs/bulletin/2002/1202lead.pdf">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">1/03/03</th>
<th scope="col">12/06/02</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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<td class="firstcol">Total Market Index</td>
<td>1,182.3</td>
<td>862.7</td>
<td>799.7</td>
<td>625.6</td>
<td>322.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>376.2</td>
<td>358.8</td>
<td>354.7</td>
<td>304.9</td>
<td>302.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>5,871.1</td>
<td>3,793.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
<td>438.8</td>
</tr>
</tbody>
</table>
Consumer Credit Outstanding Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 8, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030108b.jpg" width="353">
Consumer credit outstanding fell unexpectedly in November. Consensus expectations were for roughly a $4.0B rise. October figures were little revised. So far this year, consumer credit outstanding has risen at a 3.5% annual rate.
Nonrevolving credit fell for the second consecutive month and for the third month in four. Nonrevolving extension was up 3.6% (AR) YTD.
Revolving credit also fell for the first time since February. Revolving credit growth was 3.5% (AR) through November.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E103/@E10308/@E10308.HTM">Consumer Credit Outstanding</a></th>
<th scope="col">Nov m/m</th>
<th scope="col">Oct m/m</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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<td class="firstcol">Total</td>
<td>$-2.2B</td>
<td>$1.6B</td>
<td>3.5%</td>
<td>6.9%</td>
<td>10.2%</td>
<td>7.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$-1.6B</td>
<td>$2.4B</td>
<td>2.4%</td>
<td>5.0%</td>
<td>11.5%</td>
<td>6.3%</td>
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<tr class="odd">
<td class="firstcol">&nbsp; Nonrevolving</td>
<td>$-0.7B</td>
<td>$-0.9B</td>
<td>4.2%</td>
<td>8.3%</td>
<td>9.2%</td>
<td>8.4%</td>
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The index of mortgage applications, compiled by the Mortgage Bankers Association, jumped 24.3% in the opening week of 2003. Mortgage applications to refinance popped 29.1%, up 55% from four weeks earlier. Through 3Q02, Freddie Mac [...]

Mortgage Applications Surged

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030107x.jpg" width="353">
After improving slightly earlier in 2002, Euro-zone consumer confidence has weakened since mid year. Eurostat reported that the percent balance of respondents to their survey questions, reporting an increase less the percent reporting a decrease, fell from -14% in November to -16% in December, the lowest level since early 1997.
The overall balance of consumer confidence is based on consumers&#146; expectations, over the next twelve months, for the financial situation, general economic climate, unemployment and savings rate. From November to December, consumers reported no change in the outlook for their financial situation, a worsening in the economic climate, a rise in unemployment and a drop in savings rate. As can be seen in the attached chart, the overall index is heavily influenced by consumers&#146; expectations of unemployment.

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<th scope="col" class="firstcol">&nbsp;Percent Balance</th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Dec/Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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<td class="firstcol">Consumer Confidence</td>
<td>-16</td>
<td>-14</td>
<td>-2</td>
<td>-5</td>
<td>-11</td>
<td>-5</td>
<td>1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Expectations:</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
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<td class="firstcol">&nbsp;&nbsp;&nbsp; Financial Situation</td>
<td>-4</td>
<td>-4</td>
<td>0</td>
<td>-4</td>
<td>-1</td>
<td>2</td>
<td>4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; General Econ Climate</td>
<td>-19</td>
<td>-15</td>
<td>-4</td>
<td>-3</td>
<td>-12</td>
<td>-9</td>
<td>1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Unemployment</td>
<td>33</td>
<td>30</td>
<td>3</td>
<td>3</td>
<td>26</td>
<td>13</td>
<td>1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Savings</td>
<td>-9</td>
<td>-7</td>
<td>-2</td>
<td>-10</td>
<td>-3</td>
<td>1</td>
<td>0</td>
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After improving slightly earlier in 2002, Euro-zone consumer confidence has weakened since mid year. Eurostat reported that the percent balance of respondents to their survey questions, reporting an increase less the percent reporting [...]

Euro-zone Consumer Confidence Weakens

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030107b.jpg" width="353">
Manufacturing inventories fell in November following a slight decline the month prior that initially was reported as no change. The declines follow a brief two months of accumulation.
The figures are broadly consistent with the ISM survey which indicated that inventories continued to run off, though at a rate slower than early in 2002 and 2001.
Inventory decumulation in November was significant in the transportation sector, but outside of automobiles which have risen for the last three months.
Inventory declines also continued in a broad range of durable goods industries including electrical equipment, machinery, fabricated metals. Inventories of computers and furniture rose.
Nondurable goods inventories fell 0.4% (0.4% y/y) following five months of gain.
For analysis by the Federal Reserve Bank of New York of how inventory dynamics have changed, click <a href="http://www.newyorkfed.org/rmaghome/staff_rp/2002/sr156.html">here</a>.
Factory shipments fell sharply, nearly reversing all of the prior month&#39;s gain. For the year shipments have risen 2.4%. Gains for the year have been dominated by increases in the primary metals and miscellaneous categories.
Factory orders fell 0.8%, slightly more than expectations based on the advance report that durable goods orders fell 1.4%. That decline was revised to -1.5% (1.3% YTD).

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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>-0.3%</td>
<td>-0.1%</td>
<td>-3.6%</td>
<td>-8.0%</td>
<td>4.5%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>-0.8%</td>
<td>1.4%</td>
<td>3.5%</td>
<td>-7.2%</td>
<td>5.2%</td>
<td>4.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-0.8%</td>
<td>1.2%</td>
<td>2.7%</td>
<td>-5.3%</td>
<td>4.4%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
Chain Store Sales Fell Slightly 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 7, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030107a.jpg" width="353">
Chain store sales fell during the final week of last year, but gave back just 0.2% of the huge 2.1% gain during Christmas week, according to the BTM-UBSW survey.
December sales rose 0.1% (2.8% y/y) from the November average.
During the last ten years there has been a 48% correlation between the year-to-year percent change in monthly chain store sales and the change in GAF retail sales. That correlation rose to 63% during the last five years.

<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/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">1/04/03</th>
<th scope="col">12/28/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>408.0</td>
<td>409.0</td>
<td>3.3%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

Manufacturing inventories fell in November following a slight decline the month prior that initially was reported as no change. The declines follow a brief two months of accumulation. The figures are broadly consistent with the ISM [...]

Factory Inventories Resumed Decumulation

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030106a.jpg" width="353">
Unit sales of light vehicles surged in December to the highest level since August as zero percent financing incentives again took hold. Sales fell for the second consecutive calendar year since the high of 2000. December sales were much better than Consensus expectations for a 16.1M unit sales rate.
Sales of domestically built vehicles rose 17.7% m/m. Nevertheless, sales were well off the monthly high sales rate of 17.7M units in October 2001. Auto sales rose 10.0% m/m but sales of light trucks surged 23.8%.
Imported vehicle sales rose 0.9% m/m following the strong 14.7% gain in November. Imported auto sales fell 1.4% but truck sales rose 5.8%.
Imports&#39; share of the US light vehicle market fell to 18.4% in December. For the year, imports&#39; share of the US vehicle market averaged 19.5% versus 17.8% during 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/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil.Units)</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</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>18.32</td>
<td>16.04</td>
<td>10.7%</td>
<td>16.78</td>
<td>17.26</td>
<td>17.40</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Domestic</td>
<td>14.94</td>
<td>12.69</td>
<td>12.3%</td>
<td>13.51</td>
<td>14.19</td>
<td>14.58</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imported</td>
<td>3.38</td>
<td>3.35</td>
<td>4.2%</td>
<td>3.27</td>
<td>3.07</td>
<td>2.82</td>
</tr>
</tbody>
</table>
ISM Nonmanufacturing Index Eased 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 6, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030106b.jpg" width="353">
The Institute for Supply Management business activity index of the nonmanufacturing sector fell last month but remained at the second highest level since June. Consensus expectations were for a decline to 55.5.
Of the seasonally adjusted subgroups, the employment index rose modestly to its highest level since August. The new orders index fell slightly to a still high 56.3 and imports fell.
Business activity for the nonmanufacturing sector is a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index weights the components.
The not seasonally adjusted index of prices fell sharply to the lowest level since February.
During the last five years, there has been a 57% correlation between the level of the price index in the NAPM nonmanufacturing survey and the three month growth in the CPI for services less rent of shelter.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The nonmanufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively. 

<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/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</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">Business Activity Index</td>
<td>54.7</td>
<td>57.4</td>
<td>50.1</td>
<td>55.1</td>
<td>49.0</td>
<td>59.2</td>
</tr>
</tbody>
</table>
Challenger Survey Shows Layoffs Plunged in December 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 6, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030106c.jpg" width="353">
According to Challenger, Gray &amp; Christmas, announced job cuts plunged last month from the elevated levels of October and November.
Because of the earlier surge in layoffs, the three month moving average of job cut announcements rose again to 142,145, the highest level since March. Nevertheless, layoffs were still well below the highs of late 2001.
Announcements of job cuts varied greatly amongst industries with large decline in the electronics, entertainment and financial industries offset by huge increases in health care, pharmaceutical and retail.

<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/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>92,917</td>
<td>157,508</td>
<td>-42.5%</td>
<td>1,431,052</td>
<td>1,956,876</td>
</tr>
</tbody>
</table>
</body>
</html>

Unit sales of light vehicles surged in December to the highest level since August as zero percent financing incentives again took hold. Sales fell for the second consecutive calendar year since the high of 2000. December sales were [...]

U.S. Light Vehicle Sales Surge

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030103a.jpg" width="353">
The value of construction put in place rose about as expected in November, but the figures for October were revised up sharply due to raised estimates of residential construction.
In constant 1996 dollars, overall construction spending was unchanged and was down 1.4% YTD. Real residential spending was up 4.7% YTD but nonresidential activity fell 14.7% in real terms.
Residential building rose 0.9%, the fourth strong gain in five months. Spending on one-unit structures rose 1.6%, the third consecutive month of strong gain. 
Nonresidential building activity declined slightly following the October bounce. Spending here was down 13.9% YTD. Spending on industrial buildings fell 1.5% (-41.3% YTD).
Public construction rose led by broad based gains amongst categories.

<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/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.3%</td>
<td>1.0%</td>
<td>0.8%</td>
<td>2.5%</td>
<td>7.3%</td>
<td>8.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential</td>
<td>0.9%</td>
<td>1.2%</td>
<td>6.7%</td>
<td>3.3%</td>
<td>7.4%</td>
<td>11.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.1%</td>
<td>1.5%</td>
<td>-14.4%</td>
<td>-3.1%</td>
<td>7.1%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Public</td>
<td>1.5%</td>
<td>-0.4%</td>
<td>5.6%</td>
<td>7.4%</td>
<td>5.4%</td>
<td>10.6%</td>
</tr>
</tbody>
</table>
</body>
</html>

The value of construction put in place rose about as expected in November, but the figures for October were revised up sharply due to raised estimates of residential construction. In constant 1996 dollars, overall construction [...]

Construction Spending Up Slightly

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: January 2003

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