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/050113c.jpg" width="353">
Some months ago in this space, Louise Curley explained how the large Japanese current account was bringing Japan a strong influx of foreign exchange reserves. However, this situation shifted soon after that report appeared. The current account surplus has tapered a bit in the most recent months, although it has still been large enough that the average for the 11 months of 2004 indicates a continuing uptrend over the last several years.
But the financial account has turned around. Net inflows of funds through the financial accounts averaged &yen;683 billion in 2003, when the influx of FX reserves was largest. Now, the financial account is negative: Japanese assets abroad are increasing, sending capital out of the country. As seen in the accompanying graph, this has been going on persistently since April. As a result, the rise in FX reserves has slowed dramatically: the last three months have averaged just &yen;173 billion, compared with &yen;1.561 trillion for the year through November. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050113d.jpg" width="353">
So far this change in financial flows has meant little to the value of the yen. It continues to rise against the dollar, which today is running about &yen;102.50. The pace of increase has slowed very recently from the sharp move in November, which is evident from the table below. But it remains on an upward path, illustrating that sometimes, currency trends respond to factors other than trade flows and even other than capital flows. Political, cultural and even weather factors can impact traders&#39; assessments of a nation&#39;s standard of value.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Trillions of Yen</th>
<th scope="col">Nov 2004</th>
<th scope="col">Oct 2004</th>
<th scope="col">Sept 2004</th>
<th scope="col">Nov 2003</th>
Monthly Average
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004*</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Current Account, SA</td>
<td>+1.386</td>
<td>+1.362</td>
<td>+1.495</td>
<td>+1.453</td>
<td>+1.546</td>
<td>+1.330</td>
<td>+1.184</td>
</tr>
<tr class="odd">
<td class="firstcol">Financial Account, NSA</td>
<td>-1.389</td>
<td>-0.632</td>
<td>-0.864</td>
<td>+0.706</td>
<td>+0.173</td>
<td>+0.683</td>
<td>-0.671</td>
</tr>
<tr>
<td class="firstcol">Change in Reserves, NSA</td>
<td>+0.298</td>
<td>+0.109</td>
<td>+0.112</td>
<td>+1.752</td>
<td>+1.561</td>
<td>+1.794</td>
<td>+0.483</td>
</tr>
<tr class="odd">
<td class="firstcol">Exchange Rate: Yen/$</td>
<td>104.70</td>
<td>108.78</td>
<td>110.09</td>
<td>109.18</td>
<td>108.55</td>
<td>115.92</td>
<td>125.27</td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Trillions of Yen</th>
<th scope="col">Nov 2004</th>
<th scope="col">Oct 2004</th>
<th scope="col">Sept 2004</th>
<th scope="col">Nov 2003</th>
Monthly Average
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004*</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Current Account, SA</td>
<td>+1.386</td>
<td>+1.362</td>
<td>+1.495</td>
<td>+1.453</td>
<td>+1.546</td>
<td>+1.330</td>
<td>+1.184</td>
</tr>
<tr class="odd">
<td class="firstcol">Financial Account, NSA</td>
<td>-1.389</td>
<td>-0.632</td>
<td>-0.864</td>
<td>+0.706</td>
<td>+0.173</td>
<td>+0.683</td>
<td>-0.671</td>
</tr>
<tr>
<td class="firstcol">Change in Reserves, NSA</td>
<td>+0.298</td>
<td>+0.109</td>
<td>+0.112</td>
<td>+1.752</td>
<td>+1.561</td>
<td>+1.794</td>
<td>+0.483</td>
</tr>
<tr class="odd">
<td class="firstcol">Exchange Rate: Yen/$</td>
<td>104.70</td>
<td>108.78</td>
<td>110.09</td>
<td>109.18</td>
<td>108.55</td>
<td>115.92</td>
<td>125.27</td>
</tr>
</tbody>
</table>
</body>
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Some months ago in this space, Louise Curley explained how the large Japanese current account was bringing Japan a strong influx of foreign exchange reserves. However, this situation shifted soon after that report appeared. The [...]

Japan Current Account Surplus Sustained, as Financial Accounts Show Capital Outflow

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050113a.jpg" width="353">
US retail sales surged 1.2% in December on the strength of a 4.3% (8.9% y/y) jump in spending on motor vehicles. Consensus expectations had been for a 1.0% gain following the 0.1% rise in November sales which was unrevised.
Sales excluding motor vehicles rose 0.3% but the 0.4% gain in November sales was slightly lower than initially reported. Consensus expectations had been for a 0.4% increase.
Lower prices for gasoline dropped sales at gasoline service stations 2.0% (+21.8% y/y). Nonauto retail sales less gasoline jumped 0.6% (7.2% y/y). After a 7.0% decline in December, gasoline prices are 3.0% lower in January.
Gains in discretionary spending centered on a 1.0% (4.9%) rise in sales of furniture/home furnishings &amp; electronics/appliances that was driven by a 2.2% (6.4% y/y) jump in spending on furniture. Sales at general merchandise stores also rose a firm 0.7% (7.0% y/y). Clothing &amp; accessory store sales slipped for the second month, by 0.6% (3.3% y/y) following a revised 0.8% decline in November that was much deeper than initially estimated.
Building materials, garden equipment &amp; supply dealers&#39; sales jumped 1.2% (13.2% y/y).

<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">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>
</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>1.2%</td>
<td>0.1%</td>
<td>8.7%</td>
<td>7.6%</td>
<td>5.3%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>0.3%</td>
<td>0.4%</td>
<td>8.6%</td>
<td>8.5%</td>
<td>5.2%</td>
<td>3.2%</td>
</tr>
</tbody>
</table>
</body>
</html>

US retail sales surged 1.2% in December on the strength of a 4.3% (8.9% y/y) jump in spending on motor vehicles. Consensus expectations had been for a 1.0% gain following the 0.1% rise in November sales which was unrevised. Sales [...]

U.S. Retail Spending Boosted By Vehicle Sales

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050113a.jpg" width="353">
US retail sales surged 1.2% in December on the strength of a 4.3% (8.9% y/y) jump in spending on motor vehicles. Consensus expectations had been for a 1.0% gain following the 0.1% rise in November sales which was unrevised.
Sales excluding motor vehicles rose 0.3% but the 0.4% gain in November sales was slightly lower than initially reported. Consensus expectations had been for a 0.4% increase.
Lower prices for gasoline dropped sales at gasoline service stations 2.0% (+21.8% y/y). Nonauto retail sales less gasoline jumped 0.6% (7.2% y/y). After a 7.0% decline in December, gasoline prices are 3.0% lower in January.
Gains in discretionary spending centered on a 1.0% (4.9%) rise in sales of furniture/home furnishings &amp; electronics/appliances that was driven by a 2.2% (6.4% y/y) jump in spending on furniture. Sales at general merchandise stores also rose a firm 0.7% (7.0% y/y). Clothing &amp; accessory store sales slipped for the second month, by 0.6% (3.3% y/y) following a revised 0.8% decline in November that was much deeper than initially estimated.
Building materials, garden equipment &amp; supply dealers&#39; sales jumped 1.2% (13.2% y/y).

<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">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>
</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>1.2%</td>
<td>0.1%</td>
<td>8.7%</td>
<td>7.6%</td>
<td>5.3%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>0.3%</td>
<td>0.4%</td>
<td>8.6%</td>
<td>8.5%</td>
<td>5.2%</td>
<td>3.2%</td>
</tr>
</tbody>
</table>
Initial Unemployment Insurance Claims Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 13, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050113b.jpg" width="353">
Initial claims for unemployment insurance rose 10,000 to 367,000 last week but the sharp gain the prior week was lessened slightly to 35,000. Consensus expectations had been for a decline to 340,000 claims.
The four week moving average of initial claims rose to 344,000 (-3.6% 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 a huge 219,000 following an upwardly revised 71,000 increase the week prior.
The insured rate of unemployment fell to 2.1% from an upwardly revised 2.3% the week prior.
&quot;Why Are Married Women Working More? Some Macroeconomic Explanations&quot; from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/files/br/brq404ak.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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">01/08/05</th>
<th scope="col">01/01/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>367</td>
<td>357</td>
<td>4.3%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,631</td>
<td>-17.3%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
Import Prices Lower With Petroleum, Non Oil Prices Firm 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 13, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050113g.jpg" width="353">
Import prices fell 1.3% last month due to sharply lower prices for petroleum. The Consensus expectation had been for a 0.4% decline. Nonpetroleum prices, however, rose 0.5% and raised the y/y increase to 3.8%, its highest since 1995.
During the last ten years there has been a (negative) 55% correlation between the level of the dollar and the y/y change in nonpetroleum import prices.
Import pricing strength in December was most pronounced for foods, feeds &amp; beverages which rose 1.0% (7.8% y/y). Gains elsewhere were more moderate, but up moderately from earlier lows. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050113h.jpg" width="353">
Capital goods prices rose 0.3% and the y/y change rose to -0.9% versus earlier 2% to 8% rates of decline. Excluding computers capital goods prices rose 0.5% and the y/y gain of 1.9% compared to price deflation of 1.9% in 2002 and of 4.2% during 1997. Non-auto consumer goods import prices rose 0.3% and the y/y change rose to 0.7% versus a peak rate of decline of 1.6% in early 2002.
Petroleum prices fell 1.5% as the price of Brent crude oil fell to $39.12 in December. It rose to $43.16 last week.
Export prices rose 0.2%. Nonagricultural export prices rose 0.1% (4.9% y/y).

<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">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>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>-1.3%</td>
<td>-0.2%</td>
<td>6.9%</td>
<td>5.7%</td>
<td>2.9%</td>
<td>-2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-11.5%</td>
<td>-5.7%</td>
<td>30.8%</td>
<td>30.6%</td>
<td>21.0%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.5%</td>
<td>0.9%</td>
<td>3.8%</td>
<td>2.6%</td>
<td>1.1%</td>
<td>-2.4%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.2%</td>
<td>0.3%</td>
<td>4.1%</td>
<td>3.9%</td>
<td>1.6%</td>
<td>-1.0%</td>
</tr>
</tbody>
</table>
Small Business Optimism Slipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 13, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050113e.jpg" width="353">
The Small Business Optimism Index published by the National Federation of Independent Business (NFIB) slipped 1.5% in December from the twenty year high to 106.1.
During the last ten years there has been a 68% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percentage of firms expecting the economy to improve fell ten points to 37 but the 4Q level was the highest of the year. The percent of firms planning to raise employment also fell to a still high 17%. During the last ten years there has been a 65% correlation between these hiring plans and the three month growth in nonfarm payrolls. The percentage of firms with one or more job openings rose back to 23%, the highest level since 2001. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050113f.jpg" width="353">
The percentage of firms expecting higher real sales in 6 months remained at an elevated 35%. The net of firms expecting higher earnings this quarter slipped.
The percentage of firms raising average selling prices fell to 15%, the lowest since February.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</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>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>106.1</td>
<td>107.7</td>
<td>-0.7%</td>
<td>104.6</td>
<td>101.3</td>
<td>101.2</td>
</tr>
</tbody>
</table>
</body>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040113c.jpg" width="353">
The lackluster performance of the past two years of industrial production in France and in the UK continued in November with declines in both countries. In France, total industrial production declined 0.40% but was 1.21% above November of 2002. In the UK, industrial production declined 0.19% in November and was 0.42% below the year ago figure.
Production of consumer goods was down in both countries. In France, production of capital goods was up almost 1% from October and over 6% from November, 2002 while, in the UK, capital goods production declined 0.32% in November, but was 4.24% above a year ago.
While exchange rates, through their impact on export demand, are only one factor affecting the level of industrial production, the dampening effect of the rapid rise in both the pound and the euro over the past two years has probably been a significant factor in the lackluster performance of industrial production in both the UK and France. From the end of 2001 to the end of November, 2003, the pound has risen 18% while the euro has risen 35% or almost twice as much. 

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Industrial Production (2000=100)</th>
<th scope="col">Nov 03</th>
<th scope="col">Oct 03</th>
<th scope="col">Nov 02</th>
<th scope="col">M/M&nbsp; %</th>
<th scope="col"> Y/Y&nbsp; %</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">France Total</td>
<td>100.6</td>
<td>101.0</td>
<td>99.4</td>
<td>-0.40</td>
<td>1.21</td>
<td>100.0</td>
<td>101.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital goods</td>
<td>103.1</td>
<td>102.1</td>
<td>96.9</td>
<td>0.98</td>
<td>6.40</td>
<td>99.8</td>
<td>101.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer ex autos</td>
<td>101.4</td>
<td>102.8</td>
<td>100.6</td>
<td>-1.36</td>
<td>0.80</td>
<td>100.1</td>
<td>101.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>107.3</td>
<td>107.9</td>
<td>107.6</td>
<td>-0.56</td>
<td>-0.28</td>
<td>106.3</td>
<td>105.8</td>
</tr>
<tr class="odd">
<td class="firstcol">UK Total</td>
<td>94.7</td>
<td>95.7</td>
<td>95.1</td>
<td>-1.04</td>
<td>-0.42</td>
<td>95.7</td>
<td>98.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital goods</td>
<td>93.4</td>
<td>93.7</td>
<td>89.6</td>
<td>-0.32</td>
<td>4.24</td>
<td>90.0</td>
<td>98.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer durables</td>
<td>104.1</td>
<td>104.3</td>
<td>104.4</td>
<td>-0.19</td>
<td>-0.29</td>
<td>103.8</td>
<td>102.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer non-durables</td>
<td>100.1</td>
<td>101.6</td>
<td>99.7</td>
<td>-1.48</td>
<td>0.40</td>
<td>100.0</td>
<td>101.2</td>
</tr>
</tbody>
</table>
</body>
</html>

The lackluster performance of the past two years of industrial production in France and in the UK continued in November with declines in both countries. In France, total industrial production declined 0.40% but was 1.21% above [...]

November Industrial Production Declines in the UK and France

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040113b.jpg" width="353">
Chain store sales fell 0.4% last week and that followed a 0.1% dip in the opening week of 2004, according to the ICSC-UBS survey.
So far in January sales are up 1.9% versus December.
During the last five years there has been a 61% correlation between the year-to-year percent change in the ICSC-UBS measure of chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<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"> ICSC-UBS</a><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM"> (SA, 1977=100)</a></th>
<th scope="col">01/10/04</th>
<th scope="col">01/03/04</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>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>429.2</td>
<td>430.9</td>
<td>4.9%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Import Prices Tame 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 13, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040113a.jpg" width="353">
Imported commodities prices rose 0.2% last month, much less than Consensus expectations for a 0.5% increase. Prices in November were revised up due to a raised estimate of petroleum prices but the previously reported November gain in nonpetroleum import prices was revised down to 0.2% from 0.3%.
Non-petroleum import prices rose just 0.1% last month and reflected broad based weakness. Capital goods prices fell 0.2% and were down 1.3% during all of last year. Non-auto consumer goods prices were unchanged m/m and down 0.2% for the year while auto prices also were unchanged m/m for the second consecutive month.
During the last fifteen years there has been a (negative) 54% correlation between the trade-weighted exchange value of the dollar and the y/y change in nonpetroleum import prices
Petroleum prices rose 1.8% in December and have risen further in January. The price of Brent Crude Oil has neared $32.00/bbl this month versus $29.69 averaged in December.
Export prices rose a moderate 0.2% though foods, feeds &amp; beverages prices continued strong, up 1.0% m/m and 8.4% for the year. Nonagricultural export prices rose 0.2% m/m and 1.0% in 2003.

<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">Dec</th>
<th scope="col">Nov</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">Import - All Commodities</td>
<td>0.2%</td>
<td>0.5%</td>
<td>1.9%</td>
<td>2.9%</td>
<td>-2.5%</td>
<td>-3.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>1.8%</td>
<td>2.1%</td>
<td>9.1%</td>
<td>20.6%</td>
<td>3.0%</td>
<td>-17.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.1%</td>
<td>0.2%</td>
<td>1.0%</td>
<td>1.1%</td>
<td>-2.4%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.2%</td>
<td>0.5%</td>
<td>2.2%</td>
<td>1.6%</td>
<td>-1.0%</td>
<td>-0.8%</td>
</tr>
</tbody>
</table>
</body>
</html>

Chain store sales fell 0.4% last week and that followed a 0.1% dip in the opening week of 2004, according to the ICSC-UBS survey. So far in January sales are up 1.9% versus December. During the last five years there has been a 61% [...]

Chain Store Sales Down Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040112c.jpg" width="353">
German industrial production rose 1.33% in November after a revised 2.8% rise in October.(Unrevised figure was 2.4%). This is the first time two successive month to month increases were recorded since early 2002.
In spite of the rising Euro, it appears that export demand is fueling the rise in production rather than domestic demand. Reflecting the rises in actual exports and new orders for exports, capital goods production was up 4.03% in November and 5.42% above November, 2002. In contrast, production of consumer goods fell 0.88% in November and was 2.98% below November 2002. Retail sales have shown no consistently positive trend over the past two years and preliminary estimates for December sales are discouraging. 

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Nov 03</th>
<th scope="col">Oct 03</th>
<th scope="col">Nov 02</th>
<th scope="col"> M/M&nbsp; % </th>
<th scope="col"> Y/Y&nbsp; %</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">Industrial Production 1995=100l</td>
<td>114.6</td>
<td>113.1</td>
<td>113.4</td>
<td>1.33</td>
<td>1.06</td>
<td>111.8</td>
<td>1113.3</td>
<td>113.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital Goods</td>
<td>141.9</td>
<td>136.4</td>
<td>134.6</td>
<td>4.03</td>
<td>5.42</td>
<td>131.1</td>
<td>134.5</td>
<td>130.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>100.8</td>
<td>101.7</td>
<td>103.9</td>
<td>-0.88</td>
<td>-2.98</td>
<td>103.6</td>
<td>105.3</td>
<td>105.6</td>
</tr>
<tr>
<td class="firstcol">New Orders 2000=100</td>
<td>101.8</td>
<td>101.2</td>
<td>100.4</td>
<td>0.59</td>
<td>1.39</td>
<td>98.3</td>
<td>98.3</td>
<td>100.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic</td>
<td>97.6</td>
<td>97.2</td>
<td>95.5</td>
<td>0.41</td>
<td>2.20</td>
<td>94.6</td>
<td>97.6</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Export</td>
<td>107.0</td>
<td>106.2</td>
<td>106.5</td>
<td>0.75</td>
<td>0.47</td>
<td>102.8</td>
<td>99.1</td>
<td>100.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports Bil. Euros (Moving Average)</td>
<td>56.42</td>
<td>54.19</td>
<td>55.89</td>
<td>4.12</td>
<td>0.95</td>
<td>54.52</td>
<td>53.42</td>
<td>49.71</td>
</tr>
<tr>
<td class="firstcol">Retail Sales 2000=100</td>
<td>100.2</td>
<td>101.3</td>
<td>100.1</td>
<td>-1.09</td>
<td>-0.79</td>
<td>101.3</td>
<td>102.1</td>
<td>100.0</td>
</tr>
</tbody>
</table>
</body>
</html>

German industrial production rose 1.33% in November after a revised 2.8% rise in October.(Unrevised figure was 2.4%). This is the first time two successive month to month increases were recorded since early 2002. In spite of the [...]

German Industrial Production Rises in November: Export Demand Not Consumer Demand is the Catalyst

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040112a.jpg">
The Index of Leading Indicators for the Major Seven OECD Countries rose 0.7% (5.3% y/y) in November, the eighth consecutive firm monthly gain. Revisions to the leading indexes for Japan and in North America substantially lowered growth in 2001 and 2002.
Six-month growth in the leading index rose to 7.7%, the strongest in nearly ten years.
Gains amongst the member country leading indexes again were broad and strong. The leading index for the European Union rose 0.5% (4.5% y/y), the strongest y/y growth since 2003.
In France, the leading index jumped 0.9% (3.8% y/y) as the yield curve steepened, factory sector prospects brightened and the future tendency of production rose. The leaders in Germany also jumped 1.1% (6.8% y/y) as a firmer orders inflow led to an improved business climate. In Italy the leaders fell for the second consecutive month (+2.2% y/y).
In Canada the leading index fell slightly in November (3.2% y/y) and in the U.K. the leaders were unchanged (+0.7% y/y), soft for the third consecutive month despite firmer prospects for production. Leading indicators in the United States jumped 1.4% (8.2% y/y).
Leaders in Japan fell 0.2% (1.9% y/y) as share prices eased.
Visit the OECD&#39;s website at this <a href="http://www.oecd.org/home/">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/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">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">OECD Major Seven - Leading Index (Trend Restored)</td>
<td>120.9</td>
<td>120.1</td>
<td>5.3%</td>
<td>2.4%</td>
<td>-3.0%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; European Union</td>
<td>122.2</td>
<td>121.6</td>
<td>4.5%</td>
<td>3.3%</td>
<td>-1.6%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Japan</td>
<td>101.5</td>
<td>101.8</td>
<td>1.9%</td>
<td>-0.5%</td>
<td>-4.4%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; United States</td>
<td>132.4</td>
<td>130.5</td>
<td>8.2%</td>
<td>2.9%</td>
<td>-3.4%</td>
<td>2.7%</td>
</tr>
</tbody>
</table>
ECRI Weekly Leading Indicators Flat 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 12, 2004


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040112b.jpg">
The Weekly Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) was flat in the opening week of 2004.
The six-month growth rate of the weekly leading index also eased to 9.2%, the weakest growth rate in about six months. Slightly higher jobless claims and falling prices of basic materials offset strong stock market gains in the latest week.
During the last ten years there has been a 65% correlation between the six-month growth in the leading index and the two quarter growth in real GDP.
Construction of the ECRI Leading Index differs from the Index of Leading Economic Indicators published by the Conference Board. Nevertheless there has been a 75% correlation between the y/y percent change in the two series over the last 20 years.
The components of the ECRI weekly leading 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 go to this <a href="http://businesscycle.com">link</a>.

<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/weekly/@W8/@W801/@W801.HTM"> ECRI Leading Index</a></th>
<th scope="col"> 01/02/04</th>
<th scope="col"> 12/26/03</th>
<th scope="col"> Growth Rate</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">Weekly</td>
<td>129.7</td>
<td>129.7</td>
<td>9.2%</td>
<td>6.6%</td>
<td>1.1%</td>
<td>-5.3%</td>
</tr>
<tr>
<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 class="odd">
<td class="firstcol">&nbsp;</td>
<td> Dec</td>
<td> Nov</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Monthly</td>
<td>130.3</td>
<td>130.7</td>
<td>10.8%</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body>
</html>

The Index of Leading Indicators for the Major Seven OECD Countries rose 0.7% (5.3% y/y) in November, the eighth consecutive firm monthly gain. Revisions to the leading indexes for Japan and in North America substantially lowered [...]

OECD Leaders Signal Further Growth

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040109a.jpg" width="353">
Non-farm payrolls rose a weak 1,000 in December and gains in prior months were revised down.Consensus expectations were for a 150,000 December gain. Next month, the payroll figures will undergo an annual benchmark revision.
The index of aggregate hours worked fell 0.6% but for 4Q rose at a 2.2% annual rate versus 3Q. It was the first quarterly gain in hours worked since 4Q 2000.
From the separate household survey, the unemployment rate fell to 5.7% versus expectations for an unchanged 5.9%. The figures reflect benchmark revision.
Household employment fell 54,000 (+1.5% y/y) following strong gains of 438,000 and 451,000 in the prior two months. The labor force also fell by 309,000 (+1.2% y/y) following strong gains in the prior two months.
Manufacturing sector payrolls fell 26,000 (-3.4% y/y) following a like decline in November that was downwardly revised. The one-month diffusion index for factory payrolls fell to 38.1 from 42.9, and thus continued to suggest lower factory payrolls in the near term. Weakness in factory sector jobs was broad based.
Analysis of employment and sales in the computer industry by the Federal Reserve Bank of Dallas can be found <a href="http://www.dallasfed.org/eyi/tech/0306computer.html"> here</a>.
Service producing jobs rose a modest 13,000 (0.3% y/y). Jobs in the retail trade industry fell by 38,000 (-0.5% y/y) and jobs in the financial sector fell for the third consecutive month (+0.8% y/y). Temporary help services jobs were again strong, up 30,000 (7.7% y/y). Education &amp; health services jobs also rose 21,000 (1.8% y/y) but government sector jobs fell for the eighth month of 2003 (-0.4% y/y).
Construction jobs rose 14,000 (2.1% y/y) for the second month.
The one-month diffusion index for private non-farm payrolls fell to 50.4% from 54.3 in November, suggesting minimal employment growth
Average hourly earnings rose 0.2% (2.0% Y/Y). Earnings in the factory sector rose 0.3% (2.3% Y/Y).

<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/@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"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>1,000</td>
<td>43,000</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>-1.1%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-26,000</td>
<td>-26,000</td>
<td>-3.4%</td>
<td>-3.9%</td>
<td>-6.9%</td>
<td>-4.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.7</td>
<td>33.9</td>
<td>33.8</td>
<td>33.7</td>
<td>33.9</td>
<td>34.0</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.0%</td>
<td>2.9%</td>
<td>2.9%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.7%</td>
<td>5.9%</td>
<td>6.0%</td>
<td>6.0%</td>
<td>5.8%</td>
<td>4.8%</td>
</tr>
</tbody>
</table>
</body>
</html>

Non-farm payrolls rose a weak 1,000 in December and gains in prior months were revised down.Consensus expectations were for a 150,000 December gain. Next month, the payroll figures will undergo an annual benchmark revision. The index [...]

U.S. Non-farm Payrolls Disappoint

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 2004

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Japan Current Account Surplus Sustained, as Financial Accounts Show Capital Outflow

U.S. Retail Spending Boosted By Vehicle Sales

U.S. Retail Spending Boosted By Vehicle Sales

November Industrial Production Declines in the UK and France

Chain Store Sales Down Again

German Industrial Production Rises in November: Export Demand Not Consumer Demand is the Catalyst

OECD Leaders Signal Further Growth

U.S. Non-farm Payrolls Disappoint