Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060328b.jpg" width="353">
The Conference Board&#39;s Index of Consumer Confidence jumped 4.4% during March to 107.2, the highest level in nearly four years. The jump compared to Consensus expectations for stability at 102.0 and the m/m stability in the University of Michigan&#39;s March Index of Consumer Sentiment.
During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
The index of consumers&#39; expectations recovered most of the prior month&#39;s decline with a sharp 6.8% (-4.1% y/y) gain. Expectations for business conditions improved for the first month in four and more jobs were expected for the first month in three. Expectations for stock prices surged.
Consumers&#39; assessment of the present situation rose for the fifth straight month. The 2.3% increase (13.9% y/y) was driven by a rise in the percentage of respondents who viewed jobs as plentiful to 28.4%, the highest since 2001. Business conditions were thought to be good by 28.3% of respondents, the highest since last July.
Price inflation expected in twelve months fell to 4.8%, down slightly from the 5.2% expected in December and down sharply from the 6.8% expected last September.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>107.2</td>
<td>102.7</td>
<td>4.1%</td>
<td>100.3</td>
<td>96.1</td>
<td>79.8</td>
</tr>
</tbody>
</table>
Chain Store Sales Slide, Gasoline Prices Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 28, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060328a.jpg" width="353">
Chain store sales slid 1.6% last week, according to the International Council of Shopping Centers (ICSC)-UBS survey.The w/w drop followed a 0.1% decline during the prior period and rounded a lackluster March when sales ended the month about 1.4% lower than at the start. 
The average level of sales in March nevertheless rose roughly 1.0% versus the prior month due to a strong gain at the end of February.
During the last ten years there has been a 47% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The leading indicator of chain store sales ticked up 0.2% after the prior week&#39;s 0.3% decline and in March is up 0.1% versus February.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
Higher gasoline prices during March certainly did little to aid chain stores. Last week, the average retail price for regular gasoline held steady w/w at $2.50 per gallon (+16.0% y/y) but that followed a fourteen cent w/w jump the prior period and a fifteen cent rise in the monthly average versus February. During March, gasoline prices were at their highest since last October.
In spot market trading, yesterday&#39;s price for regular unleaded gasoline of $1.82 per gallon was up four cents from last week&#39;s average. U.S. demand for gasoline rose 1.2% from the February average (+0.3% y/y) during the latest four weeks though the very latest figures showed a decline w/w.

<table border="0" cellspacing="0" width="100%">
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<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">03/25/06</th>
<th scope="col">03/18/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>462.4</td>
<td>470.0</td>
<td>2.7%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
FOMC Increased Fed Funds Rate to 4.75% 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 28, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060328h.jpg" width="353">
The Federal Open Market Committee increased the target interest rate for Federal funds 25 basis points to 4.75% at today&#39;s meeting. It was the fifteenth increase since June of 2004 and the unanimous decision was widely expected by analysts.
The discount rate also was raised 25 basis points to 5.75%.
Reflecting little worry about the economic expansion, the Fed statement indicated &quot;The slowing of the growth of real GDP in the fourth quarter of 2005 seems largely to have reflected temporary or special factors.&quot;<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060328g.jpg" width="353">
Future rate increases were suggested by the FOMC statement. &quot;The Committee judges that some further policy firming may be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance.&quot;
For the complete text of the Fed&#39;s latest press release please click <a href="http://www.federalreserve.gov/BoardDocs/press/monetary/2006/20060328/default.htm">here</a>.
Goodbye to M3 from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20060401/cover.pdf"> here</a>.
What is Tight Money? from the American Enterprise Institute is available <a href="http://www.aei.org/publications/pubID.24126,filter.all/pub_detail.asp"> here</a>.

 Business Confidence Improves in Germany and Italy; Is Unchanged in France 
by <a href="/comment/Curley.html">Louise Curley</a> March 28, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060328c.jpg" width="353">
March surveys indicate that business confidence is surprisingly strong in Germany and Italy, but subdued in France. The first chart shows the IFO business climate index for Germany and the ISAE business confidence indicator for Italy. The second chart shows the percent balance between those in the manufacturing industry, who believe conditions are improving and those who believe they are worsening for Germany and France.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060328e.jpg" width="353">
Protests over a new law that makes it easier to fire young workers may have dampened French business confidence--it has shown little improvement since October of last year. However, in Germany, a strike by municipal workers against a proposal to increase the work week to 40 hours from 38.5 hours with no increase in pay has been in progress since February 6, with little or no effect on confidence.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060328d.jpg" width="353">
On the contrary, Germany&#39;s IFO Business Climate Index (2000=100) rose 1.9% in March surprising most observers. The consensus had been for a slight decline. The index is now at 105.4, its highest level since April, 1991. The Business Situation or Current Conditions Index at 105.1 is also at a level last reached in November, 1991 and the Expectations Index is at its highest level since October 94. The third chart shows the history of the Business Situation and Expectations Indexes since their inception in January, 1991.
Although Italy&#39;s ISAE measure of business confidence rose in March--1.6%--to reach 94.2 (2000=100), the highest level since January, 2000, the level of confidence remains almost 6% below that of 2000 while the level in Germany is now some 5% above the 2000 average level. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Business Confidence</th>
<th scope="col">Mar 06</th>
<th scope="col">Feb 05</th>
<th scope="col">Mar 05</th>
<th scope="col">M/M % or Pct chg</th>
<th scope="col">Y/Y % or Pct chg</th>
<th scope="col">2005&nbsp; </th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Germany:&nbsp; IFO&nbsp; (2000=100)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Climate</td>
<td>105.4</td>
<td>103.3</td>
<td>93.9</td>
<td>1.93</td>
<td>12.37</td>
<td>95.5</td>
<td>95.4</td>
<td>91.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Current Situation</td>
<td>105.1</td>
<td>101.9</td>
<td>92.3</td>
<td>3.14</td>
<td>13.87</td>
<td>94.7</td>
<td>93.1</td>
<td>88.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Expectations</td>
<td>105.7</td>
<td>104.9</td>
<td>95.2</td>
<td>0.76</td>
<td>11.03</td>
<td>96.3</td>
<td>97.8</td>
<td>95.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy: ISAE&nbsp;(2000=100)</td>
<td>94.2</td>
<td>92.7</td>
<td>84.9</td>
<td>1.62</td>
<td>10.95</td>
<td>87.5</td>
<td>89.5</td>
<td>88.0</td>
</tr>
<tr>
<td class="firstcol">France: General Outlook Manufacturing % Balance</td>
<td>&nbsp;-2.0</td>
<td>-2.0&nbsp;</td>
<td>-5.0&nbsp;</td>
<td>0.0&nbsp;</td>
<td>3.0&nbsp;</td>
<td>-12&nbsp;</td>
<td>5&nbsp;</td>
<td>-29&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany: Business Climate in Mfg % Balance</td>
<td>19.2</td>
<td>14.9</td>
<td>-1.5</td>
<td>4.3</td>
<td>20.7</td>
<td>1.1</td>
<td>4.4</td>
<td>-8.0</td>
</tr>
</tbody>
</table>


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The Conference Board's Index of Consumer Confidence jumped 4.4% during March to 107.2, the highest level in nearly four years. The jump compared to Consensus expectations for stability at 102.0 and the m/m stability in the University [...]

Consumer Confidence Up Sharply

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060327e.jpg" width="353">
Further evidence that deflation in Japan is becoming a thing of the past is showing up in land prices. Commercial land prices in the three metropolitan areas--Tokyo, Osaka and Nagoya--rose last year for the first time since the peak in Japan&#39;s land prices was reached in the first half of 1991. After fourteen years of ever lower prices, the price of commercial land in the three metropolitan areas rose 1.0% in 2005.Nationwide, prices of commercial land were still falling, but the decline has been decelerating and in 2005 was 2.7% versus 5.6% the year before. The first chart shows the annual percentage changes in the prices of commercial land in the three metropolitan areas and in the nation as a whole for the past twenty years.Residential land prices have not yet shown an increase but the declines have been moderating both in the metropolitan areas and in the nation as a whole, as the second chart shows.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060327f.jpg" width="353">
These price changes are published by the Department of Land, Infrastructure and Transport annually. Percentage changes from a year ago are shown on January 1st of each year, the latest being January 1, 2006. Indexes of urban land prices (End of March =100) are compiled and published by the Japan Real Estate Institute semiannually in March and September. The March figure is representative of the first half of the year and the September figure, the second half. The index of is based on conditions in some 223 cities.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060327g.jpg" width="353">
The indexes give a good picture of the rise and fall of land prices in urban areas. The rise of land prices in the boom of the eighties was more pronounced in commercial land prices than in residential land prices. Between 1980 and 1991 commercial land prices rose almost 130% and have subsequently declined 70%. The index of commercial land prices was 58.60 in the last half of 2005 below the level of the index in the first half of 1980. The rise in residential land prices was less, 108%, and the subsequent decline has been more muted, 40%. The Index of residential land prices was 75.60 in the last half of 2005, still above the 60.60 of the first half of 1980. The rise and fall of commercial and residential land prices are shown in the third chart. 

<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/JAPAN/@J5/@J5.HTM">Percent Changes in Land Prices (%)</a></th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Commercial&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Metropolitan Areas</td>
<td>1.0</td>
<td>-3.2</td>
<td>-5.8</td>
<td>-7.1</td>
<td>8.5</td>
<td>-9.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nationwide</td>
<td>-2.7</td>
<td>-5.6</td>
<td>-7.4</td>
<td>-8.0</td>
<td>-8.3</td>
<td>-8.0</td>
</tr>
<tr>
<td class="firstcol">Residential&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Metropolitan Areas</td>
<td>&nbsp;-1.2</td>
<td>-3.7&nbsp;</td>
<td>-5.7</td>
<td>-6.5&nbsp;</td>
<td>-5.6</td>
<td>&nbsp;-5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nationwide</td>
<td>-2.7</td>
<td>-4.6</td>
<td>-5.7</td>
<td>-5.8</td>
<td>-5.2</td>
<td>-4.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; <a href="http://www.haverselect.com/dlx/JAPAN/@J5/@J5.HTM">Urban Land Price Index</a> &nbsp; (End of March 2000=100)</td>
<td>1980</td>
<td>Peak 1991</td>
<td>Current Second half 2005</td>
<td>1980-Peak &nbsp; % Change</td>
<td>Peak-Current &nbsp;% Change</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Commercial Land</td>
<td>86.00</td>
<td>195.90</td>
<td>58.60</td>
<td>127.79</td>
<td>-70.09</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Residential Land</td>
<td>60.61</td>
<td>126.10</td>
<td>75.60</td>
<td>108.09</td>
<td>-40.05</td>
<td>--</td>
</tr>
</tbody>
</table>
</body>
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Further evidence that deflation in Japan is becoming a thing of the past is showing up in land prices. Commercial land prices in the three metropolitan areas--Tokyo, Osaka and Nagoya--rose last year for the first time since the peak [...]

Another Indication of the End of Deflation in Japan: Prices of Commercial Land Rise in Metropolitan Areas

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060327c.jpg" width="353">
New orders for durable goods increased 2.6% last month following an 8.9% drop during January that was somewhat shallower than initially reported. The gain outpaced Consensus expectations for a 1.0% increase, however, unlike the prior month&#39;s report covering activity in the factory sector, the details were not constructive.
During the last ten years there has been a 51% correlation between the y/y change in durable goods orders and the level of the ISM orders index.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060327d.jpg" width="353">
A 26.0% rebound in aircraft &amp; parts orders predominated last month&#39;s gain. It followed a 59.9% January plunge and was led by a 52.5% surge in nondefense (66.3% y/y) aircraft.
New orders for motor vehicles &amp; parts fell for the fourth month in the last five and the 3.3% m/m decline was to the lowest level in nearly one year.
Less the transportation sector altogether, durable goods orders fell 1.3% following an upwardly revised 1.6% January increase. The decline disappointed Consensus expectations for a 1.1% increase.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060327a.jpg" width="353">
Declines in orders were widespread during February. Electrical equipment orders fell 3.2% (+12.5% y/y) though the decline followed an 8.5% gain the month earlier which was quite a bit stronger than initially estimated. A 6.3% (+4.4% y/y) drop in machinery orders followed a 3.5% January slip while orders for fabricated metals fell 1.9% (+5.6% y/y) and primary metals also fell by 2.5% (+6.0% y/y). Orders for computers &amp; electronic products rose 4.2% (2.9% y/y) though the y/y gain is well below the double digit increases of 2004 and 2005.
Orders for nondefense capital goods increased a scant 1.6% following the 19.8% plunge during January and orders less aircraft fell 2.3%. The January figures were little revised.
During the last ten years there has been an 87% correlation between the y/y change in capital goods orders less aircraft and the y/y change in business fixed investment in equipment &amp; software from the GDP accounts.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060327b.jpg" width="353">
Shipments of durable goods rose 0.2% after the 1.8% drop during January and less the transportation sector shipments rose 0.1% (8.3% y/y) following the 0.5% January increase.
Order backlogs rose 0.9% (17.0% y/y), again dominated by the strength in unfilled orders for aircraft &amp; parts which rose 1.1% (39.3% y/y). Less transportation backlogs rose 0.5% (10.2% y/y). The ratio of backlogs to shipments outside of transportation increased moderately but remained near the middle of the range of the last two years.
Durable inventories fell 0.5% (+2.6% y/y) after a 1.0% January gain. Less transportation, the 0.4% (+2.8% y/y) February decline followed a 1.2% January surge. The inventory to sales ratio outside of the transportation sector fell to near the historic low.
Macroeconomic News and Real Interest Rates from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/06/03/KliesenSchmid.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/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>2.6%</td>
<td>-8.9%</td>
<td>8.1%</td>
<td>8.6%</td>
<td>9.5%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>-1.3%</td>
<td>1.6%</td>
<td>6.4%</td>
<td>8.6%</td>
<td>11.7%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>1.6%</td>
<td>-19.8%</td>
<td>9.4%</td>
<td>20.0%</td>
<td>11.0%</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-2.3%</td>
<td>0.3%</td>
<td>5.0%</td>
<td>10.7%</td>
<td>9.5%</td>
<td>4.8%</td>
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New orders for durable goods increased 2.6% last month following an 8.9% drop during January that was somewhat shallower than initially reported. The gain outpaced Consensus expectations for a 1.0% increase, however, unlike the prior [...]

U.S. Durable Goods Orders Up, But ...

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060327c.jpg" width="353">
New orders for durable goods increased 2.6% last month following an 8.9% drop during January that was somewhat shallower than initially reported. The gain outpaced Consensus expectations for a 1.0% increase, however, unlike the prior month&#39;s report covering activity in the factory sector, the details were not constructive.
During the last ten years there has been a 51% correlation between the y/y change in durable goods orders and the level of the ISM orders index.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060327d.jpg" width="353">
A 26.0% rebound in aircraft &amp; parts orders predominated last month&#39;s gain. It followed a 59.9% January plunge and was led by a 52.5% surge in nondefense (66.3% y/y) aircraft.
New orders for motor vehicles &amp; parts fell for the fourth month in the last five and the 3.3% m/m decline was to the lowest level in nearly one year.
Less the transportation sector altogether, durable goods orders fell 1.3% following an upwardly revised 1.6% January increase. The decline disappointed Consensus expectations for a 1.1% increase.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060327a.jpg" width="353">
Declines in orders were widespread during February. Electrical equipment orders fell 3.2% (+12.5% y/y) though the decline followed an 8.5% gain the month earlier which was quite a bit stronger than initially estimated. A 6.3% (+4.4% y/y) drop in machinery orders followed a 3.5% January slip while orders for fabricated metals fell 1.9% (+5.6% y/y) and primary metals also fell by 2.5% (+6.0% y/y). Orders for computers &amp; electronic products rose 4.2% (2.9% y/y) though the y/y gain is well below the double digit increases of 2004 and 2005.
Orders for nondefense capital goods increased a scant 1.6% following the 19.8% plunge during January and orders less aircraft fell 2.3%. The January figures were little revised.
During the last ten years there has been an 87% correlation between the y/y change in capital goods orders less aircraft and the y/y change in business fixed investment in equipment &amp; software from the GDP accounts.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060327b.jpg" width="353">
Shipments of durable goods rose 0.2% after the 1.8% drop during January and less the transportation sector shipments rose 0.1% (8.3% y/y) following the 0.5% January increase.
Order backlogs rose 0.9% (17.0% y/y), again dominated by the strength in unfilled orders for aircraft &amp; parts which rose 1.1% (39.3% y/y). Less transportation backlogs rose 0.5% (10.2% y/y). The ratio of backlogs to shipments outside of transportation increased moderately but remained near the middle of the range of the last two years.
Durable inventories fell 0.5% (+2.6% y/y) after a 1.0% January gain. Less transportation, the 0.4% (+2.8% y/y) February decline followed a 1.2% January surge. The inventory to sales ratio outside of the transportation sector fell to near the historic low.
Macroeconomic News and Real Interest Rates from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/06/03/KliesenSchmid.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/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>2.6%</td>
<td>-8.9%</td>
<td>8.1%</td>
<td>8.6%</td>
<td>9.5%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>-1.3%</td>
<td>1.6%</td>
<td>6.4%</td>
<td>8.6%</td>
<td>11.7%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>1.6%</td>
<td>-19.8%</td>
<td>9.4%</td>
<td>20.0%</td>
<td>11.0%</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-2.3%</td>
<td>0.3%</td>
<td>5.0%</td>
<td>10.7%</td>
<td>9.5%</td>
<td>4.8%</td>
</tr>
</tbody>
</table>
 Another Indication of the End of Deflation in Japan:   Prices of Commercial Land Rise in Metropolitan Areas 
by <a href="/comment/Curley.html">Louise Curley</a> March 27, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060327e.jpg" width="353">
Further evidence that deflation in Japan is becoming a thing of the past is showing up in land prices. Commercial land prices in the three metropolitan areas--Tokyo, Osaka and Nagoya--rose last year for the first time since the peak in Japan&#39;s land prices was reached in the first half of 1991. After fourteen years of ever lower prices, the price of commercial land in the three metropolitan areas rose 1.0% in 2005.Nationwide, prices of commercial land were still falling, but the decline has been decelerating and in 2005 was 2.7% versus 5.6% the year before. The first chart shows the annual percentage changes in the prices of commercial land in the three metropolitan areas and in the nation as a whole for the past twenty years.Residential land prices have not yet shown an increase but the declines have been moderating both in the metropolitan areas and in the nation as a whole, as the second chart shows.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060327f.jpg" width="353">
These price changes are published by the Department of Land, Infrastructure and Transport annually. Percentage changes from a year ago are shown on January 1st of each year, the latest being January 1, 2006. Indexes of urban land prices (End of March =100) are compiled and published by the Japan Real Estate Institute semiannually in March and September. The March figure is representative of the first half of the year and the September figure, the second half. The index of is based on conditions in some 223 cities.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060327g.jpg" width="353">
The indexes give a good picture of the rise and fall of land prices in urban areas. The rise of land prices in the boom of the eighties was more pronounced in commercial land prices than in residential land prices. Between 1980 and 1991 commercial land prices rose almost 130% and have subsequently declined 70%. The index of commercial land prices was 58.60 in the last half of 2005 below the level of the index in the first half of 1980. The rise in residential land prices was less, 108%, and the subsequent decline has been more muted, 40%. The Index of residential land prices was 75.60 in the last half of 2005, still above the 60.60 of the first half of 1980. The rise and fall of commercial and residential land prices are shown in the third chart. 

<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/JAPAN/@J5/@J5.HTM">Percent Changes in Land Prices (%)</a></th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Commercial&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Metropolitan Areas</td>
<td>1.0</td>
<td>-3.2</td>
<td>-5.8</td>
<td>-7.1</td>
<td>8.5</td>
<td>-9.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nationwide</td>
<td>-2.7</td>
<td>-5.6</td>
<td>-7.4</td>
<td>-8.0</td>
<td>-8.3</td>
<td>-8.0</td>
</tr>
<tr>
<td class="firstcol">Residential&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Metropolitan Areas</td>
<td>&nbsp;-1.2</td>
<td>-3.7&nbsp;</td>
<td>-5.7</td>
<td>-6.5&nbsp;</td>
<td>-5.6</td>
<td>&nbsp;-5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nationwide</td>
<td>-2.7</td>
<td>-4.6</td>
<td>-5.7</td>
<td>-5.8</td>
<td>-5.2</td>
<td>-4.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; <a href="http://www.haverselect.com/dlx/JAPAN/@J5/@J5.HTM"> Urban Land Price Index</a> &nbsp; (End of March 2000=100)</td>
<td>1980</td>
<td>Peak 1991</td>
<td>Current Second half 2005</td>
<td>1980-Peak &nbsp; % Change</td>
<td>Peak-Current &nbsp;% Change</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Commercial Land</td>
<td>86.00</td>
<td>195.90</td>
<td>58.60</td>
<td>127.79</td>
<td>-70.09</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Residential Land</td>
<td>60.61</td>
<td>126.10</td>
<td>75.60</td>
<td>108.09</td>
<td>-40.05</td>
<td>--</td>
</tr>
</tbody>
</table>
</body>
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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/060324a.jpg" width="353">
New home sales fell 10.5% in February, the largest one-month decline since February 1995. Sales were 1.08 million (SAAR), the lowest volume since March 2003. Following January&#39;s 5.3% drop, sales over the two months were down 15.3%, the largest two-month fall since February 1994.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060324b.jpg" width="353">
Builders have not yet caught up, of course, with the change in the sales pace, and inventories of unsold homes rose again last month, reaching 548,000. At February&#39;s sales rate, that equals a 6.3-month supply. Four months ago, this ratio was 4.5 months. This too marks a sharp turn.
How disturbing is this sudden downdraft in home sales? There are some mitigating factors. The sales drop was not nationwide. They actually rose in the northeast, 12.7%, and midwest, 5.2%. The jump in the inventory position, while large, serves mainly to highlight how very low stocks were the last several years. As seen in our graph, the long-run average supply is 5.9+ months (calculated on DLXVG3 by taking the 518-month moving average, that is, the full span of the data). <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060324c.jpg" width="353">Also, the roundly 4-month average from 1998 to 2004 is (very) roughly the length of time it takes to build a house. So for that period at least, it seems that builders were selling homes just about as fast as they could produce them. Additionally, existing home sales, down in previous months, had a nice rebound in February, as documented here yesterday by Tom Moeller. So total housing demand did not fall in the month.
Finally, home prices are showing some signs of hesitation, with a fourth consecutive monthly decline in February. Part of this price measure relates to the geographic distribution of the sales; they fell most sharply in the West, one of the high-priced regions, while they grew in the Midwest, a lower-priced region, giving a downward bias to the national price measure. Prices are available by region only quarterly, so we cannot yet tell what is happening within each area.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E904/@E904.HTM">U.S. New Homes</a></th>
<th scope="col">Feb 2006</th>
<th scope="col">Jan 2006</th>
<th scope="col">Feb 2005</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Sales (SAAR, Thous)</td>
<td>1,080</td>
<td>1,207</td>
<td>1,247</td>
<td>1,280</td>
<td>1,200</td>
<td>1,091</td>
</tr>
<tr>
<td class="firstcol">Inventory of Unsold Homes&nbsp; (SA, Thous)</td>
<td>548</td>
<td>525</td>
<td>513</td>
<td>469</td>
<td>395</td>
<td>348</td>
</tr>
<tr class="odd">
<td class="firstcol">Months&#39; Supply (SA)</td>
<td>6.3</td>
<td>5.3</td>
<td>4.4</td>
<td>4.5</td>
<td>4.0</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol">Median Price (NSA,$)</td>
<td>230,400</td>
<td>234,200</td>
<td>237,800</td>
<td>234,058</td>
<td>217,817</td>
<td>191,385</td>
</tr>
</tbody>
</table>
</body>
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New home sales fell 10.5% in February, the largest one-month decline since February 1995. Sales were 1.08 million (SAAR), the lowest volume since March 2003. Following January's 5.3% drop, sales over the two months were down 15.3%, [...]

New Home Sales Fall 10.5% in February; Inventories Rose and Prices Declined

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060323d.jpg" width="353">
Besides its wide array of macroeconomic databases, Haver Analytics also features a number of industry offerings. Just this morning, for example, Chemical Week magazine released its weekly report on chemical prices. These are maintained in Haver&#39;s CHEMWEEK database. Far from being esoteric trivia, the chemicals in this collection are main building blocks of products and fuels consumers use every day. If not ingredients in the items themselves, several of these chemicals are important in the manufacturing process.
The database consists of 29 major chemicals. We list just four in the table below as a sampling. The prices we show here averages; &quot;highs&quot; and &quot;lows&quot; are also available. These are US spot prices; spot prices are also given for European markets and contract prices for several specific delivery months are available for most items for both US and European markets.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060323e.jpg" width="353">
The particular items we show here are multipurpose chemicals. Many plastics are made from polyvinyl chloride and combinations of propylene with various other substances. Both have experienced a near doubling over the past couple of years, but have shown some signs of stabilizing so far this year. PVC is a hard plastic, frequently used now in pipes, as in household plumbing, and other building products, such as vinyl siding. Its price has been steady now since last April at $930 per metric ton. However, the price rose in steep steps from just $370/MT in early 2002.
Propylene is an ingredient in other products, such as aerosol sprays, other plastics and fibers and synthetic rubber. Its price has more than tripled since early 2002, when it traded at just $0.13/pound, compared with as much as $0.52 briefly in late November and $0.41 most currently.
Methanol, or wood alcohol, was once thought to be a potential substitute or complement to gasoline in motor vehicle fuels. Racecars and some specialty vehicles do run on it. However, it is also highly toxic, causing safety concerns. So other items, such as ethanol, are developing more as alternative fuels. This shift in potential usage may be reflected in the price trend for methanol. It has risen markedly, from $0.57/gallon in late 2003 to $0.94 recently, but on a relative basis, it has moved much less than other chemicals, as is evident in the second graph.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060323f.jpg" width="353">
Finally, the price of caustic soda is also up dramatically. Caustic soda is more familiarly known as lye and its more formal chemical name is sodium hydroxide. It is a very widely used in the manufacture of such diverse items as aluminum, textiles, soap and paper and in petroleum refining. As recently as the spring of 2004, this key substance was selling for as little as $65 a ton. But in November, it reached $587.50 before falling back to &quot;just&quot; $335 in the last couple of weeks.
The mere wide ranges covered by these price movements highlight the value of the CHEMWEEK database. Unlike many commodities that have tighter markets, these chemical prices often seem to move in fits and spurts, sometimes doubling virtually &quot;overnight&quot;. So monitoring them would seem vital for industry analysts and even macroeconomists.
Further, several are closely tied to petroleum prices. In the third graph, for instance, we show the simple spot price for crude oil, West Texas Intermediate, from the WEEKLY and OILWKLY databases. It has a high 86% correlation with PVC prices since 1999 and as high or for even longer periods with numerous other chemicals. So the role of oil is closely intertwined not only with heating and driving costs, but also with the raw material and processing costs for many other products.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">US Spot Prices</th>
<th scope="col">Mar 22, 2006</th>
<th scope="col">Feb 22, 2006</th>
<th scope="col">End-Dec 2005*</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">PVC General Purpose, $/metric ton</td>
<td>930</td>
<td>930</td>
<td>930</td>
<td>914</td>
<td>810</td>
<td>585</td>
</tr>
<tr>
<td class="firstcol">Propylene, Chemical Grade, $/lb</td>
<td>0.41</td>
<td>0.41</td>
<td>0.42</td>
<td>0.41</td>
<td>0.31</td>
<td>0.20</td>
</tr>
<tr class="odd">
<td class="firstcol">Methanol, $/gal</td>
<td>0.94</td>
<td>0.94</td>
<td>0.91</td>
<td>0.86</td>
<td>0.82</td>
<td>0.73</td>
</tr>
<tr>
<td class="firstcol">Caustic Soda, $/short ton</td>
<td>335</td>
<td>345</td>
<td>415</td>
<td>369</td>
<td>176</td>
<td>139</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo: Crude Oil, $/bbl**</td>
<td>62.69</td>
<td>60.00</td>
<td>59.49</td>
<td>56.29</td>
<td>41.31</td>
<td>31.14</td>
</tr>
</tbody>
</table>
</body>
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Besides its wide array of macroeconomic databases, Haver Analytics also features a number of industry offerings. Just this morning, for example, Chemical Week magazine released its weekly report on chemical prices. These are [...]

Chemical Prices Surge with Petroleum, But Some Stabilize or Even Decline Recently

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060323b.jpg" width="353">
The U.S. federal government posted a deeper budget deficit during February of $119.2B versus last February&#39;s deficit of $113.9B. Nevertheless, the fiscal year to date budget deficit narrowed to $217.5B versus 223.4B during the first five months of FY05.
Net revenues collapsed 50.9% m/m as is often the case during February but rose 10.5% during the first five months versus FY04. Individual income tax receipts (44% of total receipts) rose 10.8% y/y and corporate income taxes (10% of total receipts) rose 29.6% y/y during fiscal year 2005&#39;s first five months.
The improved job market raised employment taxes (36% of total receipts) 6.0% y/y though estate &amp; gift taxes fell 0.4% y/y. 
U.S. net outlays continued strong and rose 7.6% y/y fiscal year to date. Defense (19% of total outlays) for the first five months of FY06 rose 7.6% from the year prior. The growth in Medicare spending (12% of total outlays) accelerated to 8.5% y/y and spending on social security (21% of total outlays) grew 5.6%. s
Agriculture spending grew 10.6%. Also strong was spending on community &amp; regional development which nearly tripled this fiscal year to date versus last. Spending on health programs (10% of the total) rose 2.1% while spending on education &amp; training (4% of the total) fell 1.9% y/y. Interest expense (8% of the total) grew 24.3% with higher interest rates.
The Current Budget Projections from the US Congressional Budget Office released March 3rd are available <a href="http://www.cbo.gov/budget/budproj.shtml"> 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/@E1/@E106/@E10602/@E10602.HTM">US Government Finance</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">FY 2005</th>
<th scope="col">FY 2004</th>
<th scope="col">FY 2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$-119.2B</td>
<td>$21.0B</td>
<td>$-113.9B (2/05)</td>
<td>$-318.3B</td>
<td>$-412.7B</td>
<td>$-377.6B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Net Revenues</td>
<td>$112.9B</td>
<td>$230.0B</td>
<td>11.9%</td>
<td>14.5%</td>
<td>5.5%</td>
<td>-3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Outlays</td>
<td>$232.1B</td>
<td>$209.0B</td>
<td>8.0%</td>
<td>7.8%</td>
<td>6.2%</td>
<td>7.4%</td>
</tr>
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The U.S. federal government posted a deeper budget deficit during February of $119.2B versus last February's deficit of $113.9B. Nevertheless, the fiscal year to date budget deficit narrowed to $217.5B versus 223.4B during the first [...]

February U.S. Budget Deficit Deeper, Fiscal YTD Narrower

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Real GDP eased 0.3% SAAR (+2.1% y/y) during the first quarter of 2025 after increasing 2.4% in Q4’24 and 3.1% in Q3’24. A 0.4% increase had been expected in the Action Economics Forecast Survey. It was the first decline since Q1 2022.

Foreign trade subtracted 4.83 percentage points from growth last quarter as imports surged 41.3% (13.4% y/y) ahead of tariffs, which began to come into effect in the first quarter. The rise followed a 1.9% decline in Q4’24. Exports rose 1.8% (3.0% y/y) after easing 0.2% in Q4. Inventories added 2.25 percentage points to growth after subtracting 0.84 percentage point from Q4 growth.

Real final sales to domestic purchasers grew 2.3% (2.9% y/y) in Q1 after rising 3.0% in Q4. Personal consumption expenditures rose 1.8% (3.1% y/y) following a 4.0% gain. Durable goods spending fell 3.4% (+5.3% y/y) after surging 12.4% in Q4. Motor vehicle purchases declined 11.1% (+5.5% y/y) after strengthening 19.7% in Q4. Spending on home furnishings & appliances gained 1.5% (6.1% y/y) following a 5.4% rise. Recreational goods & vehicle outlays rose 2.5% (7.0% y/y) last quarter after a 13.9% Q4 increase.

Nondurable goods outlays rose 2.7% (3.0% y/y) following 3.1% growth in Q4. Apparel spending increased 6.7% (2.5% y/y) following a 5.0% rise. Food & beverage buying gained 2.5% (2.3% y/y) after a 1.8% increase. Gasoline & fuel oil purchases increased 4.6% (3.4% y/y) after falling 2.0% in Q4.

Spending on services increased 2.4% last quarter (2.7% y/y) after a 3.0% gain. Outlays on housing & utilities increased 3.4% (1.8% y/y) after rising 1.1% in Q4. Health care expenditures rose 4.0% (4.8% y/y) following a 4.7% strengthening. Transportation outlays increased 5.3% (4.6% y/y) after a 3.7% rise while recreation spending rose 4.7% (2.8% y/y) following a 4.5% rise. Restaurant & hotel expenditures declined 2.1% (+0.5% y/y) following a 2.8% rise. Financial services expenditures rose 1.9% (2.0% y/y) after a 3.1% Q4 increase.

Business fixed investment increased 9.8% (3.6% y/y) following a 3.0% decline in Q4. Expenditures on structures rose 0.4% (-0.4% y/y) after a 2.9% increase. Expenditures on producers’ durable equipment jumped 22.5% (8.0% y/y) after falling 8.7%.  Outlays on information processing equipment soared 69.3% (18.9% y/y) following a 7.3% decline. Industrial equipment investment fell 1.4% (-0.3% y/y) after easing 0.9%. Intellectual property product spending rose 4.1% (1.8% y/y) following a 0.5% decline. 

Residential structures investment increased 1.3% (-0.1% y/y) in Q1 after a 5.5% Q4 rise.

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Government spending fell 1.5% (+2.4% y/y) after a 3.1% Q4 rise. Federal government expenditures declined 5.1% (+2.9% y/y) after rising 4.0% in Q4. National defense expenditures declined 8.0% (+4.0% y/y) after increasing 4.8% in Q4. State & local government spending rose 0.8% (2.1% y/y) following a 2.5% rise.

The GDP price index rose 3.7% (2.6% y/y) after increasing 2.3% in Q4. It was the largest increase since Q4’22. A 2.4% increase had been expected. The PCE chain price index increased 3.6% (2.5% y/y) following a 2.4% rise. The PCE price index excluding food and energy rose 3.5% (2.8% y/y) after increasing 2.6% in Q4. The business fixed investment price index rose 0.4% (1.8% y/y) after 1.5% rise. The residential price index strengthened 3.9% (3.2% y/y) after a 1.9% rise while the government price index increased 4.7% (2.8% y/y) following a 2.1% rise.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Decline in GDP is first in three years.
- Foreign trade subtracts substantially ahead of tariffs.
- Domestic final demand growth weakens.
- Price index strengthens with higher core PCE prices.

U.S. GDP Unexpectedly Declines in Q1’25; Prices Strengthen

Michael J. Moran

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High-side readings on the price indexes for personal consumption expenditures in January and February caused some concern about emerging price pressure, especially with some policies of the Trump administration possibly adding to the upward force. However, March brought notable relief, with the headline price index falling slightly (-0.04%). A marked decline in energy prices was helpful (-2.7%), but core prices also were subdued, increasing less than 0.1%.  Year-over-year changes were still above the Fed’s target of 2%, but only barely so for the headline measure (2.3%). The core index backed away from the reading of 3.0% in February, but the latest reading of 2.7% was in line with observations in the past year, and still uncomfortably above target.

Consumers roused from a winter slumber in March, with nominal outlays increasing 0.7%. With inflation restrained, real outlays also posted a gain of 0.7%. Spending on durable gods stood out, with real outlays advancing 3.2%. Real outlays for both nondurable goods and services rose 0.4%, a solid pace. Signs of life were certainly welcome after an average decline of 0.1% in January and February. The March rebound left growth of 1.8% (annual rate) in the first quarter.

The brisk increase in spending in March was supported by a solid gain in personal income (0.5% in both nominal and real terms). Growth in wage income was firm at 0.5%, while proprietors’ income was robust with a gain of 1.8% (not annualized!). The farm sector led the advance in proprietors’ income, but the nonfarm sector also was strong (0.6%).

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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

Personal Income, Consumption, and Prices in March

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The Pending Home Sales Index, a forward-looking home sales measure based on contract signings, from the National Association of Realtors rose 6.1% to 76.5 (-0.6% y/y) during March after rising a little-revised 2.1% in February. These changes followed a 4.6% January decline.

The rise in March sales occurred as the rate on a 30-year mortgage eased to an average 6.65% from 6.84% in February. This rate was well above a low of 2.68% averaged in December 2020.

Pending home sales were up in most regions of the country. Sales in the Midwest rose 4.9% (1.4% y/y) last month after rising 1.8% in February. Sales in the South increased 9.8% (-0.4% y/y) following a 5.8% February rise. Sales in the West improved 4.8% (-2.0% y/y) after falling 3.0% in February. Sales in the Northeast were off 0.5% (-3.0% y/y) in March after falling 0.9% in February.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- Sales rise to highest level in four months.
- Strength is evident throughout most of country.

U.S. Pending Home Sales Surge in March

Sandy Batten

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The employment cost index (ECI) for civilian workers, arguably the most accurate measure of labor compensation in the United States, rose 0.9% q/q (3.6% y/y) in Q1, the same quarterly increase as in last year’s Q4, according to the Bureau of Labor Statistics. The quarterly gains have fluctuated between 0.8% and 1.0% for the past six quarters. The Action Economics Forecast Survey had expected a 0.9% q/q increase and a 3.5% y/y gain.

Wages and salaries for civilian workers rose 0.8% q/q (3.5% y/y) in Q1, down from 1.0% q/q in Q4. This tied the Q3 2024 quarterly rise as the smallest increase since Q2 2021. It was also the smallest y/y increase since Q2 2021. Benefits increased by an outsized 1.2% q/q (3.9% y/y) in Q1 versus 0.8% q/q in Q4. This is the largest quarterly gain since Q2 2022. In general, employment cost gains remain above the pace observed prior to the pandemic but are slowing gradually.

Private industry workers’ compensation rose 0.8% q/q (3.4% y/y) in Q1, down from 0.9% q/q (3.6% y/y) in Q4. Wages and salaries for private industry workers increased 0.8% q/q (3.4% y/y) in Q1 versus 0.8% q/q (3.7% y/y) in Q4. The quarterly gain in Q1 tied that in Q3 2024 as the smallest increase since Q4 2020. Benefits for private industry workers jumped 1.2% q/q (3.6% y/y). the largest quarterly gain since Q2 2022. The acceleration in benefits in Q1 was primarily in service-producing industries.

Compensation in private goods-producing industries increased 1.0% q/q (3.2% y/y) in Q1, the largest quarterly gain in five quarters, versus a 0.7% q/q increase in Q4. Compensation in construction jumped 1.3% q/q, its largest quarterly increase since Q2 2022, up from a 0.6% q/q gain in Q4. Manufacturing compensation growth slowed to 0.7% q/q, its slowest quarterly advance since Q4 2020, from 0.8% q/q in Q4. Compensation in private service-producing industries increased 0.8% q/q (3.5% y/y), down slightly from a 0.9% q/q gain in Q4. Compensation in education and health services jumped 1.3% q/q, its largest quarterly gain since Q3 2023. In contrast, compensation in other services edged up 0.1% q/q in Q1, its smallest quarterly advance since before the pandemic.

The employment cost index measures the change in the cost of labor, free from the influence of employment shifts across occupations and industries. It is provided by the Bureau of Labor Statistics and is available in Haver’s **USECON** database. Consensus estimates from the Action Economics Forecast Survey are in Haver’s **AS1REPNA** database.

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- Compensation grew 0.9 q/q in Q1, the same pace as in Q4.
- Wage growth slowed to 0.8% q/q while benefits surged 1.2% q/q, their largest quarterly increase since Q2 2022.

Employment Cost Growth Steady in Q1 2025

Kathleen Stephansen, CBE

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The ADP National Employment Report indicated that nonfarm private sector payrolls rose 62,000 (1.4% y/y) during April after increasing 147,000 (1.4% y/y) during March, revised from 155,000. A 124,000 April rise in ADP employment had been expected in the Action Economics Forecast Survey.

Growth in median annual pay for "job stayers" eased to 4.5% y/y during April, from 4.6% y/y in March and from 4.7% y/y in the prior two months. Manufacturing sector pay grew 4.6% y/y during April, down from 4.8% y/y in March. Construction sector pay was unchanged at 4.7% y/y. Natural resource & mining sector pay grew 4.4% y/y. Financial sector pay rose 5.1% y/y, while education & health services pay rose 4.7% y/y. Leisure & hospitality pay also increased 4.7% y/y. Professional & business service sector pay increased 4.3% y/y as did trade, transportation & utilities pay. Information pay rose 4.1% y/y. Median annual pay for “job changers” rose 6.9% y/y after 6.7% y/y in March.

Small business hiring (less than 50 employees) rose 11,000 (0.6% y/y) after rising 18,000 (0.6% y/y) in March, revised down from 52,000. Employment at medium-sized firms (50-499,000 employees) rose 40,000 (1.1% y/y) after rising 43,000 (1.1% y/y). Large business hiring (500+ employees) rose 12,000 (3.4% y/y) in April, after rising 61,000 (3.6% y/y) in March, revised from 59,000.

Goods-producing employment rose 26,000 (1.3% y/y) in April, after rising 16,000 (1.3% y/y) during March, revised from 24,000. Manufacturing jobs rose 4,000 (-0.2% y/y) after rising 17,000 (-0.3% y/y) in March. The number of construction sector jobs rose 16,000 (3.4% y/y) in April, following a 2,000 (3.6% y/y) March increase, revised from 6,000. Natural resources & mining jobs rose 6,000 (2.8% y/y) in April after falling 3,000 (+1.9% y/y) in March.

The number of service-producing jobs rose 34,000 (1.4% y/y) during April, following a rise of 131,000 (1.4% y/y) in March. Professional & business services employment fell 2,000 (0.6% y/y) after rising 46,000 (0.7% y/y) in the prior month, revised from 57,000. Employment in the financial industry rose 20,000 (2.1% y/y) in April, after rising 38,000 (2.0% y/y) in March. Leisure and hospitality employment increased 27,000 (3.0% y/y), following a 23,000 (2.9% y/y) March increase, revised from 17,000. The number of education & health care jobs fell 23,000 (1.6% y/y) in April, following a 15,000 (1.8% y/y) rise in March, revised from 12,000. Information sector employment fell 8,000 (-0.1% y/y) after a rise of 3,000 (0.2% y/y) in March. The number of jobs in trade, transportation & utilities rose 21,000 (0.4% y/y) in April, after falling 4,000 (+0.4% y/y) in March, revised from a 6,000 fall. Employment in “other” services rose fell 1,000 (+3.2% y/y) following a 10,000 (3.4% y/y) rise in March, revised from 11,000.

By region, employment in the Northeast increased 10,000 (1.9% y/y) in April, following an increase of 95,000 (2.0% y/y) in March, revised from 89,000. Employment in the Midwest rose 42,000 (1.5% y/y) after a gain of 84,000 (1.4% y/y) in March, revised from 81,000. In the South, employment rose 3,000 (1.3% y/y) during April, after rising 10,000 (1.4% y/y) in March, revised from 27,000. In the West, employment rose 9,000 (0.6% y/y) after declining 43,000 (+0.6% y/y), revised from a 41,000 decline in March.

The ADP National Employment Report and Pay Insights data can be found in Haver's **USECON** database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's **AS1REPNA** database.

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- Employment increase is modest in both services & factory sectors.
- Wage growth for “job stayers” moderates.
- Small and medium-sized business employment slows.

Economy in Brief: March 2006

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