Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091027d.jpg" align="left" border="0" height="265" width="353">
Over view: Money supply growth in the key economies continues
to erode on a broad front. Japan sports a contrary pattern with
steadily increasing growth in money supply. The UK has been through the
biggest boom/bust in money supply growth; the economy is still
languishing in recession. Money growth in the US and in the e-Zone is
slowing as well. 

Credit growth in EMU has turned negative. Loan growth is
declining even over 12-months. In real terms, credit to residents is
also falling. Over three-months inflation-adjusted loan volume in the
Zone is falling; over six months it&#8217;s flat. 

Real money supplies are declining over six months in the US
and in the UK. In EMU real money balances are growing at a low 2% pace.
Japan&#8217;s inflation-adjusted money supply is accelerating or stabilizing.
 

While it is clear that different regions have different
nominal and real money growth characteristics, only Japan is showing a
steady move back to monetary stimulus. At that it still has the lowest
Yr/Yr nominal money growth in the group. The UK has the biggest drop
off in nominal money growth but still had the strongest Yr/Yr rate of
growth. The US and EMU growth rates are closer together with EMU the
peak coming earlier than in the US. 

The more disturbing news is the lack of credit growth. In EMU
it is contracting. Banks have been stabilized by various policy
actions, but those actions did not translate directly into help for the
nonbank sector as banks have been very careful with new lending. In the
US the President is now trying to jawbone to stimulate small business
lending. Without credit growth, money growth will not be fully
activated. In the US small business is the main source of job growth
which is greatly needed to produce a real recovery. In Germany
Chancellor Merkel is warning of another crisis in 2011 and more
unemployment. There remains a lot of work to be done to get areal
recovery going.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Look at
Global and Euro Liquidity Trends</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar-all</td>
<td colspan="3"> Euro Measures (E13): Money
&amp; Credit</td>
<td colspan="3"> G-10 Major Markets: Money</td>
<td>Memo</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td> &#8364;&#8364;-Supply M2</td>
<td> Credit: 
Residential</td>
<td> Loans</td>
<td> $US M2</td>
<td>&#163;&#163;UK M4</td>
<td> &#165; &#165;Jpn M2+Cds</td>
<td> OIL:WTI</td>
</tr>
<tr class="odd">
<td class="firstcol">3-MO</td>
<td>2.8%</td>
<td>0.3%</td>
<td> -1.6%</td>
<td> -1.9%</td>
<td>8.7%</td>
<td>3.2%</td>
<td> -0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol"> 6-MO</td>
<td>2.8%</td>
<td>0.8%</td>
<td> -0.9%</td>
<td>0.2%</td>
<td>1.7%</td>
<td>3.3%</td>
<td>112.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">12-MO</td>
<td>4.1%</td>
<td>2.1%</td>
<td> -0.3%</td>
<td>6.7%</td>
<td>9.8%</td>
<td>3.0%</td>
<td> -32.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">2Yr</td>
<td>7.0%</td>
<td>6.3%</td>
<td>4.2%</td>
<td>6.5%</td>
<td>10.9%</td>
<td>2.6%</td>
<td> -6.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">3Yr</td>
<td>8.1%</td>
<td>7.9%</td>
<td>6.3%</td>
<td>6.5%</td>
<td>11.6%</td>
<td>2.3%</td>
<td>2.8%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">
Real Balances: deflated by
Own CPI. Oil deflated by US CPI</td>
</tr>
<tr class="odd">
<td class="firstcol"> 3-MO</td>
<td>2.0%</td>
<td> -0.4%</td>
<td> -2.3%</td>
<td> -4.3%</td>
<td>5.3%</td>
<td>4.0%</td>
<td> -2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">6-MO</td>
<td>2.0%</td>
<td> 0.0%</td>
<td> -1.7%</td>
<td> -2.6%</td>
<td> -1.0%</td>
<td>5.2%</td>
<td>106.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">12-MO</td>
<td>4.5%</td>
<td>2.5%</td>
<td>0.1%</td>
<td>8.1%</td>
<td>8.6%</td>
<td>5.2%</td>
<td> -31.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">2Yr</td>
<td>5.3%</td>
<td>4.6%</td>
<td>2.5%</td>
<td>4.7%</td>
<td>7.5%</td>
<td>2.6%</td>
<td>-7.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">3Yr</td>
<td>6.2%</td>
<td>6.0%</td>
<td>4.4%</td>
<td>4.3%</td>
<td>8.7%</td>
<td>2.4%</td>
<td>0.7%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Japan CPI
for Aug is an estimate; it
uses the July value to produce the real balance figure</td>
</tr>
</tbody>
</table>
</body></html>

Over view: Money supply growth in the key economies continues to erode on a broad front. Japan sports a contrary pattern with steadily increasing growth in money supply. The UK has been through the biggest boom/bust in money supply [...]

Money Supplies Continue to Erode

Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091027a.jpg" align="right" border="0" height="265" width="353">
Home prices have firmed along with the improvement seen in
home sales. The August S&amp;P/Case-Shiller
Home Price Composite Index of twenty metro-markets rose 1.0% from July
following like gains during the prior two months. The monthly increase
lowered the y/y drop to 11.4% which was
less-than-expected by Consensus. Nevertheless, prices were down by
nearly one-third since the peak in May 2006. Not seasonally adjusted
prices were even stronger m/m and posted a 1.2% increase after a 1.6%
gain during July.
The Case-Shiller composite index of home prices in 10
metropolitan areas, which has a longer history and dates back to 1987,
also firmed last month by 1.0% (-10.7% y/y). This measure also was down
by nearly one-third since the 2006 peak.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091027b.jpg" align="right" border="0" height="265" width="353">
The Case-Shiller index of 20 U.S. cities and their surrounding
areas is value-weighted. A greater index weight is assigned to more
expensive homes and the series dates back only to 2001. The
S&amp;P/Case-Shiller home price series can be found in Haver's USECON
database and the city data highlighted below is in the REGIONAL
database. The latest press release is available <a href="http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_102706.pdf">here</a>
. An overview of the S&amp;P/Case-Shiller home price series can be
found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">here</a>.
Less Weak Regions:Home prices in some areas
of the country have firmed lately though they remain down year-to-year.
Prices in Denver rose for their sixth month (-2.0% y/y) while
in Dallas prices rose for the fifth consecutive month. That pared the
y/y change to -1.3% from its worst of -5.5% this past March. Boston
prices also were higher during August (-4.2% y/y) while in Chicago home
prices were quite strong m/m, rising 1.2%, but they still were off
12.7% y/y. In the New York region prices ticked up 0.3% m/m (-9.6% y/y)
while in Charlotte, North Carolina prices slipped 0.4% (-8.6% y/y). In
Cleveland, Ohio, though prices fell 1.0% m/m during August, the y/y
decline amounted to just 2.9%. In the Washington, D.C. metro area
prices rose for the fourth straight month. The 1.2% increase left them
off 7.9% y/y.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091027c.jpg" align="right" border="0" height="265" width="353">
Weakest Regions: Several other areas of the
country have shown limited improvement. Though home prices in Phoenix,
Arizona rose for the third consecutive month they remained off 25.2%
y/y. Home prices in Las Vegas, Nevada continued their rapid rate of
decline with a 0.8% m/m drop (-29.9% y/y) and were down by roughly
one-half from their peak. Home prices in Miami also rose for the third
straight month but were off 18.9% y/y while home prices in Los Angeles
also firmed m/m (-12.0% y/y). In Tampa, Florida prices also rose for
the third month but remained off 17.7% y/y. In Detroit prices rose for
the first time since early 2006 (-22.7% y/y) yet prices were off by
nearly one-half from the peak.In San Francisco prices firmed for the
fourth straight month and that eased the y/y decline to 12.6%.
The monthly S&amp;P Case Shiller Home Price data can be
found in Haver's USECON database and the regional
data is available in the REGIONAL database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (SA, Jan 00 = 100)</th>
<th scope="col">August m/m</th>
<th scope="col">July m/m</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">20 City Composite
Index</td>
<td>1.0%</td>
<td>1.2%</td>
<td>-11.4%</td>
<td>-15.8%</td>
<td>-3.8%</td>
<td>7.6%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">&nbsp; Regional
Indicators</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Atlanta</td>
<td>0.5</td>
<td>1.6</td>
<td>-10.6</td>
<td>-8.5</td>
<td>0.7</td>
<td>4.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Boston</td>
<td>1.0</td>
<td>0.6</td>
<td>-4.2</td>
<td>-5.7</td>
<td>-4.0</td>
<td>-1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Chicago</td>
<td>1.2</td>
<td>2.1</td>
<td>-12.7</td>
<td>-10.0</td>
<td>-1.0</td>
<td>6.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Dallas</td>
<td>0.0</td>
<td>0.8</td>
<td>-1.3</td>
<td>-3.3</td>
<td>0.5</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Denver</td>
<td>1.0</td>
<td>0.7</td>
<td>-2.0</td>
<td>-4.9</td>
<td>-1.7</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Los Angeles</td>
<td>1.3</td>
<td>1.2</td>
<td>-12.0</td>
<td>-24.2</td>
<td>-5.2</td>
<td>11.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
New York</td>
<td>0.3</td>
<td>0.9</td>
<td>-9.6</td>
<td>-7.4</td>
<td>-2.8</td>
<td>7.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
San Francisco</td>
<td>2.6</td>
<td>2.8</td>
<td>-12.6</td>
<td>-24.3</td>
<td>-4.5</td>
<td>4.5</td>
</tr>
</tbody>
</table>

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Home prices have firmed along with the improvement seen in home sales. The August S&P/Case-Shiller Home Price Composite Index of twenty metro-markets rose 1.0% from July following like gains during the prior two months. The monthly [...]

Case-Shiller Home Price Index Increases For Third Consecutive Month

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026i.jpg" align="right" border="0" height="265" width="353">South Korean
joins China and Singapore among the emerging economies of the Pacific
Rim to report third quarter GDP.&nbsp; GDP growth in the three
countries is shown in the first chart.&nbsp; The declines in the
economies of Korea and Singapore have been much more severe than those
in China.&nbsp; China has not experienced a year to year decline in
GDP, merely a deceleration of growth.&nbsp; At their low points in
the first quarter of this year, GDP in Singapore was 9.5% below the
year ago figure and GDP in Korea, 4.3% below.Korea reported that GDP
grew 2.9% in the third quarter on a seasonally adjusted basis, compared
with 2.7% in the second quarter.&nbsp; On a seasonally unadjusted
basis, GDP was 0.6% above the year ago figure, the first positive
figure since the third quarter of 2008.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026j.jpg" align="right" border="0" height="265" width="353">
A swing in inventories from a liquidation of 4,506 million won* in the
second quarter to an accumulation of 6,486 won in the third quarter was
the main factor in the third quarter strength.&nbsp; However, this
should not be a cause of concern at this point in the business
cycle.&nbsp; The rise follows three successive quarters of big
liquidations, beginning in the fourth quarter of 2008--7,290 million
won 6,788 million won and 4,506 million wan.&nbsp; The inventory to
shipments ratio for manufacturing at the end of the second quarter was
.97 down from 1.25 at the end of 2008.&nbsp; As can be seen in the
second chart, the I/S ratio for manufacturing was somewhat below normal
at the end of the second quarter so that a build up in the third
quarter is not unexpected. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026k.jpg" align="right" border="0" height="265" width="353">
The performance of the other components of
GDP was generally typical of that seen in the early stages of
recovery--some increases and some retrenchments.&nbsp; The one
notable exception was a greater decline in exports of goods and
services, than that in imports of goods and services, with the result
that the balance on goods and services declined from 20.3 billion won
in the second quarter to 19.1 billion won .&nbsp; In the past,
exports have been a dynamic element in the growth of the Korean economy
and generally quick to respond to improvements in the world economy.
Private consumption increased by 3,524.7 million won in the third
quarter compared with an increase of 1,367.1, this could be an sign
that Korea is beginning to shift away from its policy of export led
growth but it is probably not too wise to base a conclusion on one
quarter's evidence. See the third chart.&nbsp; There were small
declines in construction,&nbsp; fixed investment in intangible
assets and government consumption and the change in business investment
in plant and equipment was essentially unchanged at 1,778 million won
in the third quarter, compared with a rise of 1,846 million won in the
second quarter.*The won in all cases is the 2005
chained won.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
SOUTH KOREA</th>
<th scope="col">Q3 09</th>
<th scope="col">Q2 09</th>
<th scope="col">Q1&nbsp; 09</th>
<th scope="col">Q4 08</th>
<th scope="col">Q3 08&nbsp;</th>
<th scope="col">Q2 08&nbsp;</th>
<th scope="col">Q1 08&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="10"> GDP </td>
</tr>
<tr>
<td class="firstcol">Q/Q Change (SA)</td>
<td>2.93</td>
<td>2.65</td>
<td>0.12</td>
<td>-5.07</td>
<td>0.22</td>
<td>0.43</td>
<td>1.00</td>
<td>2.22</td>
<td>5.11</td>
</tr>
<tr>
<td class="firstcol">Y/Y Change&nbsp; (NSA)</td>
<td>0.58</td>
<td>-2.16</td>
<td>-425</td>
<td>-3.40</td>
<td>3.11</td>
<td>4.35</td>
<td>5.46</td>
<td>2.22</td>
<td>5.11</td>
</tr>
<tr>
<td class="firstcol">Change in New Exports (Mil.
2005 Chained Won)</td>
<td>-1263</td>
<td>3572</td>
<td>3175</td>
<td>4876</td>
<td>-1590</td>
<td>48</td>
<td>756</td>
<td>10019</td>
<td>6577</td>
</tr>
<tr>
<td class="firstcol">Change in Inventory Change "</td>
<td>6487</td>
<td>-4506</td>
<td>-6788</td>
<td>-7290</td>
<td>1396</td>
<td>467</td>
<td>2004</td>
<td>7752</td>
<td>-2815</td>
</tr>
<tr>
<td class="firstcol">Change in Private
Consumption&nbsp; "</td>
<td>3525</td>
<td>1367</td>
<td>-880</td>
<td>-3189</td>
<td>1648</td>
<td>-3364</td>
<td>-25</td>
<td>4703</td>
<td>24655</td>
</tr>
</tbody>
</table>
</body></html>

South Korean joins China and Singapore among the emerging economies of the Pacific Rim to report third quarter GDP. GDP growth in the three countries is shown in the first chart. The declines in the economies of Korea and Singapore [...]

South Korea Reports 3Q GDP

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026h.jpg" align="left" border="0" height="265" width="353">
Germany&#8217;s GFK survey rose in October. It was a month-to-month
rise of 0.4 for the third month in a row. The economic index rose by
5.2 points its smallest rise since May but on the heels of a 10.9 point
spurt in September. Income expectations fell by 3.1 points, the first
drop in five months but after two large gains. The propensity to buy
dropped back by 10.4 points a huge drop and the largest since a drop of
15.7 in May 2008. 

Still the Climate index at +4.2 is above its average of 3.3.
All of these components are above their average values since 2002. The
&#8216;income&#8217; and &#8216;propensity to buy&#8217; percentiles are stronger for the count
percentiles than for the range percentiles; the standing among past
observations is stronger than their range standing between the highs
and lows. This means that while the current readings are still well off
peak they are in the upper part of the distribution of readings and in
the upper region of normal. 

The GFK index shows that confidence is still improving in
Germany. Germans are relatively more worried about the economy in
generally than they are impacted by expectations for income or buying
power problems. Still the fact of the matter is that German consumption
has not been very strong. And Germany&#8217;s Chancellor is out warning that
in 2011 there will be another crisis and that unemployment will rise
from current levels. I guess that Obama&#8217;s pessimistic approach to
assessing the economy is spreading abroad.

 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="5">
 Germany Consumer Climate Survey GFK</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol"></td>
<td> Climate</td>
<td colspan="2"> Expectations</td>
<td> Propensity to</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td> Economic</td>
<td>Income</td>
<td>Buy</td>
</tr>
<tr class="grey3">
<td class="firstcol">Oct-09</td>
<td>4.2</td>
<td>8.7</td>
<td>12.9</td>
<td>26.1</td>
</tr>
<tr class="grey3">
<td class="firstcol">Sep-09</td>
<td>3.8</td>
<td>3.4</td>
<td>16.0</td>
<td>36.5</td>
</tr>
<tr class="grey3">
<td class="firstcol">Aug-09</td>
<td>3.4</td>
<td>-7.5</td>
<td>8.8</td>
<td>31.1</td>
</tr>
<tr class="grey3">
<td class="firstcol">Jul-09</td>
<td>3.0</td>
<td>-14.0</td>
<td>1.8</td>
<td>25.1</td>
</tr>
<tr class="grey3">
<td class="firstcol">Jun-09</td>
<td>2.7</td>
<td>-22.6</td>
<td>-3.3</td>
<td>14.5</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="5">&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">Average</td>
<td>3.3</td>
<td>0.9</td>
<td>-3.8</td>
<td>-9.6</td>
</tr>
<tr class="grey3">
<td class="firstcol">Max</td>
<td>9.1</td>
<td>69.5</td>
<td>33.6</td>
<td>64.4</td>
</tr>
<tr class="grey3">
<td class="firstcol">Min</td>
<td>-3.5</td>
<td>-32.9</td>
<td>-24.5</td>
<td>-55.4</td>
</tr>
<tr class="grey3">
<td class="firstcol">% range</td>
<td>61.1%</td>
<td>40.6%</td>
<td>64.4%</td>
<td>68.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Count%</td>
<td>59.6%</td>
<td>66.0%</td>
<td>92.6%</td>
<td>87.2%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">% range is
current reading as a
percentile of Hi/Low range</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">Count % is
current reading ranked as
a %-tile among all readings</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">GFK survey
dates from January 2002</td>
</tr>
</tbody>
</table>
</body></html>

Germany’s GFK survey rose in October. It was a month-to-month rise of 0.4 for the third month in a row. The economic index rose by 5.2 points its smallest rise since May but on the heels of a 10.9 point spurt in September. Income [...]

Germany’s Consumer Climate Improves

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026d.jpg" align="right" border="0" height="265" width="353">
The National Association For Business Economics (NABE)
indicated in its latest Industry Survey that U.S. economic conditions
showed broad-based improvement during the last three months. That gain
was paced by improvement in unit demand and profit margins.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026e.jpg" align="right" border="0" height="265" width="353">
The net percentage of firms reporting higher demand rose to
23.4% which was the highest level in over one year. The improvement
came as 44.2% of firms indicated higher demand but only 20.8% showed
demand falling during 3Q. That was down from nearly half reporting
lower demand at the end of last year. Overall economic growth
through the end of next year is expected to average 3%.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026f.jpg" align="right" border="0" height="265" width="353">
Higher net-profit margins were indicated by firms for the
first time since the fourth quarter of 2007. Thirty-six percent of
firms indicated higher margins, up from 10% during 4Q08, while a
reduced 27% reported lower margins.
While still negative, net-employment improved materially as
12% of firms reported higher employment, double the low of last
quarter, and a much-reduced 31% reported lower hiring.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026g.jpg" align="right" border="0" height="265" width="353">
With the improvement in economic conditions, NABE indicated
that pricing power improved. The net-reading of 12% was the highest
level in one year as 23% reported higher prices and a reduced 11%
reported lower prices. Rising capital spending was indicated by firms
for the first time in one year as 26% showed higher spending while a
reduced 22% reported lower spending. 
 

The NABE Industry Survey can be found in Haver's SURVEYS
database. 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Nat'l
Assn. For Business Economics 3Q Industry Survey (Net Rising Index, %)</th>
<th scope="col">3Q09</th>
<th scope="col">2Q09</th>
<th scope="col">1Q09</th>
<th scope="col">4Q08</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Unit Demand</td>
<td>23.4</td>
<td>-5.0</td>
<td>-14.3</td>
<td>-27.5</td>
</tr>
<tr>
<td class="firstcol">Profit Margins</td>
<td>8.7</td>
<td>-17.0</td>
<td>-30.4</td>
<td>-41.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment</td>
<td>-19.2</td>
<td>-30.0</td>
<td>-25.0</td>
<td>-29.8</td>
</tr>
<tr>
<td class="firstcol">Prices Charged</td>
<td>12.2</td>
<td>-12.9</td>
<td>-2.0</td>
<td>-9.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital Spending</td>
<td>4.2</td>
<td>-23.6</td>
<td>-15.8</td>
<td>-26.0</td>
</tr>
</tbody>
</table>
</body></html>

The National Association For Business Economics (NABE) indicated in its latest Industry Survey that U.S. economic conditions showed broad-based improvement during the last three months. That gain was paced by improvement in unit [...]

National Association For Business Economics Indicates Demand, Profits and Employment Improved

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026b.jpg" align="right" border="0" height="265" width="353">The Chicago Federal Reserve
Bank indicated that while the U.S.
economy had improved, growth was still below the historic trend. For
September, the Chicago Fed National Activity Index (CFNAI) slipped m/m
after having improved sharply from the January low. The reading of
-0.90 was down from -0.56 during August yet both readings were up
sharply from the series' low of -4.13 reached this past January. Since
1970 there has been a 74% correlation between the level of the index
and the q/q change in real GDP but during the last ten years that
correlation has risen to 80%.
The three-month moving average which smoothes out
some of the volatility of the index improved to its highest level since
June of '08.
An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3%. The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_october2009.pdf">here</a>.
The Chicago Fed indicated that 32 of the series' individual
indicators made positive contributions to the September index while 53
made negative contributions. The CFNAI is a weighted average of 85
indicators of economic activity. The indicators reflect activity in the
following categories: production &amp; income, the labor market,
personal consumption &amp; housing, manufacturing &amp; trade
sales, and inventories &amp; orders.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026c.jpg" align="right" border="0" height="265" width="353">
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index slipped during August but remained near its
lowest since late-1993. Indicators for the steel, machinery and
resource sectors improved modestly, however, that was outweighed by
deterioration in the auto sector. The Chicago Federal Reserve figures
are available in Haver's SURVEYS database.
International Perspective on the Crisis and Response is
the title of Friday's speech by Fed Vice-Chairman Donald L. Kohn and it
can be found here <a href="http://www.federalreserve.gov/newsevents/speech/kohn20091023a.htm">here</a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">August '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-0.90</td>
<td>-0.56</td>
<td>-1.82</td>
<td>-2.01</td>
<td>-1.77</td>
<td>-0.35</td>
<td>0.05</td>
</tr>
<tr>
<td class="firstcol">3-Month Moving Average</td>
<td>-1.09</td>
<td>-1.61</td>
<td>-2.15</td>
<td>-1.42</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

The Chicago Federal Reserve Bank indicated that while the U.S. economy had improved, growth was still below the historic trend. For September, the Chicago Fed National Activity Index (CFNAI) slipped m/m after having improved sharply [...]

Chicago Fed Index Dipped Last Month But Trend Level Still Rising

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026b.jpg" align="right" border="0" height="265" width="353">The Chicago Federal Reserve
Bank indicated that while the U.S.
economy had improved, growth was still below the historic trend. For
September, the Chicago Fed National Activity Index (CFNAI) slipped m/m
after having improved sharply from the January low. The reading of
-0.90 was down from -0.56 during August yet both readings were up
sharply from the series' low of -4.13 reached this past January. Since
1970 there has been a 74% correlation between the level of the index
and the q/q change in real GDP but during the last ten years that
correlation has risen to 80%.
The three-month moving average which smoothes out
some of the volatility of the index improved to its highest level since
June of '08.
An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3%. The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_october2009.pdf">here</a>.
The Chicago Fed indicated that 32 of the series' individual
indicators made positive contributions to the September index while 53
made negative contributions. The CFNAI is a weighted average of 85
indicators of economic activity. The indicators reflect activity in the
following categories: production &amp; income, the labor market,
personal consumption &amp; housing, manufacturing &amp; trade
sales, and inventories &amp; orders.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026c.jpg" align="right" border="0" height="265" width="353">
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index slipped during August but remained near its
lowest since late-1993. Indicators for the steel, machinery and
resource sectors improved modestly, however, that was outweighed by
deterioration in the auto sector. The Chicago Federal Reserve figures
are available in Haver's SURVEYS database.
International Perspective on the Crisis and Response is
the title of Friday's speech by Fed Vice-Chairman Donald L. Kohn and it
can be found here <a href="http://www.federalreserve.gov/newsevents/speech/kohn20091023a.htm">here</a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">August '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-0.90</td>
<td>-0.56</td>
<td>-1.82</td>
<td>-2.01</td>
<td>-1.77</td>
<td>-0.35</td>
<td>0.05</td>
</tr>
<tr>
<td class="firstcol">3-Month Moving Average</td>
<td>-1.09</td>
<td>-1.61</td>
<td>-2.15</td>
<td>-1.42</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>

National Association For Business
Economics Indicates Demand, Profits and Employment Improved 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 26, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026d.jpg" align="right" border="0" height="265" width="353">
The National Association For Business Economics (NABE)
indicated in its latest Industry Survey that U.S. economic conditions
showed broad-based improvement during the last three months. That gain
was paced by improvement in unit demand and profit margins.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026e.jpg" align="right" border="0" height="265" width="353">
The net percentage of firms reporting higher demand rose to
23.4% which was the highest level in over one year. The improvement
came as 44.2% of firms indicated higher demand but only 20.8% showed
demand falling during 3Q. That was down from nearly half reporting
lower demand at the end of last year. Overall economic growth
through the end of next year is expected to average 3%.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026f.jpg" align="right" border="0" height="265" width="353">
Higher net-profit margins were indicated by firms for the
first time since the fourth quarter of 2007. Thirty-six percent of
firms indicated higher margins, up from 10% during 4Q08, while a
reduced 27% reported lower margins.
While still negative, net-employment improved materially as
12% of firms reported higher employment, double the low of last
quarter, and a much-reduced 31% reported lower hiring.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026g.jpg" align="right" border="0" height="265" width="353">
With the improvement in economic conditions, NABE indicated
that pricing power improved. The net-reading of 12% was the highest
level in one year as 23% reported higher prices and a reduced 11%
reported lower prices. Rising capital spending was indicated by firms
for the first time in one year as 26% showed higher spending while a
reduced 22% reported lower spending. 
 

The NABE Industry Survey can be found in Haver's SURVEYS
database. 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Nat'l
Assn. For Business Economics 3Q Industry Survey (Net Rising Index, %)</th>
<th scope="col">3Q09</th>
<th scope="col">2Q09</th>
<th scope="col">1Q09</th>
<th scope="col">4Q08</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Unit Demand</td>
<td>23.4</td>
<td>-5.0</td>
<td>-14.3</td>
<td>-27.5</td>
</tr>
<tr>
<td class="firstcol">Profit Margins</td>
<td>8.7</td>
<td>-17.0</td>
<td>-30.4</td>
<td>-41.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment</td>
<td>-19.2</td>
<td>-30.0</td>
<td>-25.0</td>
<td>-29.8</td>
</tr>
<tr>
<td class="firstcol">Prices Charged</td>
<td>12.2</td>
<td>-12.9</td>
<td>-2.0</td>
<td>-9.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital Spending</td>
<td>4.2</td>
<td>-23.6</td>
<td>-15.8</td>
<td>-26.0</td>
</tr>
</tbody>
</table>
Germany&#8217;s Consumer Climate
Improves 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October
26, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026h.jpg" align="left" border="0" height="265" width="353">
Germany&#8217;s GFK survey rose in October. It was a month-to-month
rise of 0.4 for the third month in a row. The economic index rose by
5.2 points its smallest rise since May but on the heels of a 10.9 point
spurt in September. Income expectations fell by 3.1 points, the first
drop in five months but after two large gains. The propensity to buy
dropped back by 10.4 points a huge drop and the largest since a drop of
15.7 in May 2008. 

Still the Climate index at +4.2 is above its average of 3.3.
All of these components are above their average values since 2002. The
&#8216;income&#8217; and &#8216;propensity to buy&#8217; percentiles are stronger for the count
percentiles than for the range percentiles; the standing among past
observations is stronger than their range standing between the highs
and lows. This means that while the current readings are still well off
peak they are in the upper part of the distribution of readings and in
the upper region of normal. 

The GFK index shows that confidence is still improving in
Germany. Germans are relatively more worried about the economy in
generally than they are impacted by expectations for income or buying
power problems. Still the fact of the matter is that German consumption
has not been very strong. And Germany&#8217;s Chancellor is out warning that
in 2011 there will be another crisis and that unemployment will rise
from current levels. I guess that Obama&#8217;s pessimistic approach to
assessing the economy is spreading abroad.

 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="5">
 Germany Consumer Climate Survey GFK</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol"></td>
<td> Climate</td>
<td colspan="2"> Expectations</td>
<td> Propensity to</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td> Economic</td>
<td>Income</td>
<td>Buy</td>
</tr>
<tr class="grey3">
<td class="firstcol">Oct-09</td>
<td>4.2</td>
<td>8.7</td>
<td>12.9</td>
<td>26.1</td>
</tr>
<tr class="grey3">
<td class="firstcol">Sep-09</td>
<td>3.8</td>
<td>3.4</td>
<td>16.0</td>
<td>36.5</td>
</tr>
<tr class="grey3">
<td class="firstcol">Aug-09</td>
<td>3.4</td>
<td>-7.5</td>
<td>8.8</td>
<td>31.1</td>
</tr>
<tr class="grey3">
<td class="firstcol">Jul-09</td>
<td>3.0</td>
<td>-14.0</td>
<td>1.8</td>
<td>25.1</td>
</tr>
<tr class="grey3">
<td class="firstcol">Jun-09</td>
<td>2.7</td>
<td>-22.6</td>
<td>-3.3</td>
<td>14.5</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="5">&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">Average</td>
<td>3.3</td>
<td>0.9</td>
<td>-3.8</td>
<td>-9.6</td>
</tr>
<tr class="grey3">
<td class="firstcol">Max</td>
<td>9.1</td>
<td>69.5</td>
<td>33.6</td>
<td>64.4</td>
</tr>
<tr class="grey3">
<td class="firstcol">Min</td>
<td>-3.5</td>
<td>-32.9</td>
<td>-24.5</td>
<td>-55.4</td>
</tr>
<tr class="grey3">
<td class="firstcol">% range</td>
<td>61.1%</td>
<td>40.6%</td>
<td>64.4%</td>
<td>68.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Count%</td>
<td>59.6%</td>
<td>66.0%</td>
<td>92.6%</td>
<td>87.2%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">% range is
current reading as a
percentile of Hi/Low range</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">Count % is
current reading ranked as
a %-tile among all readings</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">GFK survey
dates from January 2002</td>
</tr>
</tbody>
</table>
 South Korea Reports 3Q GDP 
by <a href="/comment/Curley.html">Louise
Curley</a> October 26, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026i.jpg" align="right" border="0" height="265" width="353">South Korean
joins China and Singapore among the emerging economies of the Pacific
Rim to report third quarter GDP.&nbsp; GDP growth in the three
countries is shown in the first chart.&nbsp; The declines in the
economies of Korea and Singapore have been much more severe than those
in China.&nbsp; China has not experienced a year to year decline in
GDP, merely a deceleration of growth.&nbsp; At their low points in
the first quarter of this year, GDP in Singapore was 9.5% below the
year ago figure and GDP in Korea, 4.3% below.
Korea reported that GDP
grew 2.9% in the third quarter on a seasonally adjusted basis, compared
with 2.7% in the second quarter.&nbsp; On a seasonally unadjusted
basis, GDP was 0.6% above the year ago figure, the first positive
figure since the third quarter of 2008.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026j.jpg" align="right" border="0" height="265" width="353">A swing in
inventories from a liquidation of 4,506 million won* in the
second quarter to an accumulation of 6,486 won in the third quarter was
the main factor in the third quarter strength.&nbsp; However, this
should not be a cause of concern at this point in the business
cycle.&nbsp; The rise follows three successive quarters of big
liquidations, beginning in the fourth quarter of 2008--7,290 million
won 6,788 million won and 4,506 million wan.&nbsp; The inventory to
shipments ratio for manufacturing at the end of the second quarter was
.97 down from 1.25 at the end of 2008.&nbsp; As can be seen in the
second chart, the I/S ratio for manufacturing was somewhat below normal
at the end of the second quarter so that a build up in the third
quarter is not unexpected.
 <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091026k.jpg" align="right" border="0" height="265" width="353">The
performance of the other components of
GDP was generally typical of that seen in the early stages of
recovery--some increases and some retrenchments.&nbsp; The one
notable exception was a greater decline in exports of goods and
services, than that in imports of goods and services, with the result
that the balance on goods and services declined from 20.3 billion won
in the second quarter to 19.1 billion won .&nbsp; In the past,
exports have been a dynamic element in the growth of the Korean economy
and generally quick to respond to improvements in the world economy.
Private consumption increased by 3,524.7 million won in the third
quarter compared with an increase of 1,367.1, this could be an sign
that Korea is beginning to shift away from its policy of export led
growth but it is probably not too wise to base a conclusion on one
quarter's evidence. See the third chart.&nbsp; There were small
declines in construction,&nbsp; fixed investment in intangible
assets and government consumption and the change in business investment
in plant and equipment was essentially unchanged at 1,778 million won
in the third quarter, compared with a rise of 1,846 million won in the
second quarter.
*The won in all cases is the 2005
chained won.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
SOUTH KOREA</th>
<th scope="col">Q3 09</th>
<th scope="col">Q2 09</th>
<th scope="col">Q1&nbsp; 09</th>
<th scope="col">Q4 08</th>
<th scope="col">Q3 08&nbsp;</th>
<th scope="col">Q2 08&nbsp;</th>
<th scope="col">Q1 08&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="10"> GDP </td>
</tr>
<tr>
<td class="firstcol">Q/Q Change (SA)</td>
<td>2.93</td>
<td>2.65</td>
<td>0.12</td>
<td>-5.07</td>
<td>0.22</td>
<td>0.43</td>
<td>1.00</td>
<td>2.22</td>
<td>5.11</td>
</tr>
<tr>
<td class="firstcol">Y/Y Change&nbsp; (NSA)</td>
<td>0.58</td>
<td>-2.16</td>
<td>-425</td>
<td>-3.40</td>
<td>3.11</td>
<td>4.35</td>
<td>5.46</td>
<td>2.22</td>
<td>5.11</td>
</tr>
<tr>
<td class="firstcol">Change in New Exports (Mil.
2005 Chained Won)</td>
<td>-1263</td>
<td>3572</td>
<td>3175</td>
<td>4876</td>
<td>-1590</td>
<td>48</td>
<td>756</td>
<td>10019</td>
<td>6577</td>
</tr>
<tr>
<td class="firstcol">Change in Inventory Change "</td>
<td>6487</td>
<td>-4506</td>
<td>-6788</td>
<td>-7290</td>
<td>1396</td>
<td>467</td>
<td>2004</td>
<td>7752</td>
<td>-2815</td>
</tr>
<tr>
<td class="firstcol">Change in Private
Consumption&nbsp; "</td>
<td>3525</td>
<td>1367</td>
<td>-880</td>
<td>-3189</td>
<td>1648</td>
<td>-3364</td>
<td>-25</td>
<td>4703</td>
<td>24655</td>
</tr>
</tbody>
</table>

</body></html>

Chicago Fed Index Dipped LastMonth But Trend Level Still Rising

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: October 2009

Jump to:

Money Supplies Continue to Erode

Case-Shiller Home Price Index Increases For Third Consecutive Month

Case-Shiller Home Price Index Increases For Third Consecutive Month

South Korea Reports 3Q GDP

Germany’s Consumer Climate Improves

National Association For Business Economics Indicates Demand, Profits and Employment Improved

Chicago Fed Index Dipped Last Month But Trend Level Still Rising

Chicago Fed Index Dipped LastMonth But Trend Level Still Rising