Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080326f.jpg" align="left" border="0" height="265" width="353">
It may not be resiliency as much as volatility as the rise in
January EMU orders still
shows growth rates steadily declining from 12 months to 6 months to 3
months. In the current
quarter despite the bump up in January orders are only rising at a 1.2%
annual rate over Q4. Still, other more &#8216;timely&#8217; data tell a better
resiliency story.
Total domestic orders show the same steady deceleration in
orders as overall orders with the recent three-month order growth rate
at a -3.7$ saar. Foreign MFG orders do not show the clear slowdown of
overall orders, but that is a bit of nitpicking since the 6-month
growth rate is about the same as the 12-month pace and the recent
3-month growth rate is about half of those rates at 5.5%. The Euro Area
does seem to be slowing domestically and, despite the strength of the
euro, foreign growth is keeping the EMU stronger.
Germany and Italy show withering order trends. France is
consistent with a slowdown. Only the UK is different on a jump in
orders in January that has sent the three-month growth rate soaring.
On balance though, the ECB and EU Commission seem still very
worried about the level of the euro. But the German IFO index has risen
again in March and the new Belgian Bank index for March also has shown
growth for the second month running. This domestic resilience was not
expected.
Data and Policy Conundrums&#8230; The
orders data tell us that domestic orders are in a slowing pattern. The
strength has come from orders outside the EMU. Now some new measures
are showing that there may be some domestic resiliency in February and
March in Germany and Belgium. None of this will make the ECB ready to
reverse its course and cut rates anytime soon. It makes you wonder if
the euro really does have more upside, something I have been unwilling
to ponder up to now. Is
Europe swallowing its teeth to hide the euro&#8217;s damage to its economy?
Or is Europe really this resilient? If Europe is this resilient, the
ECB&#8217;s carping about inflation risk makes sense, but complaining about
&#8216;euro strength and excessive FX volatility&#8217; does not make sense. Which
is it? 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="10" scope="col">Euro Area and UK Industrial Orders &amp; Sales Trends </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">SAAR except M/M</td>
<td colspan="3">% m/m</td>
<td>Jan-08</td>
<td>Jan-08</td>
<td>Jan-08</td>
<td>Jan-07</td>
<td>Jan-06</td>
<td>Qtr-2 Date</td>
</tr>
<tr class="even">
<td class="firstcol">Euro Area Detail</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG Orders</td>
<td>2.0%</td>
<td>-3.6%</td>
<td>2.0%</td>
<td>1.2%</td>
<td>3.6%</td>
<td>6.7%</td>
<td>7.7%</td>
<td>6.7%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">MFG Sales</td>
<td>0.8%</td>
<td>0.3%</td>
<td>0.0%</td>
<td>4.6%</td>
<td>1.8%</td>
<td>4.1%</td>
<td>7.2%</td>
<td>6.5%</td>
<td>6.3%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.3%</td>
<td>0.3%</td>
<td>0.2%</td>
<td>3.1%</td>
<td>2.9%</td>
<td>3.4%</td>
<td>7.2%</td>
<td>6.5%</td>
<td>3.3%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td>0.4%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>1.6%</td>
<td>2.4%</td>
<td>4.6%</td>
<td>4.7%</td>
<td>3.4%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td>1.1%</td>
<td>0.5%</td>
<td>0.2%</td>
<td>-3.7%</td>
<td>-0.4%</td>
<td>6.2%</td>
<td>8.4%</td>
<td>6.0%</td>
<td>9.2%</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="10">MFG Orders</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Orders</td>
<td>2.0%</td>
<td>-3.6%</td>
<td>2.0%</td>
<td>1.2%</td>
<td>3.6%</td>
<td>6.7%</td>
<td>7.7%</td>
<td>6.7%</td>
<td>1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">EA13 Domestic MFG orders</td>
<td>1.6%</td>
<td>-4.3%</td>
<td>1.8%</td>
<td>-3.7%</td>
<td>-0.4%</td>
<td>6.2%</td>
<td>6.2%</td>
<td>1.6%</td>
<td>-4.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">EA13 Foreign MFG orders</td>
<td>3.3%</td>
<td>-5.4%</td>
<td>3.7%</td>
<td>5.5%</td>
<td>11.3%</td>
<td>10.2%</td>
<td>7.8%</td>
<td>11.2%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Countries:</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>Qtr-2 Date</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany:</td>
<td>-1.1%</td>
<td>-1.5%</td>
<td>3.5%</td>
<td>3.5%</td>
<td>9.4%</td>
<td>9.3%</td>
<td>9.2%</td>
<td>8.6%</td>
<td>-5.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">France:</td>
<td>3.1%</td>
<td>-2.1%</td>
<td>-0.2%</td>
<td>3.0%</td>
<td>-2.7%</td>
<td>5.9%</td>
<td>5.1%</td>
<td>7.8%</td>
<td>10.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>2.6%</td>
<td>-5.6%</td>
<td>2.9%</td>
<td>-1.0%</td>
<td>-3.0%</td>
<td>7.2%</td>
<td>4.6%</td>
<td>9.0%</td>
<td>-1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK (EU)</td>
<td>23.0%</td>
<td>-1.3%</td>
<td>4.0%</td>
<td>154.7%</td>
<td>-4.6%</td>
<td>31.1%</td>
<td>10.1%</td>
<td>-8.8%</td>
<td>255.9%</td>
</tr>
</tbody>
</table>
</body></html>

It may not be resiliency as much as volatility as the rise in January EMU orders still shows growth rates steadily declining from 12 months to 6 months to 3 months. In the current quarter despite the bump up in January orders are only [...]

EMU Orders Rise in January but Trends Point Lower

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080326d.jpg" width="353">
New single family home sales fell 1.8% during February to 590,000 after a 1.6% January decline that was slightly less than reported initially. The decline dropped sales to the lowest level since 1995 and they were down 57.5% since the peak in July of 2005. A sales rate of 576,000 was the Consensus expectation for sales last month.
By region, sales in the Northeast were by far the weakest last month and dropped 40.3% (-19.6% y/y). Sales in the Midwest also continued quite weak and fell 6.4% during February (-42.5% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080326e.jpg" width="353">
In the West sales added a slight 0.7% (-28.3% y/y) to the 5.0% January increase while sales in the South recovered all of the January decline and rose 5.7% (-27.9% y/y).
The median price for a new single family home rose a firm 8.2% to $244,100 after a 0.2% January downtick. Prices were down 7.0% from the early 2007 peak. That was much less of a decline point to point reported last month due to the February rise and upward revisions. 
The number of new homes for sale fell 2.1% last month, continuing a recent decline. Since the July &#39;06 peak the number of new homes on the market was down 17.8%.
Continuing the recent trend, the decline in the inventory of homes for sale did not keep pace with the weakness in home sales. At the current low sales rate, the 9.8 months&#39; supply of homes on the market was more than double the rate for all of 2005 and it was the highest since 1981.<div align="left"><div align="left">
Falling House Prices and Rising Time on the Market from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-11.pdf"> here</a>.</div><div align="left"></div></div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">US New Homes</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Sales (SAAR, 000s)</td>
<td>590</td>
<td>601</td>
<td>-29.8%</td>
<td>774</td>
<td>1,049</td>
<td>1,279</td>
</tr>
<tr>
<td class="firstcol">Median Price (NSA, $)</td>
<td>244,100</td>
<td>225,600</td>
<td>-2.7%</td>
<td>243,500</td>
<td>243,067</td>
<td>234,208</td>
</tr>
</tbody>
</table>
</body>
</html>

New single family home sales fell 1.8% during February to 590,000 after a 1.6% January decline that was slightly less than reported initially. The decline dropped sales to the lowest level since 1995 and they were down 57.5% since the [...]

U.S. New Home Sales Down Again

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080326a.jpg" width="353">
New orders for durable manufactured goods fell 1.7% last month. During January orders declined 4.7% and that was slightly less severe than originally reported. Consensus expectations had been for a slight uptick in February orders. Weakness in factory orders initially was suggested by the Institute for Supply Management&#39;s orders index which at 49.1 in February remained below the breakeven level of 50.</div><div align="left">
Excluding the volatile transportation sector, durable goods orders fell 2.6% after a 1.0% January decline that was slightly shallower than initially estimated. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080326b.jpg" width="353">
Orders for transportation equipment rose a modest 0.6% after the 12.8% January slump. New orders for aircraft &amp; parts recovered 5.1% (22.8% y/y) after a 30.7% January collapse but orders for motor vehicles parts fell 2.7% (-7.7% y/y). Orders for nondefense aircraft rose 5.4% following a 30.3% January drop.</div><div align="left">
Despite the rise in aircraft orders, orders for nondefense capital goods fell 1.0% after a little revised 8.4% January swoon . During the last ten years there has been an 80% correlation between the y/y gain in nondefense capital goods orders and the rise in equipment &amp; software spending in the GDP accounts. The correlation with capital goods shipments is, as one would expect, a larger 92%.<div align="left">
February orders for nondefense capital goods less aircraft fell 2.6% following a 1.8% January decline that was deeper than initially estimated.</div></div><div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080326c.jpg" width="353">
Orders for machinery fell a hard 13.3% (+0.7% y/y) following a modest 0.4% January uptick.Computers &amp; related products orders, however, made up most of the prior month&#39;s decline with a 10.0% increase. Orders for communications equipment also recovered but only by 6.0% after a 14.1% January drop. Primary metal orders rose 1.0% and essentially repeated a 0.9% January increase.</div><div align="left">
Overall shipments of durable goods gave back all of the January increase with a 2.8% decline last month. That was led by a 4.1% drop in shipments from the transportation sector. Less transportation, shipments were weak and fell 2.3% (+3.1% y/y). </div><div align="left">
Inventories of durable goods rose 0.5% (4.1% y/y) and they have been building at an accelerated rate during the last few months. Annualized, an 8.8% rate of accumulation during those three months is up from -0.1% last August. Less transportation, inventories rose at a 4.7% rate during the last three months and that was raised from -0.6% last Summer.<div align="left"></div></div>

<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">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>-1.7%</td>
<td>-4.7%</td>
<td>2.2%</td>
<td>0.9%</td>
<td>6.3%</td>
<td>9.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>-2.6%</td>
<td>-1.0%</td>
<td>1.6%</td>
<td>0.2%</td>
<td>7.6%</td>
<td>8.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-1.0%</td>
<td>-8.4%</td>
<td>6.9%</td>
<td>3.5%</td>
<td>10.6%</td>
<td>17.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-2.6%</td>
<td>-1.8%</td>
<td>4.7%</td>
<td>-1.6%</td>
<td>8.5%</td>
<td>11.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

New orders for durable manufactured goods fell 1.7% last month. During January orders declined 4.7% and that was slightly less severe than originally reported. Consensus expectations had been for a slight uptick in February orders. [...]

U.S. Durable Goods Orders Post Surprising Decline

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080325f.jpg" align="left" border="0" height="265" width="353">

Iceland unexpectedly raised its official discount rate
today to 15% from 13.75%. According to the Board of Governors of the
Bank of Iceland, inflation has been higher than forecast and its
currency, the kroner, has depreciated sharply. The kroner fell 14%
during the week ending March 19 as seen in the first chart. Demand is
down and it is becoming more difficult to finance its current account
deficit.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080325g.jpg" align="right" border="0" height="265" width="353">
Iceland's action is in stark contrast to that of the
majority of developed nations who are lowering rates to combat the
spreading effects of the sub prime crisis. Iceland's problems appear to
have little to do with the financial turmoil resulting from the sub
prime crisis, rather its problems appear to be more the result of its
role in the "Carry Trade." (Investors borrow money in low interest
countries, say in Japan, and invest the proceeds in high interest
countries, say in Iceland. Providing that exchange rates are relatively
stable, the trade is profitable. When exchange rates go against the
borrower, the trade becomes unprofitable.) Iceland with its relatively
high interest rates was a favorite recipient of funds in the "Carry
Trade". With relative stability in exchange rates in the period from
2002 to 2006, the Carry Trade was, for the most part, very profitable.
When exchange rates began rising in the low interest countries in 2007
and falling in the high interest countries, the Carry Trade lost much
of its appeal. Inflows were reduced and, in some cases, reversed. The
ups and downs in the carry trade in Iceland are shown in the second
chart which shows the dramatic rise in the inflow of foreign investment
in debt securities. These flows rose dramatically beginning in 2003,
holding at high levels through 2006, plummeting in most of 2007 and
recovering slightly in the last quarter.
The Carry Trade inflows are more like "hot money" flows
than more long term oriented inflows. As such they tend to cause
disruptions in an economy. Among other things, they result in bigger
current account deficits and, unless they are sterilized, they tend to
add to inflationary pressures.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">ICELAND&nbsp;</th>
<th scope="col">Q4 08</th>
<th scope="col">Q3 07&nbsp;</th>
<th scope="col">Q1&nbsp; 07&nbsp;</th>
<th scope="col">Q/Q Chg&nbsp;</th>
<th scope="col">Y/Y Chg&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Inflows of Foreign
Invest in Debt Securities
(Mil Korona)</td>
<td>11,212</td>
<td>-138,609</td>
<td>278,074</td>
<td>149,981</td>
<td>-266,862</td>
<td>37,891</td>
<td>925,191</td>
<td>1,057,402</td>
</tr>
</tbody>
</table>
</body></html>

Iceland unexpectedly raised its official discount rate today to 15% from 13.75%. According to the Board of Governors of the Bank of Iceland, inflation has been higher than forecast and its currency, the kroner, has depreciated [...]

Iceland Raises Its Official Discount Rate to 15%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080325e.jpg" width="353">
The International Council of Shopping Centers ICSC-UBS Chain Store survey indicated that chain store sales last week fell 0.4% and gave back all of the prior week&#39;s modest increase. The decline left sales so far in March up a negligible 0.1% after February&#39;s 0.4% rise.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
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.
During the latest week the leading indicator of chain store sales from ICSC-UBS also retreated 0.5% after the prior week&#39;s 0.9% increase.

<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">03/21/08</th>
<th scope="col">03/14/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>488.3</td>
<td>490.1</td>
<td>1.0%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>


</html>

The International Council of Shopping Centers ICSC-UBS Chain Store survey indicated that chain store sales last week fell 0.4% and gave back all of the prior week's modest increase. The decline left sales so far in March up a [...]

U.S. Chain Store Sales Backpedal

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080325d.jpg" width="353">
Retail gasoline prices ticked down two cents last week after rising strongly during each of the prior five weeks. The retreat to $3.26 per gallon was so modest that prices so far in March are still up 6.6% from February. They were roughly stable for three months before that.
Yesterday, the wholesale price of unleaded gasoline continued strong. A five cent rise in Monday&#39;s price to $2.48 per gallon versus Friday pulled gas prices up nearly a dime versus last week&#39;s average.
Crude oil prices also retreated with last week&#39;s average price for WTI crude down three dollars w/w to $106.02 per bbl. Yesterday crude prices backed off even further to $101.07 per barrel.
Natural gas prices also topped last week and were down w/w to $9.12 /mmbtu. Nevertheless, natural gas prices were up sharply from February and were up by nearly one third versus last year.
These energy price series are available in Haver&#39;s Daily and Weekly databases.
Globalization and the Determinants of Domestic Inflation is a panel discussion held by Janet L. Yellen, President of the San Francisco Federal Reserve Bank and it is available <a href="http://www.frbsf.org/news/speeches/2008/0307.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">03/24/08</th>
<th scope="col">03/17/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Retail Gasoline ($ per Gallon)</td>
<td>3.26</td>
<td>3.28</td>
<td>24.9%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>106.02</td>
<td>109.43</td>
<td>81.0%</td>
<td>94.00</td>
<td>61.11</td>
<td>58.16</td>
</tr>
<tr class="odd">
<td class="firstcol">Natural Gas Price, Henry Hub ($/mmbtu)</td>
<td>9.12</td>
<td>9.75</td>
<td>42.3%</td>
<td>6.96</td>
<td>6.74</td>
<td>8.68</td>
</tr>
</tbody>
</table>
</body>
</html>

Retail gasoline prices ticked down two cents last week after rising strongly during each of the prior five weeks. The retreat to $3.26 per gallon was so modest that prices so far in March are still up 6.6% from February. They were [...]

U.S. Petroleum Prices Tick Lower

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080325c.jpg" align="left" border="0" height="265" width="353">
The S&amp;P/Case-Shiller Composite 20
home price index fell 2.4% m/m in January. As a result this index of U.S.
home prices was down 10.7% from January of 2007, a record
decline for this series which dates back only to 2000. Home prices have
fallen in every month since July of 2006 and the decline over that
period totals 12.5%.
The index of 20 U.S. cities and their surrounding areas is not
adjusted for the quality or the size of the home. The home price index
from the Office of Federal Housing Enterprise Oversight (OFHEO) does
make these adjustments. This series indicates that during the fourth
quarter of 2007 house prices rose a negligible 0.8% y/y, the weakest
gain since 1990.
The Case-Shiller composite index of homes in a fewer 10 a
metropolitan areas fell 2.3% (-11.4% y/y) last month.
Home prices in San Francisco prices fell 13.2% and prices in
Miami Florida also fell sharply by 19.3% y/y. Home prices in Las Vegas
Nevada matched that decline and fell 19.3% y/y while in Los Angeles
prices fell 16.5% y/y.
Relatively moderate declines were registered in New York
(-5.8% y/y), Chicago (-6.6% y/y), Denver (-5.1% y/y) and San Diego
California (-5.8% y/y).
An overview of the S&amp;P/Case-Shiller home price series
can be found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">here</a>.
The S&amp;P/Case-Shiller home price series can be found in
Haver's REGIONAL database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (NSA, Jan 00 = 100)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">20 City Composite
Index</td>
<td>180.65</td>
<td>185.01</td>
<td>-10.7%</td>
<td>-3.8%</td>
<td>7.6%</td>
<td>15.8%</td>
</tr>
</tbody>
</table>
</body></html>

The S&P/Case-Shiller Composite 20 home price index fell 2.4% m/m in January. As a result this index of U.S. home prices was down 10.7% from January of 2007, a record decline for this series which dates back only to 2000. Home prices [...]

Case-Shiller Home Price Index Posts 10.7% y/y Decline

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 2008

Jump to:

EMU Orders Rise in January but Trends Point Lower

U.S. New Home Sales Down Again

U.S. Durable Goods Orders Post Surprising Decline

U.S. Durable Goods Orders Post Surprising Decline

Iceland Raises Its Official Discount Rate to 15%

U.S. Chain Store Sales Backpedal

U.S. Petroleum Prices Tick Lower

Case-Shiller Home Price Index Posts 10.7% y/y Decline