Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080428b.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080428c.jpg" border="0" height="265" width="312">

Brazil's has been recording a deficit on its current account
for the last nine months after having recorded surpluses since 2002. In
March the seasonally unadjusted deficit was $4,429 million US$, the
largest in the last ten years, as can be seen in the first chart. The
data are also shown on a quarterly basis in the second chart. In
subsequent charts, we show the data on a quarterly basis to moderate
the fluctuations in the monthly series.
The major components of the current account are shown in the
third chart. The positive trade balance that was the main factor in the
current account surpluses of recent years, has been declining. In the
first quarter of 2008, while still positive, was only $2,835 million
US$ compared to a peak of $14,482 million US$ in the third quarter of
2006. Unilateral current transfers continue to be positive, but are
small. The big negatives are the balances on services of -$3,845 and on
income of -$10,736 million US$. The net outflow of profits and
dividends on investments in Brazil has increased steadily, though
irregularly since 2004 and net Income payments on debt have declined in
recent years as can be seen in the fourth chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080428d.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080428e.jpg" border="0" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">BRAZIL:&nbsp;
CURRENT ACCOUNT B.O.P. 
&nbsp;(mil. US$)&nbsp;</th>
<th scope="col">Q1 08</th>
<th scope="col">Q4&nbsp; 07&nbsp;</th>
<th scope="col">Q1 07&nbsp;</th>
<th scope="col">Q/Q Chg&nbsp;</th>
<th scope="col">Y/Y Chg&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-10,757</td>
<td>-1,856</td>
<td>241</td>
<td>-8,901</td>
<td>-10,999</td>
<td>1,461</td>
<td>13,642</td>
<td>13,984</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade
balance</td>
<td>2,835</td>
<td>9,097</td>
<td>11,855</td>
<td>-6,262</td>
<td>-5,885</td>
<td>40,027</td>
<td>46,457</td>
<td>44,203</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Service
balance&nbsp;</td>
<td>-3,848</td>
<td>-3,672</td>
<td>-2,723</td>
<td>-176</td>
<td>-1,125</td>
<td>-13,355</td>
<td>-9,641</td>
<td>-8,309</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Income
balance</td>
<td>-10,736</td>
<td>-8,352</td>
<td>-6,717</td>
<td>-2,384</td>
<td>-4,019</td>
<td>-29,242</td>
<td>-27,480</td>
<td>-25,967</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Profits and Dividends</td>
<td>-8,662</td>
<td>-7,450</td>
<td>-3,962</td>
<td>-1,210</td>
<td>-4,697</td>
<td>-22,435</td>
<td>-16,369</td>
<td>-12,686</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Interest Payments</td>
<td>-2,191</td>
<td>-1,011</td>
<td>-2,863</td>
<td>-1,180</td>
<td>-672</td>
<td>-7,255</td>
<td>-11,289</td>
<td>-13496</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Remittances</td>
<td>991.6</td>
<td>1,071</td>
<td>961</td>
<td>-79</td>
<td>31</td>
<td>4,029</td>
<td>4,306</td>
<td>3,558</td>
</tr>
</tbody>
</table>
</body></html>

Brazil's has been recording a deficit on its current account for the last nine months after having recorded surpluses since 2002. In March the seasonally unadjusted deficit was $4,429 million US$, the largest in the last ten years, as [...]

Brazil's Current Account Deficit Widends

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080428b.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080428c.jpg" border="0" height="265" width="312">

Brazil's has been recording a deficit on its current account
for the last nine months after having recorded surpluses since 2002. In
March the seasonally unadjusted deficit was $4,429 million US$, the
largest in the last ten years, as can be seen in the first chart. The
data are also shown on a quarterly basis in the second chart. In
subsequent charts, we show the data on a quarterly basis to moderate
the fluctuations in the monthly series.
The major components of the current account are shown in the
third chart. The positive trade balance that was the main factor in the
current account surpluses of recent years, has been declining. In the
first quarter of 2008, while still positive, was only $2,835 million
US$ compared to a peak of $14,482 million US$ in the third quarter of
2006. Unilateral current transfers continue to be positive, but are
small. The big negatives are the balances on services of -$3,845 and on
income of -$10,736 million US$. The net outflow of profits and
dividends on investments in Brazil has increased steadily, though
irregularly since 2004 and net Income payments on debt have declined in
recent years as can be seen in the fourth chart.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080428d.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080428e.jpg" border="0" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">BRAZIL:&nbsp;
CURRENT ACCOUNT B.O.P. 
&nbsp;(mil. US$)&nbsp;</th>
<th scope="col">Q1 08</th>
<th scope="col">Q4&nbsp; 07&nbsp;</th>
<th scope="col">Q1 07&nbsp;</th>
<th scope="col">Q/Q Chg&nbsp;</th>
<th scope="col">Y/Y Chg&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-10,757</td>
<td>-1,856</td>
<td>241</td>
<td>-8,901</td>
<td>-10,999</td>
<td>1,461</td>
<td>13,642</td>
<td>13,984</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade
balance</td>
<td>2,835</td>
<td>9,097</td>
<td>11,855</td>
<td>-6,262</td>
<td>-5,885</td>
<td>40,027</td>
<td>46,457</td>
<td>44,203</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Service
balance&nbsp;</td>
<td>-3,848</td>
<td>-3,672</td>
<td>-2,723</td>
<td>-176</td>
<td>-1,125</td>
<td>-13,355</td>
<td>-9,641</td>
<td>-8,309</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Income
balance</td>
<td>-10,736</td>
<td>-8,352</td>
<td>-6,717</td>
<td>-2,384</td>
<td>-4,019</td>
<td>-29,242</td>
<td>-27,480</td>
<td>-25,967</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Profits and Dividends</td>
<td>-8,662</td>
<td>-7,450</td>
<td>-3,962</td>
<td>-1,210</td>
<td>-4,697</td>
<td>-22,435</td>
<td>-16,369</td>
<td>-12,686</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Interest Payments</td>
<td>-2,191</td>
<td>-1,011</td>
<td>-2,863</td>
<td>-1,180</td>
<td>-672</td>
<td>-7,255</td>
<td>-11,289</td>
<td>-13496</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Remittances</td>
<td>991.6</td>
<td>1,071</td>
<td>961</td>
<td>-79</td>
<td>31</td>
<td>4,029</td>
<td>4,306</td>
<td>3,558</td>
</tr>
</tbody>
</table>
&nbsp;French Service Sector
Outlook and Climate Gauges Slip 
by <a href="/comment/Brusca.html">Robert
Brusca</a> April 28, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080428a.jpg" align="left" border="0" height="265" width="353">
The French service sector climate indicator is down sharply in
the current month form 104 to 102 after being as high as 109 in January
to start the year. Service sector sentiment has been steadily eroding.
The climate indicator is in the 63 percentile of its range. The gauge
of employment expected in the next three months is lower in the 58th
percentile of its range. 
 

The slip in the service sector is both steady and widespread.
France is coming off a period when the service climate has been in the
top 94th percentile of its range. But conditions in France have been
deteriorating rapidly. Morale and activity gauges from other large EMU
economies have been off peak. France itself is succumbing to these
adverse pressures. French Finance Minister Christine Lagarde said
Sunday that the Federal Reserve has a policy of very low interest rates
and the ECB has kept interest rates elevated and that the differential
in rates between the two is a little too big at the moment. This
continues a policy of being obliquely critical of the tight ECB
interest rate policy. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col"> France
INSEE Services Survey Jan 2000-date</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr>
<td class="firstcol">Climate Indicator</td>
<td>102</td>
<td>104</td>
<td>106</td>
<td>109</td>
<td>63.3</td>
<td>51</td>
<td>113</td>
<td>83</td>
<td>30</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">Climate: 3-Mos MAV</td>
<td>104</td>
<td>106</td>
<td>108</td>
<td>109</td>
<td>68.7</td>
<td>48</td>
<td>113</td>
<td>85</td>
<td>28</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">Climate: 12-Mos MAV</td>
<td>109</td>
<td>110</td>
<td>110</td>
<td>110</td>
<td>94.1</td>
<td>10</td>
<td>110</td>
<td>91</td>
<td>20</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">Outlook</td>
<td>-3</td>
<td>-1</td>
<td>-1</td>
<td>2</td>
<td>61.3</td>
<td>55</td>
<td>9</td>
<td>-22</td>
<td>31</td>
<td>-1</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Sales</td>
</tr>
<tr>
<td class="firstcol">Observed 3-Mos</td>
<td>9</td>
<td>17</td>
<td>13</td>
<td>13</td>
<td>69.0</td>
<td>28</td>
<td>18</td>
<td>-11</td>
<td>29</td>
<td>6</td>
</tr>
<tr>
<td class="firstcol">Expected 3-Mos</td>
<td>9</td>
<td>5</td>
<td>10</td>
<td>14</td>
<td>70.4</td>
<td>36</td>
<td>17</td>
<td>-10</td>
<td>27</td>
<td>7</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Sales
Price</td>
</tr>
<tr>
<td class="firstcol">Observed over 3-Mos</td>
<td>5</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>75.0</td>
<td>2</td>
<td>8</td>
<td>-4</td>
<td>12</td>
<td>0</td>
</tr>
<tr>
<td class="firstcol">Expected over 3-Mos</td>
<td>2</td>
<td>1</td>
<td>0</td>
<td>0</td>
<td>70.0</td>
<td>10</td>
<td>5</td>
<td>-5</td>
<td>10</td>
<td>0</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Employment</td>
</tr>
<tr>
<td class="firstcol">Observed over 3-Mos</td>
<td>11</td>
<td>17</td>
<td>17</td>
<td>7</td>
<td>78.6</td>
<td>9</td>
<td>17</td>
<td>-11</td>
<td>28</td>
<td>4</td>
</tr>
<tr>
<td class="firstcol">Expected over 3-Mos</td>
<td>9</td>
<td>12</td>
<td>19</td>
<td>14</td>
<td>58.3</td>
<td>17</td>
<td>19</td>
<td>-5</td>
<td>24</td>
<td>5</td>
</tr>
</tbody>
</table>
Italy's Biz Confidence Continues
to Sink 
by <a href="/comment/Brusca.html">Robert
Brusca</a> April 28, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080428f.jpg" align="left" border="0" height="265" width="353">
Italy&#8217;s Business confidence index is in the bottom 30 percent
of its range since 1999. Orders
are in about the bottom 25th percentile of their
range. Orders for consumer goods are in the bottom 15 percentile of
their range. Investment goods continue to be the strongest of the
sectors and consumer goods in the weakest sector. The last period in
which the business index fell more sharply was in 2001. The index was
last lower in early 2005. Production is extremely weak for consumer
goods and weak for investment goods. Investment goods production is in
the 40th percent of range while consumer goods
are in the 11th percentile of their range.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Italy ISAE
Business Sentiment </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="2">Since January 1999</td>
</tr>
<tr class="even">
<td class="f7irstcol">&nbsp;</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Percentile</td>
<td>Rank</td>
</tr>
<tr class="odd">
<td class="firstcol">Biz Confidence</td>
<td>86.9</td>
<td>88.8</td>
<td>89.5</td>
<td>91.1</td>
<td>30.4</td>
<td>84</td>
</tr>
<tr>
<td class="firstcol" colspan="7">TOTAL
INDUSTRY</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="7">Order
books &amp;
Demand</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-19</td>
<td>-16</td>
<td>-13</td>
<td>-8</td>
<td>23.8</td>
<td>78</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic</td>
<td>-20</td>
<td>-16</td>
<td>-16</td>
<td>-15</td>
<td>26.2</td>
<td>78</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>-20</td>
<td>-17</td>
<td>-17</td>
<td>-11</td>
<td>29.5</td>
<td>62</td>
</tr>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>5</td>
<td>3</td>
<td>5</td>
<td>5</td>
<td>66.7</td>
<td>51</td>
</tr>
<tr class="odd">
<td class="firstcol">Production</td>
<td>-14</td>
<td>-11</td>
<td>-13</td>
<td>-12</td>
<td>26.5</td>
<td>81</td>
</tr>
<tr>
<td class="firstcol" colspan="7">INTERMEDIATE</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="7">Order
books &amp;
Demand</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-18</td>
<td>-17</td>
<td>-14</td>
<td>-13</td>
<td>32.7</td>
<td>70</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic</td>
<td>-19</td>
<td>-16</td>
<td>-14</td>
<td>-17</td>
<td>34.0</td>
<td>68</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>-17</td>
<td>-19</td>
<td>-21</td>
<td>-13</td>
<td>40.7</td>
<td>60</td>
</tr>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>6</td>
<td>4</td>
<td>4</td>
<td>3</td>
<td>72.4</td>
<td>15</td>
</tr>
<tr class="odd">
<td class="firstcol">Production</td>
<td>-13</td>
<td>-13</td>
<td>-13</td>
<td>-14</td>
<td>31.0</td>
<td>62</td>
</tr>
<tr>
<td class="firstcol" colspan="7">INVESTMENT
GOODS</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="7">Order
books &amp;
Demand</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-13</td>
<td>1</td>
<td>-4</td>
<td>1</td>
<td>38.4</td>
<td>59</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic</td>
<td>-18</td>
<td>-6</td>
<td>-8</td>
<td>-5</td>
<td>36.8</td>
<td>64</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>-14</td>
<td>0</td>
<td>-8</td>
<td>-1</td>
<td>33.9</td>
<td>60</td>
</tr>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>6</td>
<td>0</td>
<td>6</td>
<td>4</td>
<td>62.2</td>
<td>34</td>
</tr>
<tr class="odd">
<td class="firstcol">Production</td>
<td>-4</td>
<td>3</td>
<td>-4</td>
<td>-1</td>
<td>40.9</td>
<td>45</td>
</tr>
<tr>
<td class="firstcol" colspan="7">CONSUMER
GOODS</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="7">Order
books &amp;
Demand</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-23</td>
<td>-22</td>
<td>-23</td>
<td>-18</td>
<td>13.6</td>
<td>92</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic</td>
<td>-23</td>
<td>-23</td>
<td>-24</td>
<td>-21</td>
<td>13.9</td>
<td>88</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>-26</td>
<td>-20</td>
<td>-18</td>
<td>-24</td>
<td>19.1</td>
<td>89</td>
</tr>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>3</td>
<td>3</td>
<td>6</td>
<td>6</td>
<td>53.8</td>
<td>66</td>
</tr>
<tr class="odd">
<td class="firstcol">Production</td>
<td>-21</td>
<td>-18</td>
<td>-20</td>
<td>-17</td>
<td>11.1</td>
<td>96</td>
</tr>
<tr class="odd">
<td colspan="7" class="firstcol">Total number
of months: 118</td>
</tr>
</tbody>
</table>
</body></html>

Brazil's Current AccountDeficit Widends

Robert Brusca

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<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080425d.jpg" align="left" border="0" height="265" width="353">

I don&#8217;t expect the ECB to declare inflation victory based on
this German external price report. But, German ex energy prices are
coalescing around the 2% level. That&#8217;s not headline inflation. And the
result is for Germany not EMU and Germany consistently has one of the
very best inflation records in EMU. So while the German figures show
signs of inflation coming into line, we can expect figures for the Euro
Area as a whole to fall short of this progress.

Even for Germany there remain question marks on inflation.
Three month export and import headline price trends are, respectively
at 4.5% and 6.7% over thee months, at 3% and 8.5% over 6-months and at
2.2% and 5.9% over 12-months. The twelve month results while better are
still an acceleration over the previous March of 2007 12-month period
(marked as Yr-ago in the table).

Since the ex-petroleum indices are NSA so the sequential
growth rates calculations are not to be relied on. There, the 12-mnth
growth in ex petrol export and import prices is at 1.9% and 1.5%,
respectively: within ECB boundaries at least for an HICP headline rate.

But the actual German CPI headline rate is up by 3% yr/yr
accelerating sharply from 1.9% over the previous March&#8217;s 12-month pace.
Ex-energy the German CPI is up at a 2.3% pace, something the Fed in the
US would be pleased with but it&#8217;s still accelerating from 1.7% in the
12-month period ending in March of 2007. While the ECB may look at
ex-food and ex petrol HICP measures, its standard is for headline
inflation alone and that is running &#8216;wild&#8217; in the ECB&#8217;s mind. Still,
the sequential growth rates for Germany&#8217;s overall and core CPI (which
are based on seasonally adjusted data) are actually showing diminishing
pressures.

The German PPI and its core remain rogue. The same inflation
twist is at work in the US, but the US CPI report continues to perform
well at least for Core inflation. Wholesale prices place a greater
weight on raw goods. At a time of spiking commodity prices, that&#8217;s
going to be a problem. Consumer goods industries use industrial prices
as an input but have another stage of processing and therefore have
another chance for productivity to keep price trends in check.

The German figures, while not up to the ECB&#8217;s lofty standards
are nonetheless showing a lot of progress especially for a period with
such repeated and strong commodity price shocks. One hopes that behind
closed doors the ECB is really more pleased than what it reveals in its
public comments.

Europe still has some inflation to fight. The situation in the
UK seems to be worse than in the Euro Area. But the ECB seems to have
matters more under control especially with the strong euro to help. The
German price trends aren&#8217;t perfect but there are some good things in
train there. As Euro Area economies are getting weaker maybe ECB
rhetoric can tone down its concerns a notch or two &#8211; okay, maybe a
half-notch or so&#8230;.
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">German
International and Domestic Inflation Trends </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% m/m</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="even">
<td class="firstcol">SA:</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr-Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">Export Prices</td>
<td>0.1%</td>
<td>0.5%</td>
<td>0.6%</td>
<td>4.5%</td>
<td>3.0%</td>
<td>2.2%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Import Prices</td>
<td>0.0%</td>
<td>0.9%</td>
<td>0.7%</td>
<td>6.7%</td>
<td>8.5%</td>
<td>5.9%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol" colspan="8">NSA</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports excl Petroleum</td>
<td>0.2%</td>
<td>0.6%</td>
<td>0.7%</td>
<td>5.8%</td>
<td>2.6%</td>
<td>1.9%</td>
<td>2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports excl Petroleum</td>
<td>0.0%</td>
<td>0.9%</td>
<td>0.9%</td>
<td>7.2%</td>
<td>3.7%</td>
<td>1.5%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol" colspan="8">Memo:
SA</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI</td>
<td>0.4%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.7%</td>
<td>3.5%</td>
<td>3.0%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; CPI excl Energy</td>
<td>0.3%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>2.3%</td>
<td>2.3%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">PPI</td>
<td>0.5%</td>
<td>0.6%</td>
<td>0.5%</td>
<td>6.4%</td>
<td>6.5%</td>
<td>4.2%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; PPI excl Energy</td>
<td>0.4%</td>
<td>0.4%</td>
<td>0.4%</td>
<td>4.7%</td>
<td>3.1%</td>
<td>2.8%</td>
<td>3.0%</td>
</tr>
</tbody>
</table></div></body></html>

I don’t expect the ECB to declare inflation victory based on this German external price report. But, German ex energy prices are coalescing around the 2% level. That’s not headline inflation. And the result is for Germany not EMU and [...]

German Export and Import Inflation Trends Blunted in March

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080425a.jpg" width="353">
The final April reading of consumer sentiment from the University of Michigan fell 9.9% m/m to 62.6, a bit more than the 9.1% decline in the preliminary figure. The drop was larger than Consensus expectations and it reduced the level of sentiment to the lowest level since 1982.
The current conditions index within overall consumer sentiment was weaker than indicated in the preliminary report. It fell 8.6% m/m after a slight rise during March. The view of current conditions for buying large household goods fell a hard 9.7% (-26.3% y/y) and the view of current personal finances fell a somewhat lesser 7.5% (-27.7% y/y).The view of current buying conditions for large household goods fell 25.7% y/y and 11% of respondents thought that prices were too high, nearly the largest percentage since late 1996. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080425b.jpg" width="353">
The expectations component of overall sentiment still accounted for the larger part of the April decline with an 11.3% m/m drop. The index fell to its lowest level since late 1990. Expectations for personal finances fell a sharp 10.7% m/m (-21.3% y/y). Expectations for business conditions during the next year fell an even sharper 13.0% (-54.0% y/y) and expectations for conditions over the next five years fell 12.3% m/m (-21.1% y/y).
Opinions about government policy, which apparently influence economic expectations, fell 5.9% m/m (-29.7% y/y) which was an even deeper decline than in the preliminary report. The percentage of those surveyed who indicated that they thought government was doing a good job fell to 7%, the lowest level since 1991 while 43% indicated that they thought government was doing a poor job.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080425c.jpg" width="353">
The mean expected rate of inflation during the next twelve months rose further to 5.7%, the highest level since 1990.Has the Behavior of Inflation and Long-Term Inflation Expectations Changed? from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/1q08Clark.pdf"> here</a>.
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database, with details in the proprietary UMSCA database.
PCE and CPI Inflation Differential: Converting Inflation Forecasts also from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/Publicat/Econrev/PDF/1q08Hakkio.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">April (Final)</th>
<th scope="col">April (Prelim.)</th>
<th scope="col">March</th>
<th scope="col">Feb</th>
<th scope="col">April 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">Consumer Sentiment</td>
<td>62.6</td>
<td>63.2</td>
<td>&nbsp;69.5</td>
<td>70.8</td>
<td>-28.1% </td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>77.0</td>
<td>78.4</td>
<td>84.2</td>
<td>83.8</td>
<td>-26.4%</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>53.3</td>
<td>53.4</td>
<td>60.1</td>
<td>62.4</td>
<td>-29.8%</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
</body>
</html>

The final April reading of consumer sentiment from the University of Michigan fell 9.9% m/m to 62.6, a bit more than the 9.1% decline in the preliminary figure. The drop was larger than Consensus expectations and it reduced the level [...]

Michigan Consumer Sentiment Lowest Since 1982

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080425a.jpg" align="left" border="0" height="265" width="353">
The final April reading of consumer sentiment from the
University of Michigan fell 9.9% m/m to 62.6, a bit more than the 9.1%
decline in the preliminary figure. The drop was larger than Consensus
expectations and it reduced the level of sentiment to the
lowest level since 1982.
The current conditions index within overall consumer sentiment
was weaker than indicated in the preliminary report. It fell 8.6% m/m
after a slight rise during March. The view of current conditions for
buying large household goods fell a hard 9.7% (-26.3% y/y) and the view
of current personal finances fell a somewhat lesser 7.5% (-27.7%
y/y).The view of current buying conditions for large household goods
fell 25.7% y/y and 11% of respondents thought that prices were too
high, nearly the largest percentage since late 1996. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080425b.jpg" align="right" border="0" height="265" width="353">
The expectations component of overall sentiment still
accounted for the larger part of the April decline with an 11.3% m/m
drop. The index fell to its lowest level since late 1990. Expectations
for personal finances fell a sharp 10.7% m/m (-21.3% y/y). Expectations
for business conditions during the next year fell an even sharper 13.0%
(-54.0% y/y) and expectations for conditions over the next five years
fell 12.3% m/m (-21.1% y/y).
Opinions about government policy, which apparently influence
economic expectations, fell 5.9% m/m (-29.7% y/y) which was an even
deeper decline than in the preliminary report. The percentage of those
surveyed who indicated that they thought government was doing a good
job fell to 7%, the lowest level since 1991 while 43% indicated that
they thought government was doing a poor job.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080425c.jpg" align="left" border="0" height="265" width="353">
The mean expected rate of inflation during the next twelve
months rose further to 5.7%, the highest level since 1990.Has
the Behavior of Inflation and Long-Term Inflation Expectations Changed?
from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/1q08Clark.pdf">
here</a>.
The University of Michigan survey is not seasonally
adjusted.The reading is based on telephone interviews with about 500
households at month-end; the mid-month results are based on about 300
interviews. The summary indexes are in Haver's USECON database,
with details in the proprietary UMSCA database.
PCE and CPI Inflation Differential: Converting
Inflation Forecasts also from the Federal Reserve Bank of
Kansas City is available <a href="http://www.kansascityfed.org/Publicat/Econrev/PDF/1q08Hakkio.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">April (Final)</th>
<th scope="col">April (Prelim.)</th>
<th scope="col">March</th>
<th scope="col">Feb</th>
<th scope="col">April 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">Consumer Sentiment</td>
<td>62.6</td>
<td>63.2</td>
<td>&nbsp;69.5</td>
<td>70.8</td>
<td>-28.1% </td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>77.0</td>
<td>78.4</td>
<td>84.2</td>
<td>83.8</td>
<td>-26.4%</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>53.3</td>
<td>53.4</td>
<td>60.1</td>
<td>62.4</td>
<td>-29.8%</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
German Export and Import InflationTrends Blunted in March 
by <a href="/comment/Brusca.html">Robert
Brusca</a> April 25, 2008


<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080425d.jpg" align="left" border="0" height="265" width="353">

I don&#8217;t expect the ECB to declare inflation victory based on
this German external price report. But, German ex energy prices are
coalescing around the 2% level. That&#8217;s not headline inflation. And the
result is for Germany not EMU and Germany consistently has one of the
very best inflation records in EMU. So while the German figures show
signs of inflation coming into line, we can expect figures for the Euro
Area as a whole to fall short of this progress.

Even for Germany there remain question marks on inflation.
Three month export and import headline price trends are, respectively
at 4.5% and 6.7% over thee months, at 3% and 8.5% over 6-months and at
2.2% and 5.9% over 12-months. The twelve month results while better are
still an acceleration over the previous March of 2007 12-month period
(marked as Yr-ago in the table).

Since the ex-petroleum indices are NSA so the sequential
growth rates calculations are not to be relied on. There, the 12-mnth
growth in ex petrol export and import prices is at 1.9% and 1.5%,
respectively: within ECB boundaries at least for an HICP headline rate.

But the actual German CPI headline rate is up by 3% yr/yr
accelerating sharply from 1.9% over the previous March&#8217;s 12-month pace.
Ex-energy the German CPI is up at a 2.3% pace, something the Fed in the
US would be pleased with but it&#8217;s still accelerating from 1.7% in the
12-month period ending in March of 2007. While the ECB may look at
ex-food and ex petrol HICP measures, its standard is for headline
inflation alone and that is running &#8216;wild&#8217; in the ECB&#8217;s mind. Still,
the sequential growth rates for Germany&#8217;s overall and core CPI (which
are based on seasonally adjusted data) are actually showing diminishing
pressures.

The German PPI and its core remain rogue. The same inflation
twist is at work in the US, but the US CPI report continues to perform
well at least for Core inflation. Wholesale prices place a greater
weight on raw goods. At a time of spiking commodity prices, that&#8217;s
going to be a problem. Consumer goods industries use industrial prices
as an input but have another stage of processing and therefore have
another chance for productivity to keep price trends in check.

The German figures, while not up to the ECB&#8217;s lofty standards
are nonetheless showing a lot of progress especially for a period with
such repeated and strong commodity price shocks. One hopes that behind
closed doors the ECB is really more pleased than what it reveals in its
public comments.

Europe still has some inflation to fight. The situation in the
UK seems to be worse than in the Euro Area. But the ECB seems to have
matters more under control especially with the strong euro to help. The
German price trends aren&#8217;t perfect but there are some good things in
train there. As Euro Area economies are getting weaker maybe ECB
rhetoric can tone down its concerns a notch or two &#8211; okay, maybe a
half-notch or so&#8230;.
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">German
International and Domestic Inflation Trends </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% m/m</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="even">
<td class="firstcol">SA:</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr-Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">Export Prices</td>
<td>0.1%</td>
<td>0.5%</td>
<td>0.6%</td>
<td>4.5%</td>
<td>3.0%</td>
<td>2.2%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Import Prices</td>
<td>0.0%</td>
<td>0.9%</td>
<td>0.7%</td>
<td>6.7%</td>
<td>8.5%</td>
<td>5.9%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol" colspan="8">NSA</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports excl Petroleum</td>
<td>0.2%</td>
<td>0.6%</td>
<td>0.7%</td>
<td>5.8%</td>
<td>2.6%</td>
<td>1.9%</td>
<td>2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports excl Petroleum</td>
<td>0.0%</td>
<td>0.9%</td>
<td>0.9%</td>
<td>7.2%</td>
<td>3.7%</td>
<td>1.5%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol" colspan="8">Memo:
SA</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI</td>
<td>0.4%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.7%</td>
<td>3.5%</td>
<td>3.0%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; CPI excl Energy</td>
<td>0.3%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>2.3%</td>
<td>2.3%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">PPI</td>
<td>0.5%</td>
<td>0.6%</td>
<td>0.5%</td>
<td>6.4%</td>
<td>6.5%</td>
<td>4.2%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; PPI excl Energy</td>
<td>0.4%</td>
<td>0.4%</td>
<td>0.4%</td>
<td>4.7%</td>
<td>3.1%</td>
<td>2.8%</td>
<td>3.0%</td>
</tr>
</tbody>
</table>
</div></body></html>

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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">
During March, new single family home sales fell 8.5%. The decline to 526,000 followed a 5.3% drop during February that was revised deeper from the initial report. A March sales level of 585,000 had been expected. The latest level of sales was the lowest since 1991.
By region, double digit month-to-month declines were logged in the Northeast (-64.6% y/y), in the Midwest (-50.0% Y/Y) and in the West (-39.3% y/y). In the South new home sales fell by a lesser 4.6% m/m (-25.9% y/y).
The median price for a new single family home fell 6.8% to $227,600 and reduced prices to near their lowest since 2004. 
The number of new homes for sale fell 1.1% last month (-14.6% y/y). That inventory was down 18.3% from the peak in mid-2006.
Will Rural Prosperity Prevail in 2008? from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/1q08Henderson.pdf"> here</a>.<div align="left"><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">March</th>
<th scope="col">February</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>526</td>
<td>575</td>
<td>-36.6%</td>
<td>773</td>
<td>1,049</td>
<td>1,279</td>
</tr>
<tr>
<td class="firstcol">Median Price (NSA, $)</td>
<td>227,600</td>
<td>244,200</td>
<td>-13.3%</td>
<td>243,500</td>
<td>243,067</td>
<td>234,208</td>
</tr>
</tbody>
</table>
</body>
</html>

During March, new single family home sales fell 8.5%. The decline to 526,000 followed a 5.3% drop during February that was revised deeper from the initial report. A March sales level of 585,000 had been expected. The latest level of [...]

U.S. New Home Sales & Prices Drop

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080424h.jpg" align="left" border="0" height="265" width="353">
Germany&#8217;s IFO index has dropped sharply in March to 102.4 from
104.8. Its current conditions index fell to 109.4 from 111.5. The April
expectations index moved lower to 96.8 from 98.4. On a Yr/Yr basis the
percentage declines in the IFO index accelerated for each of these
components (see table below). 
The readings for the IFO and its components are not yet dour,
but they clearly have weakened and are no longer strong. The Business
Climate index stands in the 73rd percentile of
its range, a firm reading. The current situation is a bit better than
that, lodged at its 78th percentile. Expectations, the forward-looking
indicator, are weaker; still standing in the 60th
percentile of their range. That is still above the midpoint but longer
looking very strong and certainly losing momentum. Expectations
readings, while above their range mid point stand at their period
average at a value of 96.8.
The sector indices tell curious stories. Compared to their
respective average values since January of 2001, all are still well
above average. But all are not well-off. Retailing is the most curious
having moved strongly higher earlier this year even as the euro was
gaining in value. But in April it is falling sharply even as it was
retaining some of those gains. The message from this sector is not
clear. It resides in the 78th percentile of its
range. In that respect it is the relative strongest of the sectors in
its range since 2001. Wholesaling is the weakest sector residing in the
65th percentile of its range. MFG Construction
and retailing are in the low seventieth percentiles of their respective
ranges. All of them fell in the month, retailing fell the mostly
sharply shedding 10 points in one month. Wholesaling lost over 6 points
on its diffusion index. Manufacturing lost about four and one-half
points.
It was not a good month for the IFO report that was generally
worse than the Zew index has suggested. The IFO&#8217;s details are yet to be
revealed. A MFG morale report from neighboring France, a fellow EMU
member, (also released today) showed that French morale was off and
that orders had dropped sharply. That result accords with the Belgian
National Bank index released on Wednesday, just one day ago. We are
getting confirming signs with similar causes about spreading weakness
in the Euro Area. Even the UK&#8217;s CBI MFG survey showed a similar pattern
of weakness made more nettlesome by reports that more firms were
passing through price increases.
The reports for the EMU in the coming months are going to be
important. On today&#8217;s weakness the Euro shed a large dollop of its
recent outsized dollar gains. The ECB rhetoric about tightening rates
has done a quick 180-degree turn, suddenly the IMF is pleased with the
state of ECB policy and the ECB itself no longer seems to threaten a
rate-hiking agenda.
What a difference a few bad economic reports can make. Stay
tuned as we try to discern how weak things will get. For its part the
German government has not cut its growth rate further for 2008 but has
lowered the outlook for 2009. In the face of all the complaining that
the euro is too strong, some of this is going have to undergo a
credibility check. If the euro is far, far above parity (and seems to
suggest that is so) then the recent strength in a number of euro
indicators would seem to at risk. More weak readings from the IFO and
its companion reports must lie ahead. All this talk of a resilient and
robust economy in Europe surely must be about to go by the boards. 
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> IFO
Survey: Germany</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="5">Percent: Yr/Yr</td>
<td colspan="3">INDEX NUMBERS</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>CURRENT</td>
<td>Average</td>
<td>Percentile</td>
</tr>
<tr>
<td class="firstcol">Biz Climate</td>
<td>-5.7%</td>
<td>-2.7%</td>
<td>-2.7%</td>
<td>-4.2%</td>
<td>-5.3%</td>
<td>102.4</td>
<td>96.0</td>
<td>73.1%</td>
</tr>
<tr>
<td class="firstcol">Current Situation</td>
<td>-4.2%</td>
<td>-0.7%</td>
<td>-1.1%</td>
<td>-4.3%</td>
<td>-6.2%</td>
<td>108.4</td>
<td>95.2</td>
<td>78.6%</td>
</tr>
<tr>
<td class="firstcol">Biz Expectations</td>
<td>-7.2%</td>
<td>-4.7%</td>
<td>-4.4%</td>
<td>-4.1%</td>
<td>-4.3%</td>
<td>96.8</td>
<td>96.8</td>
<td>60.5%</td>
</tr>
</tbody>
</table>

</body></html>

Germany’s IFO index has dropped sharply in March to 102.4 from 104.8. Its current conditions index fell to 109.4 from 111.5. The April expectations index moved lower to 96.8 from 98.4. On a Yr/Yr basis the percentage declines in the [...]

IFO Weakness: A New Trend Lower or a ‘Mild’ Offset to a Spurious Jump?

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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/080424g.jpg" width="353">
The index of help-wanted advertising reported by the Conference Board fell sharply last month to 19 from an unrevised 21 in February. The latest level was a new record low.
During the last ten years there has been a 57% correlation between the level of help-wanted advertising and the three month change in non-farm payrolls.
The proportion of labor markets with rising want-ads rose slightly to a still low 39%. The latest was nevertheless improved from 12% in August which was the lowest monthly reading since October 2001.</div>
Each region of the country showed a m/m decline in its help wanted index except the Middle Atlantic and the New England regions.
The Conference Board surveys help-wanted print advertising volume in 51 major newspapers across the country every month. The latest help wanted report from the Conference Board is available <a href="http://www.conference-board.org/economics/helpwanted.cfm">here</a>.
In 2006, the Conference Board introduced its Help Wanted Online Data Series and the latest release can be found in this <a href="http://www.conference-board.org/pdf_free/HWOnLine3183_PR.pdf">link</a>.<div align="left"></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/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">March 2007</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>19</td>
<td>21</td>
<td>29</td>
<td>26</td>
<td>33</td>
<td>39</td>
</tr>
</tbody>
</table>
</body>
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The index of help-wanted advertising reported by the Conference Board fell sharply last month to 19 from an unrevised 21 in February. The latest level was a new record low. During the last ten years there has been a 57% correlation [...]

U.S. Help-Wanted Advertising Fell to a Record Low

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: April 2008

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Brazil's Current Account Deficit Widends

Brazil's Current AccountDeficit Widends

German Export and Import Inflation Trends Blunted in March

Michigan Consumer Sentiment Lowest Since 1982

Michigan Consumer Sentiment Lowest Since 1982

U.S. New Home Sales & Prices Drop

IFO Weakness: A New Trend Lower or a ‘Mild’ Offset to a Spurious Jump?

U.S. Help-Wanted Advertising Fell to a Record Low