Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124g.jpg" align="right" border="0" height="265" width="312">
Haver Analytics has a number of series that may prove useful
in comparing and contrasting current conditions with those in the Great
Depression.Among them are the annual series of real and nominal gross
domestic product, its components and prices in USNA
that go back to 1929.


The first chart shows real GDP since 1929, plotted on a log
scale to show equal percentage changes. Real GDP declined 26.5% from
1929 to 1933.

Monthly data on the Consumer Price Index are available from
January 1921 and are shown in the second chart. Consumer prices
declined steadily from 51.9 (1967=100) in May 1929 to 39.4 in December
1933, a decline of 24.1%. These data are found in the Prices section of
 USECON.

Long term monthly data are also available for stock prices and
interest rates. The third chart show monthly average prices for the Dow
Jones Industrial Average and for the S&amp;P 500 Index. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124d.jpg" align="right" border="0" height="265" width="312">
The Dow
Jones declined 87.3% from 364.93 in September, 1929 to 46.19 in July,
1932. The S&amp;P 500 declined 84.8% from 31.30 in September 1929
to 4.77 in June, 1933.
The fourth chart shows the interest rate on the Treasury's
long term composite (over ten years) together with the interest rates
on Moody's AAA and BBB corporate bonds.The rate on the Treasury goes
back to January, 1925 and the rates on Moody's corporates go back to
January 1921. Both the stock market data and interest rates are found
in the Financial Section of USECON. 
 
 
 
 

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124e.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124f.jpg" border="0" height="265" width="312">

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Haver Analytics has a number of series that may prove useful in comparing and contrasting current conditions with those in the Great Depression.Among them are the annual series of real and nominal gross domestic product, its [...]

Comparing Current Trends with Those in the Great Depression

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124b.jpg" width="353">
During October, U.S. existing home sales reversed most of the prior month&#39;s rise and fell 3.1% to 4.980 million, according to the National Association of Realtors. The 3.1% decline followed a revised 4.7% September increase and it was slightly greater than Consensus expectations for which were for a selling rate of 5.00M homes. Total sales include sales of condos and co-ops.
The month-to-month volatility in home sales this year has been near a roughly stable trend line at the 5.0 million unit level, down 11.8% from last year&#39;s average.
Median home prices fell 4.2% (NSA) during October for the fourth consecutive monthly drop. That pulled the y/y comparison to -11.3%. Prices have fallen 20.0% since their peak in June 2007.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124c.jpg" width="353">
Sales of existing single-family homes followed a similar pattern as the total and fell 3.3% after a revised 5.3% rise during September. Sales of existing homes are down by one-third from their peak in mid-2005.
By region, home sales in the Midwest led last month&#39;s decline with a 6.0% drop and they were down nearly ten percent from last year. In the South sales fell 2.2% m/m (-10.2% y/y). In the West sales slipped 1.6%, however, they were up one-third from last October. Sales in the Northeast fell 1.2% and they were off 17.7% from last year&#39;s average.
The number of unsold homes (condos &amp; single-family) on the market fell for the third straight month (-4.5% y/y). Nevertheless, at the current sales rate there as a 10.2 months&#39; supply on the market. That was down from the April peak of 11.2 months. For single-family homes the inventory ticked up m/m to a 9.6 months supply at the current sales rate, down from an 11.0 months supply in June.
The House testimony offered by Fed GovernorRandall S. Kroszner titled the Effects of the financial crisis on small business is available <a href="http://www.federalreserve.gov/newsevents/testimony/kroszner20081120a.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">Existing Home Sales (Thous)</th>
<th scope="col">October</th>
<th scope="col">y/y %</th>
<th scope="col">September</th>
<th scope="col">October &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>4,980</td>
<td>-1.6</td>
<td>5,140</td>
<td>5,020</td>
<td>5,672</td>
<td>6,508</td>
<td>7,076</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>830</td>
<td>-9.8</td>
<td>840</td>
<td>910</td>
<td>1,008</td>
<td>1,090</td>
<td>1,168</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,100</td>
<td>-9.1</td>
<td>1,170</td>
<td>1,220</td>
<td>1,331</td>
<td>1,491</td>
<td>1,589</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,840</td>
<td>-10.2</td>
<td>1,900</td>
<td>2,050</td>
<td>2,240</td>
<td>2,576</td>
<td>2,704</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,210</td>
<td>37.5</td>
<td>1,230</td>
<td>880</td>
<td>1,093</td>
<td>1,353</td>
<td>1,617</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,430</td>
<td>0.0</td>
<td>4,580</td>
<td>4,430</td>
<td>4,958</td>
<td>5,703</td>
<td>6,181</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>183,300</td>
<td>-11.3</td>
<td>191,400</td>
<td>206,700</td>
<td>216,617</td>
<td>222,000</td>
<td>218,217</td>
</tr>
</tbody>
</table>


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During October, U.S. existing home sales reversed most of the prior month's rise and fell 3.1% to 4.980 million, according to the National Association of Realtors. The 3.1% decline followed a revised 4.7% September increase and it was [...]

U.S. Existing Home Sales Slide Along Bottom, Prices Down 20%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124a.jpg" width="353">
The October National Activity Index (CFNAI) from the Chicago Federal Reserve Bank improved last month after Hurricanes depressed economic activity during September. The index, however, remained in recession territory. The latest reading of -1.06 roughly equaled the averages of the first and second quarters of this year but improved from the third quarter average of -2.15.Since 1970 there has been a 75% correlation between the level of the index and the q/q change in real GDP.
The three-month moving average of the index held roughly steady at -2.09. The latest was near its lowest since the last recession, early in 1991.
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%. During the last twenty years there has been a 68% correlation between the level of the CFNAI and q/q growth in real GDP.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_november2008.pdf">here</a> and the historical data are available in Haver&#39;s SURVEYS database.
The production category made a positive contribution to the October index as it recovered from a depressed level the month earlier. Conversely the income, housing, consumption and employment categories had a negative influence on the total.
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.
In a separate survey, the Chicago Fed indicated that its Midwest manufacturing index fell during September to its lowest level since 2003. The auto sector continued to lead the weakness but the steel, machinery and resource sector components also were weak.
The Joint Statement by Treasury, Federal Reserve, and the FDIC on Citigroup can be found <a href="http://www.federalreserve.gov/newsevents/press/bcreg/20081123a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">October &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-1.06</td>
<td>-3.11</td>
<td>-0.75</td>
<td>-0.41</td>
<td>-0.02</td>
<td>0.28</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-2.09</td>
<td>-2.16</td>
<td>-0.59</td>
<td>--</td>
<td>--</td>
<td>&nbsp;--</td>
</tr>
</tbody>
</table>
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The October National Activity Index (CFNAI) from the Chicago Federal Reserve Bank improved last month after Hurricanes depressed economic activity during September. The index, however, remained in recession territory. The latest [...]

Chicago Fed Index Rose After Hurricanes

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124a.jpg" align="left" border="0" height="265" width="353">
The October National Activity Index (CFNAI) from the Chicago
Federal Reserve Bank improved last month after Hurricanes depressed
economic activity during September. The index, however, remained in
recession territory. The latest reading of -1.06 roughly equaled the
averages of the first and second quarters of this year but improved
from the third quarter average of -2.15.Since 1970 there has been a 75%
correlation between the level of the index and the q/q change in real
GDP.
The three-month moving average of the index held roughly
steady at -2.09. The latest was near its lowest since the last
recession, early in 1991.
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%. During the last twenty years there has been a 68%
correlation between the level of the CFNAI and q/q growth in real GDP.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_november2008.pdf">here</a>
and the historical data are available in Haver's SURVEYS
database.
The production category made a positive contribution to the
October index as it recovered from a depressed level the month earlier.
Conversely the income, housing, consumption and employment categories
had a negative influence on the total.
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.
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index fell during September to its lowest level
since 2003. The auto sector continued to lead the weakness but the
steel, machinery and resource sector components also were weak.
The Joint Statement by Treasury, Federal Reserve,
and the FDIC on Citigroup can be found <a href="http://www.federalreserve.gov/newsevents/press/bcreg/20081123a.htm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">October '07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-1.06</td>
<td>-3.11</td>
<td>-0.75</td>
<td>-0.41</td>
<td>-0.02</td>
<td>0.28</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-2.09</td>
<td>-2.16</td>
<td>-0.59</td>
<td>--</td>
<td>--</td>
<td>&nbsp;--</td>
</tr>
</tbody>
</table>
U.S. Existing Home Sales Slide
Along Bottom, Prices Down 20% 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 24, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124b.jpg" align="left" border="0" height="265" width="353">
During October, U.S. existing home sales reversed
most of the prior month's rise and fell 3.1% to 4.980 million,
according to the National Association of Realtors. The 3.1% decline
followed a revised 4.7% September increase and it was slightly greater
than Consensus expectations for which were for a selling rate of 5.00M
homes. Total sales include sales of condos and co-ops.
The month-to-month volatility in home sales this year has been
near a roughly stable trend line at the 5.0 million unit level, down
11.8% from last year's average.
Median home prices fell 4.2% (NSA) during
October for the fourth consecutive monthly drop. That pulled the y/y
comparison to -11.3%. Prices have fallen 20.0% since their peak in June
2007.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124c.jpg" align="right" border="0" height="265" width="353">
Sales of existing single-family homes followed a similar
pattern as the total and fell 3.3% after a revised 5.3% rise during
September. Sales of existing homes are down by one-third from their
peak in mid-2005.
<blockquote>

By region, home sales in the Midwest led last month's
decline with a 6.0% drop and they were down nearly ten percent from
last year. In the South sales fell 2.2% m/m (-10.2% y/y). In the West
sales slipped 1.6%, however, they were up one-third from last October.
Sales in the Northeast fell 1.2% and they were off 17.7% from last
year's average.
</blockquote>

The number of unsold homes (condos &amp; single-family) on
the market fell for the third straight month (-4.5% y/y). Nevertheless,
at the current sales rate there as a 10.2 months' supply on the market.
That was down from the April peak of 11.2 months. For single-family
homes the inventory ticked up m/m to a 9.6 months supply at the current
sales rate, down from an 11.0 months supply in June.
The House testimony offered by Fed GovernorRandall S. Kroszner
titled the Effects of the financial crisis on small business is
available <a href="http://www.federalreserve.gov/newsevents/testimony/kroszner20081120a.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">Existing
Home Sales (Thous)</th>
<th scope="col">October</th>
<th scope="col">y/y %</th>
<th scope="col">September</th>
<th scope="col">October '07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>4,980</td>
<td>-1.6</td>
<td>5,140</td>
<td>5,020</td>
<td>5,672</td>
<td>6,508</td>
<td>7,076</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>830</td>
<td>-9.8</td>
<td>840</td>
<td>910</td>
<td>1,008</td>
<td>1,090</td>
<td>1,168</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,100</td>
<td>-9.1</td>
<td>1,170</td>
<td>1,220</td>
<td>1,331</td>
<td>1,491</td>
<td>1,589</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,840</td>
<td>-10.2</td>
<td>1,900</td>
<td>2,050</td>
<td>2,240</td>
<td>2,576</td>
<td>2,704</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,210</td>
<td>37.5</td>
<td>1,230</td>
<td>880</td>
<td>1,093</td>
<td>1,353</td>
<td>1,617</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,430</td>
<td>0.0</td>
<td>4,580</td>
<td>4,430</td>
<td>4,958</td>
<td>5,703</td>
<td>6,181</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>183,300</td>
<td>-11.3</td>
<td>191,400</td>
<td>206,700</td>
<td>216,617</td>
<td>222,000</td>
<td>218,217</td>
</tr>
</tbody>
</table>
Comparing CurrentTrends with Those
in the Great Depression&nbsp; 
by <a href="/comment/Curley.html">Louise
Curley</a> November 24, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124g.jpg" align="right" border="0" height="265" width="312">
Haver Analytics has a number of series that may prove useful
in comparing and contrasting current conditions with those in the Great
Depression.Among them are the annual series of real and nominal gross
domestic product, its components and prices in USNA
that go back to 1929.


The first chart shows real GDP since 1929, plotted on a log
scale to show equal percentage changes. Real GDP declined 26.5% from
1929 to 1933.

Monthly data on the Consumer Price Index are available from
January 1921 and are shown in the second chart. Consumer prices
declined steadily from 51.9 (1967=100) in May 1929 to 39.4 in December
1933, a decline of 24.1%. These data are found in the Prices section of
 USECON.

Long term monthly data are also available for stock prices and
interest rates. The third chart show monthly average prices for the Dow
Jones Industrial Average and for the S&amp;P 500 Index. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124d.jpg" align="right" border="0" height="265" width="312">
The Dow
Jones declined 87.3% from 364.93 in September, 1929 to 46.19 in July,
1932. The S&amp;P 500 declined 84.8% from 31.30 in September 1929
to 4.77 in June, 1933.
The fourth chart shows the interest rate on the Treasury's
long term composite (over ten years) together with the interest rates
on Moody's AAA and BBB corporate bonds.The rate on the Treasury goes
back to January, 1925 and the rates on Moody's corporates go back to
January 1921. Both the stock market data and interest rates are found
in the Financial Section of USECON. 
 
 
 
 
 

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124e.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124f.jpg" border="0" height="265" width="312">

Germany&#8217;s IFO to Sixteen Year Low 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 24. 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124h.jpg" align="left" border="0" height="265" width="353">IFO: I
Fell, OUCH! 

Germany&#8217;s IFO index, a focal point for early economic signals
in Germany, fell to a 16 year low in November. Manufacturing has fallen
very hard and fast, as the chart above demonstrates. Going back to
January of 1991 the overall IFO sector index stands in the lower 4% of
its range &#8211; in simple terms, it rarely is weaker than this.
Manufacturing is in the bottom 10% of its range. Retailing is in the
bottom 9% of its range. These are extremely weak readings. The service
sector is in the bottom 18% of its range which extends back only to mid
2001. Wholesaling is in the bottom 27% of its range. Construction is
relatively better off standing in the bottom 39% of its range of values
since 1991. In terms of raw readings instead of relative IFO scores we
see a clustering of scores in the -30 region. Wholesaling is a bit
better at -21 and services, a more stable sector overall, registers a
-7.3 net reading. Still for that sector such a raw reading is still in
the bottom 18% of its range. 
 

A fast unravel: Compared to just a month
ago the indices have dropped sharply. The headlines and MFG indices
have shed nearly 10 points in one month. Only in Sept 2001 did the
German sector headline index drop by more. Clearly this downturn is
hitting with lightning speed and a savage punch in Europe where key
policymakers thought they would be spared. Think again. 
 

Headline level is very weak, too -The
headline for the IFO business climate index fell to 85.8 in November
from 90.2 October. This index only fell more sharply than this in Sept
of 2001 after the attack on the US World trade Towers. The current
situation index dropped to a level of 94.8 in November from 99.9 in
October. The expectations index at 81.4 fell to 77.6. The 77.6 reading
is a lifetime low. For current conditions it is a bottom third of the
range reading. For the climate index it&#8217;s a bottom 4% of range reading.
Not only is the index falling fast but it is scrapping very low levels. 
 

Germany: harbinger for Euro-weakness --
Clearly the situation in Germany is fluid and falling fast. For all of
the Euro Area new industrial orders were released today and that series
dropped by 3.9% month to month in September and by 5.2% Yr/Yr. The Q3
drop for EMU-wide orders is 7.4% at an annual rate. Among large
countries Germany&#8217;s -7.0% Yr/Yr drop is one of the largest among EMU
members; while engineering orders in the EU&#8217;s UK are off by 10.7% Yr/Yr. 
 

Autos too - Europe is also having
difficulties in the auto sector as France&#8217;s Sarkozy and Germany&#8217;s
Merkel in a joint statement indicated their interest to support the
ailing sector. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> Summary
of IFO Sector Diffusion readings: CLIMATE</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">CLIMATE Sum</td>
<td>Current</td>
<td>Last Mo</td>
<td colspan="6">Since Jan 1991*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>average</td>
<td>Median</td>
<td>Max</td>
<td>Min</td>
<td>range</td>
<td>% range</td>
</tr>
<tr>
<td class="firstcol">All Sectors</td>
<td>-29.0</td>
<td>-20.2</td>
<td>-7.7</td>
<td>-8.4</td>
<td>16.9</td>
<td>-30.9</td>
<td>47.8</td>
<td>4.0%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-29.6</td>
<td>-18.9</td>
<td>-0.2</td>
<td>1.6</td>
<td>27.0</td>
<td>-35.9</td>
<td>62.9</td>
<td>10.0%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-30.2</td>
<td>-27.7</td>
<td>-28.2</td>
<td>-30.3</td>
<td>1.3</td>
<td>-50.5</td>
<td>51.8</td>
<td>39.2%</td>
</tr>
<tr>
<td class="firstcol">Wholesale</td>
<td>-21.8</td>
<td>-15.1</td>
<td>-13.2</td>
<td>-15.7</td>
<td>23.6</td>
<td>-39.3</td>
<td>62.9</td>
<td>27.8%</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>-33.5</td>
<td>-25.1</td>
<td>-14.2</td>
<td>-14.5</td>
<td>28.7</td>
<td>-39.7</td>
<td>68.4</td>
<td>9.1%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>-7.3</td>
<td>-4.3</td>
<td>11.0</td>
<td>9.5</td>
<td>28.5</td>
<td>-15.2</td>
<td>43.7</td>
<td>18.1%</td>
</tr>
</tbody>
</table>
</body></html>

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081121a.jpg" align="left" border="0" height="265" width="353">
The Markit/NTC readings on conditions in services and MFG in
the Euro Area show another chilling story. The indices are down to all
time lows that covers 11-Years for the Manufacturing PMI and 10-years
for services. 
 

The MFG index stands at a level of 36.16 well below the
neutral mark of 50. The services PMI stands at 43.32 a very low reading
for a less volatile sector. The services PMI is only slightly less
volatile than the MFG readings on m/mo levels basis. But the MFG PMI
has a range of variation that is 20% larger. Even so in terms of m/m
changes in the indices services is slightly more volatile. 
 

Compared to the US where the PMIs (ISM) measure MFG and Non
MFG, the MFG and Services sectors in Europe are far more closely
correlated. Their simple correlation is 0.89 compared to 0.78 for the
tow US measures. This suggest the US economy has room for more
independent activity in each sector possibly a better ability to avert
sector contagion, whereas in Europe when one sector does something, the
other is quick to follow. That is bad news when economic growth is
slipping. The US MFG sector is about 25% more volatile than its
European counterpart whereas the US Nonmanufacturing sector is about 4
percent less volatile than its European counterpart. Right now all PMIs
are sinking and are very weak. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="3" scope="col"> FLASH Readings:&nbsp; Market PMIs for the Euro Area 13</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td> Manufacturing</td>
<td> Services</td>
</tr>
<tr>
<td class="firstcol"> Nov-08</td>
<td> 36.16</td>
<td> 43.32</td>
</tr>
<tr>
<td class="firstcol"> Oct-08</td>
<td>41.10</td>
<td>45.76</td>
</tr>
<tr>
<td class="firstcol"> Sep-08</td>
<td>44.97</td>
<td>48.44</td>
</tr>
<tr>
<td class="firstcol"> Aug-08</td>
<td>47.55</td>
<td>48.46</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol"> Averages</td>
</tr>
<tr>
<td class="firstcol"> 3-Month</td>
<td>44.54</td>
<td>46.13</td>
</tr>
<tr>
<td class="firstcol"> 6-Month</td>
<td>46.79</td>
<td>47.39</td>
</tr>
<tr>
<td class="firstcol"> 12-Month</td>
<td>49.50</td>
<td>49.66</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol"> 125-Mo Range</td>
</tr>
<tr>
<td class="firstcol"> High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol"> Low</td>
<td>36.16</td>
<td>43.32</td>
</tr>
<tr>
<td class="firstcol"> % Range</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

The Markit/NTC readings on conditions in services and MFG in the Euro Area show another chilling story. The indices are down to all time lows that covers 11-Years for the Manufacturing PMI and 10-years for services. The MFG index [...]

Euro Area PMIs

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081121a.jpg" align="left" border="0" height="265" width="353">
The Markit/NTC readings on conditions in services and MFG in
the Euro Area show another chilling story. The indices are down to all
time lows that covers 11-Years for the Manufacturing PMI and 10-years
for services. 
 

The MFG index stands at a level of 36.16 well below the
neutral mark of 50. The services PMI stands at 43.32 a very low reading
for a less volatile sector. The services PMI is only slightly less
volatile than the MFG readings on m/mo levels basis. But the MFG PMI
has a range of variation that is 20% larger. Even so in terms of m/m
changes in the indices services is slightly more volatile. 
 

Compared to the US where the PMIs (ISM) measure MFG and Non
MFG, the MFG and Services sectors in Europe are far more closely
correlated. Their simple correlation is 0.89 compared to 0.78 for the
tow US measures. This suggest the US economy has room for more
independent activity in each sector possibly a better ability to avert
sector contagion, whereas in Europe when one sector does something, the
other is quick to follow. That is bad news when economic growth is
slipping. The US MFG sector is about 25% more volatile than its
European counterpart whereas the US Nonmanufacturing sector is about 4
percent less volatile than its European counterpart. Right now all PMIs
are sinking and are very weak. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr> <th colspan="3" scope="col"> FLASH
Readings:&nbsp; Market PMIs for the Euro Area 13</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td> Manufacturing</td>
<td> Services</td>
</tr>
<tr>
<td class="firstcol"> Nov-08</td>
<td> 36.16</td>
<td> 43.32</td>
</tr>
<tr>
<td class="firstcol"> Oct-08</td>
<td>41.10</td>
<td>45.76</td>
</tr>
<tr>
<td class="firstcol"> Sep-08</td>
<td>44.97</td>
<td>48.44</td>
</tr>
<tr>
<td class="firstcol"> Aug-08</td>
<td>47.55</td>
<td>48.46</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol"> Averages</td>
</tr>
<tr>
<td class="firstcol"> 3-Month</td>
<td>44.54</td>
<td>46.13</td>
</tr>
<tr>
<td class="firstcol"> 6-Month</td>
<td>46.79</td>
<td>47.39</td>
</tr>
<tr>
<td class="firstcol"> 12-Month</td>
<td>49.50</td>
<td>49.66</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol"> 125-Mo Range</td>
</tr>
<tr>
<td class="firstcol"> High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol"> Low</td>
<td>36.16</td>
<td>43.32</td>
</tr>
<tr>
<td class="firstcol"> % Range</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120g.jpg" width="353">
For France and Italy new industrial orders continue to sink. France is right now seeing the greater weakness. Foreign orders show consistent weakness across time horizons for both Italy and for France. For France the recent deterioration in foreign orders is a bit worse than for Italy. But one remaining difference between these two countries is that in Italy domestic orders have shown some resiliency. Over three six and twelve months Italian orders have mostly showed increases. Meanwhile for France total and foreign order are down by almost the same percentage amounts over three months, hinting at weakening domestic orders. Italy may just be a step behind however. While Italy&#146;s domestic orders have been resilient, in September they have dropped by a sharp 2.6%. Also Italy&#146;s overall sales trends are deteriorating very rapidly. Both Italy and France seem to be well on their way to a deepening weakness in manufacturing. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Italy Orders
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar exept m/m</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-1.5%</td>
<td>-0.9%</td>
<td>2.2%</td>
<td>-1.0%</td>
<td>-5.1%</td>
<td>-3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>0.8%</td>
<td>-3.4%</td>
<td>-0.8%</td>
<td>-13.1%</td>
<td>-11.6%</td>
<td>-11.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic</td>
<td>-2.6%</td>
<td>0.3%</td>
<td>3.8%</td>
<td>5.7%</td>
<td>-1.4%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">Memo</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">Sales</td>
<td>1.7%</td>
<td>-3.1%</td>
<td>-2.6%</td>
<td>-15.1%</td>
<td>-1.6%</td>
<td>-0.6%</td>
</tr>
<tr class="even">
<td colspan="7">French Orders</td>
</tr>
<tr>
<td class="firstcol">Saar except m/m</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.7%</td>
<td>-7.6%</td>
<td>4.7%</td>
<td>-10.1%</td>
<td>-3.0%</td>
<td>-4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>2.2%</td>
<td>-8.3%</td>
<td>3.4%</td>
<td>-11.9%</td>
<td>-7.2%</td>
<td>-8.5%</td>
</tr>
</tbody>
</table>
</body>
</html>

For France and Italy new industrial orders continue to sink. France is right now seeing the greater weakness. Foreign orders show consistent weakness across time horizons for both Italy and for France. For France the recent [...]

New Orders for Italy and France Sink

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120e.jpg" width="353">
The Conference Board indicated that the October composite index of leading economic indicators fell by 0.8% after rising a downwardly revised 0.1% during September. The peak for the index was in July of last year and the six-month percent change fell to -4.7%, the largest rate of decline in nearly one year.
Six of the ten components of the leading index fell last month notably consumer expectations, vendor performance, stock prices and building permits.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120f.jpg" width="353">
The breadth of one-month increase amongst the leaders&#39; 10 components fell back to 35% and over a six-month period the breadth of gain amongst the components picked slightly to 30%.
The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.
The coincident indicators rose 0.2% following five consecutive months of decline. Three quarters of the index components rose m/m but over six months none rose. Over the last ten years there has been an 86% correlation between the y/y changes in the coincident indicators and real GDP.
The lagging index ticked up 0.1%, the smallest increase in four months. The ratio of coincident to lagging indicators (a measure of economic excess) also ticked up slightly but remained near its lowest level since 1982.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a> (%)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July, 6 Month % (AR)</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.8</td>
<td>0.1</td>
<td>-0.9</td>
<td>-4.7</td>
<td>-0.4%</td>
<td>1.3%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-2.4</td>
<td>1.7%</td>
<td>2.4%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.1</td>
<td>0.3</td>
<td>0.4</td>
<td>2.5</td>
<td>2.9%</td>
<td>3.1%</td>
<td>3.1%</td>
</tr>
</tbody>
</table>


</html>

The Conference Board indicated that the October composite index of leading economic indicators fell by 0.8% after rising a downwardly revised 0.1% during September. The peak for the index was in July of last year and the six-month [...]

U.S. Leading Indicators Fell Again

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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Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

250501Z1.jpg

**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

250501Z2.jpg

**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

250501Z3.jpg

**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

250501Z4.jpg

**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

250501Z5.jpg

**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

250501Z6.jpg

Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

Charts of the Week: Tariff Truce, Tenuous Trust

250430N1.jpg

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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.

Economy in Brief: November 2008

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