Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040318b.jpg" width="353">
Finished producer prices surged 0.6% in January. The increase was the largest since October of last year. The core PPI rose 0.3% following two months of flat-to-down prices.
Release of the figures was delayed due to the conversion to the 2002 North American Industry Classification System (NAICS) from the 1987 Standard Industrial Classification (SIC). The change affects industry breakdowns. The product-type breakdowns which are the usual focus of attention should not be meaningfully impacted. Seasonal adjustment factors also were recalculated.
Finished consumer goods prices rose 0.7% in January (4.0% y/y). Less food &amp; energy finished consumer goods prices rose 0.3% (+0.9% y/y). Consumer durable prices rose 0.4% (1.1% y/y) and reversed a December decline. Core non-durable prices jumped 0.7% (0.7% y/y).
Finished capital goods prices rose 0.3% (+1.1% y/y).
Finished energy prices rose 4.7% (11.3% y/y) on the strength of higher gasoline (13.0% y/y) and fuel oil (10.9% y/y) prices. These energy product price series are NSA.
Intermediate goods prices jumped 0.9% as energy prices rose. Core intermediate prices, up 0.6%, also rose the most for any month since February 2003. 
Crude goods prices surged 2.8% as energy prices jumped 12.5% (11.8% y/y). Core crude prices also rose 3.3%, strong for the seventh consecutive month.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM"> Producer Price Index</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>0.6%</td>
<td>0.2%</td>
<td>3.3%</td>
<td>3.2%</td>
<td>-1.3%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.3%</td>
<td>-0.1%</td>
<td>0.9%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.8%</td>
<td>0.4%</td>
<td>3.7%</td>
<td>4.7%</td>
<td>-1.5%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.6%</td>
<td>0.1%</td>
<td>2.3%</td>
<td>2.0%</td>
<td>-0.5%</td>
<td>-0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>2.8%</td>
<td>2.2%</td>
<td>13.6%</td>
<td>25.1%</td>
<td>-10.6%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>3.3%</td>
<td>3.0%</td>
<td>23.9%</td>
<td>12.2%</td>
<td>3.8%</td>
<td>-10.0%</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Lower 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 18, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040318a.jpg" width="353">
Initial claims for jobless insurance fell another 6,000 to 336,000 last week. The Consensus expectation was for 340,000 claims. The prior week was revised up slightly.
The latest figure covers the survey period for March nonfarm payrolls. Claims fell 8,000 (2.3%) from the February period.
During the last ten years there has been a 77% (negative) correlation between the level of initial claims and the three-month change in non-farm payrolls.
The four-week moving average of initial claims fell to 344,000 (-18.9% y/y).
Continuing claims for unemployment insurance rose 47,000 from the prior week&#39;s level that was revised to show a 55,000 decline.
The insured rate of unemployment was unchanged at 2.4% for the fourth week.

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col">3/13/04</th>
<th scope="col">3/06/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>336.0</td>
<td>342.0</td>
<td>-21.5%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,064</td>
<td>-13.3%</td>
<td>3,535</td>
<td>3,575</td>
<td>3,022</td>
</tr>
</tbody>
</table>
Leading Indicators Unchanged 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 18, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040318c.jpg" width="353">
The Composite Index of Leading Economic Indicators reported by the Conference Board was unchanged in February, about as expected. January&#39;s 0.5% gain was revised down slightly.
The soft one-month reading was dominated by lower consumer expectations which subtracted 0.2 percentage points. The breadth-of-gain amongst the leaders&#39; component series improved slightly to 60% from a downwardly revised 50% in January. Over a six-month span 80% of the leading series rose.
The Leading index is based on eight previously reported economic data series and two that are estimated.
The coincident indicators rose 0.3%, the strongest gain since November.
The ratio of coincident-to-lagging indicators rose to another record level. The ratio is an indicator of excess relative to actual economic performance.
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.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM"> Business Cycle Indicators</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">Leading</td>
<td>0.0%</td>
<td>0.4%</td>
<td>4.1%</td>
<td>1.3%</td>
<td>2.2%</td>
<td>-0.8%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.3%</td>
<td>0.1%</td>
<td>1.7%</td>
<td>0.4%</td>
<td>-0.5%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.0%</td>
<td>0.1%</td>
<td>-3.0%</td>
<td>-2.2%</td>
<td>-2.8%</td>
<td>-1.4%</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Fell Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 18, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040318e.jpg" width="353">
The Philadelphia Fed&#146;s March index of general business conditions in the manufacturing sector fell to 24.2 versus 31.4 last month. Consensus expectations had been for less of a decline to 29.0.
During the last twenty years there has been a 62% correlation between the level of the Philadelphia Fed Business Conditions Index and quarterly growth in real GDP. The correlation with quarterly growth in factory sector industrial production has been 76%.
Amongst the sub indexes, new orders fell sharply to 21.9 versus a high of 37.9 in December. Shipments improved slightly to 22.3 and the employment index was roughly stable at 12.3, a level consistent with expanding factory sector employment.
The business conditions index reflects a separate survey question, not the sub indexes.
A separate survey of expected business conditions in six months fell sharply to 36.7, the lowest level since February 2003.
The prices paid index surged again to 53.4, the highest level since January 1995.
The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0304.html">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM"> Philadelphia Fed Business Outlook</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#39;03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>24.2</td>
<td>31.4</td>
<td>-6.8</td>
<td>10.6</td>
<td>7.7</td>
<td>-17.2</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>53.4</td>
<td>43.7</td>
<td>21.2</td>
<td>16.7</td>
<td>12.2</td>
<td>-0.9</td>
</tr>
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Finished producer prices surged 0.6% in January. The increase was the largest since October of last year. The core PPI rose 0.3% following two months of flat-to-down prices. Release of the figures was delayed due to the conversion to [...]

Producer Prices Surged in January

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040317c.jpg" width="353">
Trade in Singapore remains in comfortable surplus through February as exports continue to grow more rapidly than imports. Growth rates of both are erratic from month to month, but uptrends show the signs of world-wide economic revival following the recession in 2001.
Singapore is widely known as a trading hub in Southeast Asia. And its trade data reflect this status quite clearly. In a distinctive (although not unique) breakdown of its exports, Singapore reports that only some 55% of its exports over the past four years have been produced locally. Of its S$251.1 billion in exports last year, S$112.2 billion represent re-exports, goods imported into the area, possibly graded and/or broken into lots and repackaged and then sent on to a final destination. Much of the Singapore economy is located on its docks.
Among those exports, both domestic and re-exports, is a substantial portion consisting of &quot;machinery and transport equipment&quot;. For Singapore, this largely means semiconductors and other electronic components and parts. The value of this line item fell nearly S$19 billion between 2000 and 2001, and through last year (December is latest available), while those exports have recovered markedly, they remained below the 2000 peak.

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<th scope="col" class="firstcol">Singapore Dollars (except where noted)</th>
Seasonally Adj.
<th scope="col">Year/ Year</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Feb 2004</td>
<td>Jan 2004</td>
</tr>
<tr>
<td class="firstcol">Trade Balance</td>
<td>2.8</td>
<td>2.4</td>
<td>&nbsp;</td>
<td>28.3</td>
<td>15.6</td>
<td>10.3</td>
<td>5.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Exports</td>
<td>24.6</td>
<td>23.2</td>
<td>24.1%</td>
<td>251.1</td>
<td>223.9</td>
<td>218.0</td>
<td>237.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Exports</td>
<td>13.6</td>
<td>12.4</td>
<td>22.6%</td>
<td>138.9</td>
<td>119.4</td>
<td>118.4</td>
<td>135.9</td>
</tr>
<tr>
<td class="firstcol">Re-Exports</td>
<td>11.1</td>
<td>10.2</td>
<td>26.0%</td>
<td>112.2</td>
<td>104.5</td>
<td>99.6</td>
<td>101.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>21.8</td>
<td>20.8</td>
<td>19.8%</td>
<td>222.8</td>
<td>208.3</td>
<td>207.7</td>
<td>232.2</td>
</tr>
</tbody>
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Trade in Singapore remains in comfortable surplus through February as exports continue to grow more rapidly than imports. Growth rates of both are erratic from month to month, but uptrends show the signs of world-wide economic revival [...]

Singapore Exports Lift Trade Surplus

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040317b.jpg" width="353">
The Consumer Price Index (CPI-U) rose 0.3% in February, matching Consensus expectations for a 0.3% gain. A 0.2% rise in prices less food &amp; energy was slightly firmer than the 0.1% Consensus expectation.
Prices of core consumer goods rose 0.2%, the firmest one month gain since August 2002. This strength reflected a 0.4% (2.4% y/y) rise in medical care commodities, a 0.4% (4.7% y/y) rise in educational books &amp; supplies and a 0.4% (-0.7% y/y) gain in new vehicle prices. Prices for home furnishings &amp; operation, up 0.2% (-1.6% y/y), also rose for the second consecutive month.
Apparel prices fell another 0.1% (-1.6% y/y) and tobacco prices also were off slightly (-0.0% y/y).
Core services prices rose a modest 0.1% as shelter prices ticked up just 0.1% (2.1% y/y). Prices for medical care services jumped 0.7% (4.7% y/y) but public transportation prices eased slightly (+2.2% y/y).
Energy prices moderated to a 1.7% gain following the 4.7% January spike. Gasoline prices rose 2.5% after the 8.1% jump in January (+2.0% y/y) but are up another 4.7% so far in March. Fuel oil prices rose 1.0% (-0.7% y/y) and piped gas prices rose 0.9% (6.2% y/y).
Food prices rose 0.2% and mostly reflected higher prices for fruits &amp; vegetables, up 1.0% (2.9% y/y).
The chained CPI which adjusts for shifts in consumer buying behavior surged 0.6%. It is similar to the PCE price deflator. The core chain price measure also surged by 0.5%, the strongest gain since February 2002.
&quot;Classical Deflation Theory&quot; from the Federal Reserve Bank of Richmond can be found <a href="http://www.rich.frb.org/pubs/eq/search.cfm/article=191"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM"> Consumer Price Index</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>0.3%</td>
<td>0.5%</td>
<td>1.7%</td>
<td>2.3%</td>
<td>1.6%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>1.2%</td>
<td>1.5%</td>
<td>2.3%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.0%</td>
<td>-2.0%</td>
<td>-2.0%</td>
<td>-1.1%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.5%</td>
<td>2.9%</td>
<td>3.8%</td>
<td>3.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>1.7%</td>
<td>4.7%</td>
<td>3.9%</td>
<td>12.2%</td>
<td>-5.8%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.2%</td>
<td>0.0%</td>
<td>3.2%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM"> Chained CPI: Total (NSA)</a></td>
<td>0.6%</td>
<td>0.5%</td>
<td>1.4%</td>
<td>1.9%</td>
<td>1.3%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.5%</td>
<td>0.2%</td>
<td>0.8%</td>
<td>1.1%</td>
<td>1.9%</td>
<td>&nbsp;2.0%</td>
</tr>
</tbody>
</table>
Mortgage Applications Surged Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 17, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040317a.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association jumped 25.6% last week for the fifth consecutive weekly gain.
Applications to refinance surged 39.7% (-46.9% y/y) as interest rates remained low.
The effective interest rate on a conventional 30-Year mortgage rose to 5.62% from 5.61% the week prior, but these rates are the lowest since last June. The effective rate on a 15-year mortgage ticked up to 5.01%.
Purchase applications rose 5.6% w/w (+30.3% y/y) and so far in March are 6.0% ahead of the February average.
During the last ten years there has been a 56% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">03/12/04</th>
<th scope="col">03/05/04</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>1,117.1</td>
<td>889.1</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>452.4</td>
<td>428.6</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>4,983.7</td>
<td>3,567.6</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
</body>
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The Consumer Price Index (CPI-U) rose 0.3% in February, matching Consensus expectations for a 0.3% gain. A 0.2% rise in prices less food & energy was slightly firmer than the 0.1% Consensus expectation. Prices of core consumer goods [...]

Consumer Prices Rose Broadly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040316a.jpg" width="353">
Housing starts fell 4.0% last month and added to the 6.3% drop in January. February starts of 1.855M were the lowest since last August. Consensus forecasts had been for 1.93M starts in February.
Single family starts fell 4.1%, the third consecutive monthly decline.
Multi-family starts fell 3.4% and are off 9.9% during the last two months.
Starts were mixed across the country&#39;s regions last month. Housing starts fell hard m/m in the South (+10.5% y/y) and also were down in the West (+4.1% y/y). Starts rose 25.3% m/m in the Northeast (32.4% y/y) and rose in the Midwest (+25.1% y/y), recovering from the January cold snap.
Building permits fell a moderate 1.5% m/m (+6.6% y/y) for the second month.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM"> Housing Starts (000s, AR)</a></th>
<th scope="col"> Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,855</td>
<td>1,932</td>
<td>13.1%</td>
<td>1,848</td>
<td>1,711</td>
<td>1,601</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,489</td>
<td>1,553</td>
<td>13.5%</td>
<td>1,501</td>
<td>1,364</td>
<td>1,272</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>366</td>
<td>379</td>
<td>11.6%</td>
<td>347</td>
<td>347</td>
<td>330</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,903</td>
<td>1,932</td>
<td>6.6%</td>
<td>1,831</td>
<td>1,750</td>
<td>1,637</td>
</tr>
</tbody>
</table>
Housing Market Index Unchanged 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 16, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040316b.jpg" width="353">
The Composite Housing Market Index reported by the National Association of Home Builders (NAHB) was unchanged in March at 64 versus February which was revised down slightly. It was the lowest level for the index since last June.
During the last fifteen years there has been a 79% correlation between the y/y change in the NAHB index and the change in single family housing starts.
The sub index which measures expected home sales in six months fell to the lowest level since June.
The index of current market conditions for home sales fell 2.8% m/m to 69 (+16.9% y/y).
Traffic of prospective buyers rose slightly m/m in March but still was off 12.7% from the August peak.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the National Association of Home Builders using this <a href="http://www.nahb.org">link</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/@S4/@S4.HTM"> Nat&#39;l Association of Home Builders</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">3 &#39;03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>64</td>
<td>64</td>
<td>52</td>
<td>64</td>
<td>61</td>
<td>56</td>
</tr>
</tbody>
</table>
Chain Store Sales Up Modestly 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 16, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040316c.jpg" width="353">
Chain store sales rose a modest 0.5% last week and recovered all of the prior week&#39;s 0.3% dip, according to the ICSC-UBS survey.
Sales so far in March are up 0.2% versus the February average.
During the last ten years there has been a 59% correlation between the year-to-year percent change in the ICSC-UBS measure of chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM"> ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">03/13/04</th>
<th scope="col">03/06/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>438.6</td>
<td>436.6</td>
<td>7.0%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Manpower Index of US Hiring Intentions Up Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 16, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040316d.jpg" width="353">
The Manpower survey of hiring intentions in the US for 2Q04 improved sharply. A seasonally adjusted net 20% of 16,000 employers expect to increase hiring activity. It was the highest level for hiring intentions since 1Q 2001.
The latest reading is up from 13% in 1Q and from 7% in 3Q03. Hiring typically picks up in 2Q, therefore seasonal adjustment factors damped the increase in the seasonally adjusted index.
Since 1980 there has been a 75% correlation between the Manpower index and the y/y change in non-farm payrolls.
The latest press release from Manpower Inc. covering employment prospects in North America can be viewed <a href="http://www.manpower.com/mpcom/viewMeos?name=Americas.pdf"> here</a>.

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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@SC/@SC.HTM"> Manpower Employment Survey</a></th>
<th scope="col">2Q04</th>
<th scope="col">1Q04</th>
<th scope="col">2Q03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">All Industries - Net Higher (SA)</td>
<td>20</td>
<td>13</td>
<td>11</td>
<td>11</td>
<td>11</td>
<td>17</td>
</tr>
</tbody>
</table>
FOMC Left Rates Unchanged 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 16, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040316e.jpg" width="353">
As expected, the Federal Reserve left the target rate for federal funds unchanged at 1.00%. The discount rate also was left unchanged at 2.00%.
The decision was unanimous.
The press release which accompanied the Fed&#39;s action indicated that &quot;The evidence accumulated over the intermeeting period indicates that output is continuing to expand at a solid pace. Although job losses have slowed, new hiring has lagged.&quot;
Regarding inflation, the Fed indicated that &quot;The probability of an unwelcome fall in inflation has diminished in recent months and now appears almost equal to that of a rise in inflation. With inflation quite low and resource use slack, the Committee believes that it can be patient in removing its policy accommodation.&quot;
The complete text of the Fed&#39;s latest press release can be found <a href="http://www.federalreserve.gov/boarddocs/press/monetary/2004/20040316/default.htm"> here</a>.
&quot;How the Fed Affects the Economy: A Look at Systemic Monetary Policy&quot; from the Federal Reserve Bank of Philadelphia is available <a href="http://www.phil.frb.org/files/br/brq104md.pdf">here</a> .
&quot;Macroeconomic Principles and Monetary Policy&quot; from J. Alfred Broaddus, Jr., President of the Federal Reserve Bank of Richmond can be found <a href="http://www.rich.frb.org/pubs/eq/search.cfm/article=190"> here</a>.

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Housing starts fell 4.0% last month and added to the 6.3% drop in January. February starts of 1.855M were the lowest since last August. Consensus forecasts had been for 1.93M starts in February. Single family starts fell 4.1%, the [...]

Housing Starts Fell Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040315a.jpg" width="353">
Industrial production rose another 0.7% in February following an upwardly revised 0.8% gain in January. The rise easily outpaced Consensus expectations for a 0.4% increase.
Production in the factory sector jumped 1.0% following the 0.3% January gain (3.2% y/y). Output of utilities fell 0.7% after a revised 5.3% jump in January due to cold weather.
Output in selected high-technology industries again led the factory sector with a 2.1% m/m surge (23.5% y/y). Output of semiconductors &amp; related equipment surged 3.0% (42.6% y/y). Output of computers &amp; peripheral equipment jumped 2.1% (16.7% y/y), the eighth consecutive monthly gain at about that rate, and output of communications equipment rose 0.3% (-1.3% y/y).
Excluding high-tech, factory output jumped 0.9% (1.9% y/y). Higher output of motor vehicles &amp; parts, up 1.6%, led that gain but machinery output also rose a strong 1.7% (6.4% y/y). Non-durables output jumped 0.9% (0.7% y/y) due to across the board strength.
Total capacity utilization rose to 76.6%, the highest level since June &#39;02. Y/Y growth in capacity was a low 1.1%, the slowest since early 1989.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM"> Production &amp; Capacity</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Industrial Production</td>
<td>0.7%</td>
<td>0.8%</td>
<td>2.7%</td>
<td>0.3%</td>
<td>-0.6%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>76.6%</td>
<td>76.1%</td>
<td>75.4%(2/03)</td>
<td>74.9%</td>
<td>75.6%</td>
<td>77.4%</td>
</tr>
</tbody>
</table>
Empire State Index Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 15, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040315b.jpg" width="353">
The March Empire State Index of General Business Conditions fell to 25.33 from the record high in February. The 16.7 point m/m decline was versus a more moderate decline expected by the Consensus and was to the lowest level in six months.
The new orders index dropped sharply to 23.52, also the lowest level in six months. The shipments index fell just slightly after the 15 point slump in January and the employment index slid further to 9.72, a six month low.
The index of prices surged 16.4 points m/m to 50.0, another series&#39; record.
The February index of expectations for business conditions six months ahead fell slightly m/m, the third consecutive monthly decline from the record high in December. Expectations for capital expenditures improved for the second month in a row.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question, not the components.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM"> Empire State Manufacturing Survey</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">3/03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col"> 2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>25.33</td>
<td>42.05</td>
<td>-0.35</td>
<td>16.30</td>
<td>7.02</td>
<td>-13.57</td>
</tr>
</tbody>
</table>
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Industrial production rose another 0.7% in February following an upwardly revised 0.8% gain in January. The rise easily outpaced Consensus expectations for a 0.4% increase. Production in the factory sector jumped 1.0% following the [...]

U.S. Industrial Production Firm Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040311c.jpg" width="353">
Retail sales rose 0.6% last month and matched the Consensus expectation. The previously reported 0.3% decline in January sales was revised up to a 0.3% increase.
Retail sales excluding motor vehicles &amp; parts dealers were little changed but January sales were revised up to a 1.2% surge from 0.9%. Consensus expectations had been for a 0.5% February increase.
Sales at general merchandise stores jumped another 1.3% (7.2% y/y) after an upwardly revised 1.2% January surge.Sales of furniture/home furnishings &amp; electronics/appliances were unchanged (12.3% y/y) after a 0.7% January gain that was revised from a 0.4% decline. Clothing and accessory store sales rose 0.4% (9.6% y/y) following several months of strong gain.
Motor vehicle dealers&#39; sales rose 2.7% m/m as unit sales of light vehicles rose 1.5% to 16.37M.
Sales of building materials were unchanged (14.7% y/y) following a little-revised 1.0% January drop. Sales at food stores fell 0.5% and gasoline service stations&#39; sales fell 0.1%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM"> Retail Sales &amp; Food Services</a></td>
<td>0.6%</td>
<td>0.2%</td>
<td>7.9%</td>
<td>5.6%</td>
<td>3.0%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>-0.0%</td>
<td>1.2%</td>
<td>7.3%</td>
<td>5.3%</td>
<td>3.6%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
Import Prices Rose 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 11, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040311b.jpg" width="353">
Imported commodities prices rose 0.4% in February, just under the Consensus expectation for a 0.5% rise.
Non-petroleum import prices rose 0.4%. The gain mostly reflected a 1.6% (3.9% y/y) jump in food prices. Capital goods prices were unchanged (-0.9% y/y) and as were non-auto consumer goods prices (0.6% y/y). Auto prices rose 0.1% (1.2% y/y).
During the last fifteen years there has been a (negative) 54% correlation between the trade-weighted exchange value of the dollar and the y/y change in non-petroleum import prices
Petroleum prices rose 0.2% last month. So far in March the price of Brent Crude Oil has risen another 13% to $34/bbl.
Export prices rose another 0.6%. Higher prices for food exports, up 2.1% (15.0% y/y), drove the gain. Capital goods export prices rose just 0.2% (-1.0% y/y) and non-auto consumer goods prices fell for the second month (0.4% y/y).
&quot;Import Prices and the Exchange Rate&quot; from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/iet/20040201/cover.pdf"> here</a>.
&quot;A Perspective on U.S. International Trade&quot; from St. Louis Bank President William Poole can be found <a href="http://research.stlouisfed.org/publications/review/04/03/Poole.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM"> Import/Export Prices (NSA)</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>0.4%</td>
<td>1.5%</td>
<td>0.8%</td>
<td>2.9%</td>
<td>-2.5%</td>
<td>-3.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>0.2%</td>
<td>8.2%</td>
<td>-4.9%</td>
<td>20.9%</td>
<td>3.0%</td>
<td>-17.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.4%</td>
<td>0.8%</td>
<td>1.8%</td>
<td>1.1%</td>
<td>-2.4%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.6%</td>
<td>0.6%</td>
<td>2.4%</td>
<td>1.6%</td>
<td>-1.0%</td>
<td>-0.8%</td>
</tr>
</tbody>
</table>
Initial Jobless Insurance Claims Down Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 11, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040311a.jpg" width="353">
Initial claims for jobless insurance fell 6,000 (-1.7%) to 341,000 last week, near the Consensus expectation for 345,000 claims. The prior week was revised up slightly.
During the last ten years there has been a 77% (negative) correlation between the level of initial claims and the three-month change in non-farm payrolls.
The four-week moving average of initial claims fell to 345,750 (-17.5% y/y).
Continuing claims for unemployment insurance fell 41,000 from the prior week&#39;s level that was revised to show a 17,000 decline.
The insured rate of unemployment was unchanged at 2.4% for the third week.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col">3/6/04</th>
<th scope="col">2/28/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>341.0</td>
<td>347.0</td>
<td>-18.8%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,032</td>
<td>-12.0%</td>
<td>3,535</td>
<td>3,575</td>
<td>3,022</td>
</tr>
</tbody>
</table>
U.S. Budget Deficit Deeper 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 11, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040311f.jpg" width="353">
The U.S. Government budget deficit deepened to $96.7B in February.That about equaled expectations and also about equaled last year&#39;s deficit in February, but for the first five months of FY04 the deficit of $226.8B was 17% larger than last year.
As a percentage of US GDP the Federal deficit is projected to hit 4.5% this year versus 3.5% last year and a peak of 6.0% in 1983.
Net receipts for the first five months of FY04 rose 0.8% versus the first five months of FY03. The gain reflected higher corporate tax receipts, up 46.7% y/y. Contributions for social insurance, estate taxes, and miscellaneous taxes also rose. Individual income tax receipts fell 4.6% y/y.
Federal net expenditures rose 4.2% versus the first five months of last fiscal year. Defense expenditures surged 14.2%. Medicare outlays grew 0.5% and spending on health programs rose 10.0%. Interest expense fell 4.5% y/y.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E10602.HTM"> US Government Finance</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Feb &#39;03</th>
<th scope="col">FY2003</th>
<th scope="col">FY2002</th>
<th scope="col">FY2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$-96.7B</td>
<td>$-1.6B</td>
<td>$-96.7B</td>
<td>$-374.2B</td>
<td>$-157.8B</td>
<td>$127.3B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revenues</td>
<td>$85.3B</td>
<td>$184.3B</td>
<td>-4.7%</td>
<td>-3.8%</td>
<td>-6.9%</td>
<td>-1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Outlays</td>
<td>$182.0B</td>
<td>$185.6B</td>
<td>-2.2%</td>
<td>7.2%</td>
<td>7.9%</td>
<td>4.2%</td>
</tr>
</tbody>
</table>
</body>
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Retail sales rose 0.6% last month and matched the Consensus expectation. The previously reported 0.3% decline in January sales was revised up to a 0.3% increase. Retail sales excluding motor vehicles & parts dealers were little [...]

U.S. Retail Sales Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040310c.jpg" width="353">
Japan&#39;s seasonally adjusted current account surplus widened to a record in January, according to the Bank of Japan/Ministry of Finance report on the nation&#39;s Balance of Payments issued today. The increase over December was &yen;345 billion. Notably this was not due to a larger surplus in merchandise trade. That balance remained exactly the same as in December, &yen;1185.8 billion, as exports and imports rose by equal amounts..
In the month, then, non-trade factors held sway: the deficit on services decreased markedly, and the surplus on income flows widened. It reached a record &yen;849 billion, &yen;154 billion more than the monthly average for all of last year. The January gain, &yen;212 billion, was more than accounted for by a favorable swing in portfolio investment income of &yen;336 billion. The service accounts saw a decrease in imports of &quot;other business services&quot;, that is, excluding financial, communication and computer services.
The picture from these data still shows Japanese merchandise trade with a sizable surplus due to strong exports. But imports have been growing since late 2001 as the Japanese economy works its way out of recession. And other forces tied to capital markets have been at work, so that, as can be seen in the accompanying chart, the current account in Japan no longer moves in lock step with the trade account.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Billion Yen&nbsp; (Months seasonally adjusted)</th>
<th scope="col">Jan 2004</th>
<th scope="col">Dec 2003</th>
<th scope="col">2003 Monthly Average</th>
<th scope="col">2003 Total</th>
<th scope="col">2002 Total</th>
<th scope="col">2001 Total</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account</td>
<td>1685.2</td>
<td>1339.9</td>
<td>1315.4</td>
<td>15785.2</td>
<td>14139.7</td>
<td>10652.4</td>
</tr>
<tr>
<td class="firstcol">Trade Balance</td>
<td>1185.8</td>
<td>1185.8</td>
<td>1021.3</td>
<td>12255.0</td>
<td>11733.2</td>
<td>8527.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>4626.8</td>
<td>4545.3</td>
<td>4327.2</td>
<td>51926.1</td>
<td>49479.7</td>
<td>46583.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>3441.0</td>
<td>3359.5</td>
<td>3305.9</td>
<td>39671.3</td>
<td>37746.4</td>
<td>38056.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>-318.7</td>
<td>-394.7</td>
<td>-321.4</td>
<td>-3889.1</td>
<td>-5264.3</td>
<td>-5315.1</td>
</tr>
<tr>
<td class="firstcol">Income</td>
<td>848.8</td>
<td>637.3</td>
<td>690.5</td>
<td>8286.0</td>
<td>8266.6</td>
<td>8400.5</td>
</tr>
</tbody>
</table>
</body>
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Japan's seasonally adjusted current account surplus widened to a record in January, according to the Bank of Japan/Ministry of Finance report on the nation's Balance of Payments issued today. The increase over December was ¥345 [...]

Japan Current Account at Record, Bolstered by Services & Income Flows

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040310a.jpg" width="353">
The U.S. foreign trade deficit set a new record in January. It deepened sharply to $43.1B versus December&#39;s deficit of $42.7B which was little revised. Consensus expectations had been for a deficit of $41.5B.
Exports fell a sharp 1.2% (+8.5% y/y) following a 0.6% December decline which was revised slightly. Lower exports of foods, feeds &amp; beverages paced the January decline and fell 7.9% following a 4.6% December drop.
Exports of capital goods fell 0.8% (+12.6% y/y) after the 4.5% December plunge. Non-auto consumer goods exports also fell for the second month, off 2.1% (+5.8% y/y).
Imports fell 0.5% and it was broad based. Capital goods imports dropped for the second consecutive month (+12.6% y/y). Imports of non-auto consumer goods again fell hard versus the November peak (+5.8% y/y).
Non-petroleum imports fell 1.5% (+7.5% y/y). The value of petroleum imports rose another 6.1% (+13.1% y/y) as crude oil prices rose (+3.0% y/y).
By country, the US trade deficit with China deepened to $11.5B ($123.9B in 2003). The US trade deficit with Japan improved m/m to $5.3B ($66.0B in 2003) and the deficit with the European Union fell to a low $5.9B ($94.3B in 2003) as imports plummeted 20.1% m/m.
Exchange rate analysis from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr179.html">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/USECON/@EE/@EE03/@EE03.HTM"> Foreign Trade</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Deficit</td>
<td>$43.1B</td>
<td>$42.7B</td>
<td>$40.0B(1/03)</td>
<td>$489.9</td>
<td>$418.0B</td>
<td>$357.8B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>-1.2%</td>
<td>-0.6%</td>
<td>8.5%</td>
<td>4.6%</td>
<td>-3.3%</td>
<td>-5.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>-0.5%</td>
<td>3.1%</td>
<td>8.2%</td>
<td>8.4%</td>
<td>2.0%</td>
<td>-5.5%</td>
</tr>
</tbody>
</table>
Mortgage Applications Spurred by Lower Rates 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 10, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040310b.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association rose 1.2% last week for the fourth consecutive weekly gain.
The effective interest rate on a conventional 30-Year mortgage dropped to 5.61% from 5.75%, the lowest level since last June. The effective rate on a 15-year mortgage fell to 4.92%.
Purchase applications rose 1.4% w/w (+24.2% y/y) and started the month 3.1% ahead of the February average.
During the last ten years there has been a 55% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance rose 1.0% (-60.0% y/y) for the fourth consecutive weekly gain.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.

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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">03/05/04</th>
<th scope="col">02/27/04</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>889.1</td>
<td>878.7</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>428.6</td>
<td>422.6</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>3,567.6</td>
<td>3,532.2</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
</body>
</html>

The U.S. foreign trade deficit set a new record in January. It deepened sharply to $43.1B versus December's deficit of $42.7B which was little revised. Consensus expectations had been for a deficit of $41.5B. Exports fell a sharp 1.2% [...]

U.S. Trade Deficit Set New Record

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

250430O1.jpg

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.

250430P1.jpg

250430Q1.jpg

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**.

250430R1.jpg

250430S1.jpg

- 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

250430A.jpg

250430B.jpg

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**.

250430C.jpg

250430D.jpg

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

Personal Income, Consumption, and Prices in March

250430F20.jpg

250430G20.jpg

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

250430F5.jpg

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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: March 2004

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