Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030513a.jpg" width="353">
The U.S. foreign trade deficit deepened quite a bit more than expected in March. The deficit deepened to $43.5B versus Consensus expectations for a deficit of $41.0B. February&#39;s deficit was little revised.
Imports rose a strong 2.9% and the strength was fairly broad based. Nonauto consumer goods rose 1.5% (15.9% y/y) and auto imports rose 2.1% (7.7% y/y).Imports of other merchandise rose 3.8% (-7.0% y/y). Capital goods imports fell 0.1% (-0.5% y/y) for the third consecutive monthly decline.
Imports of industrial supplies and materials rose 9.6% (42.3% y/y) as the value of petroleum product imports rose 24.9%. The quantity of crude petroleum imports jumped 25.0% (18.1% y/y). The per barrel price of crude petroleum fell slightly (57.8% y/y).
Exports rose 0.6% for the fourth gain in five months and were up 1.1% during that period.
Nonauto consumer goods exports jumped 5.6% (7.8% y/y). Exports of automotive vehicles, parts &amp; engines rose 1.2% (6.0% y/y). Capital goods exports fell 0.2% (-1.3% y/y) after strong gains in the prior two months.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE03/@EE03.HTM">Foreign Trade</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Deficit</td>
<td>$43.5B</td>
<td>$40.4B</td>
<td>$32.6B(3/02)</td>
<td>$435.7B</td>
<td>$358.3B</td>
<td>$378.7B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>0.6%</td>
<td>0.4%</td>
<td>5.8%</td>
<td>-2.6%</td>
<td>-6.2%</td>
<td>11.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>2.9%</td>
<td>-0.5%</td>
<td>13.9%</td>
<td>3.8%</td>
<td>-6.0%</td>
<td>18.3%</td>
</tr>
</tbody>
</table>
Chain Store Sales Down Slightly 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 13, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030513b.jpg" width="353">
Chain store sales last week gave back just 0.2% of the 2.1% jump the prior week, according to the BTM-UBSW survey.
During the first ten days of May sales were 2.1% above the April average. The latest weekly index level was 4.1% above the December average.
During the last ten years there has been a 58% correlation between the year-to-year percent change in these chain store sales and the change in nonauto retail sales less gasoline.
The BTM-UBSW retail chain-store sales index is constructed from the sales results reported by seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">5/10/03</th>
<th scope="col">5/03/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>416.9</td>
<td>417.7</td>
<td>2.7%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
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The U.S. foreign trade deficit deepened quite a bit more than expected in March. The deficit deepened to $43.5B versus Consensus expectations for a deficit of $41.0B. February's deficit was little revised. Imports rose a strong 2.9% [...]

U.S. Trade Deficit Deepened Unexpectedly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030512a.jpg" width="353">
The Weekly Leading Index of the US economy jumped in the opening week of May. The 2.0% w/w rise was the largest gain since a like increase in the middle of March. The index is published by the Economic Cycle Research Institute (ECRI).
These recent gains raised the six-month growth rate of the weekly index into positive territory where it has not been since the Summer of 2002, except briefly in January.
Higher stock prices and a narrower spread between higher-risk corporate bonds and safe-haven U.S. treasuries contributed to gains in the leading index.
During the last five years there has been a 55% correlation between growth in the leading index and next quarter&#39;s growth in real GDP.
Construction of the ECRI Leading Index differs from the Index of Leading Economic Indicators published by the Conference Board. Nevertheless there has been an 80% correlation between the annual percent change in the two series over the last 20 years.
The components of the weekly index are money supply plus stock &amp; bond mutual funds, the JOC-ECRI industrial materials price index, mortgage applications, bond quality spreads, stock prices, bond yields, and initial jobless insurance claims.
The median lead of the ECRI index at business cycle peaks has been 10.5 months and at cycle troughs 3.0 months. The sideways movement of the leading index in 2002 may or may not signal something about the economy&#39;s growth rate.
For more on ECRI and the Weekly Leading Index go to <a href="http://businesscycle.com">businesscycle.com</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/weekly/@W8/@W801/@W801.HTM">ECRI Leading Index</a></th>
<th scope="col">5/02/03</th>
<th scope="col">4/25/03</th>
<th scope="col">Growth Rate</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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<td class="firstcol">Weekly</td>
<td>121.8</td>
<td>119.4</td>
<td>0.6%</td>
<td>1.2%</td>
<td>-5.3%</td>
<td>-0.1%</td>
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<tr>
<td class="firstcol">&nbsp;</td>
<td>April</td>
<td>Mar</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<tr class="odd">
<td class="firstcol">Monthly</td>
<td>119.6</td>
<td>119.2</td>
<td>0.1%</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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The Weekly Leading Index of the US economy jumped in the opening week of May. The 2.0% w/w rise was the largest gain since a like increase in the middle of March. The index is published by the Economic Cycle Research Institute (ECRI). [...]

ECRI Leading Indicators Move Up

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030509b.jpg" width="353">
Data on German industrial production and exports, released today, give little cause for cheer. Exports, which had been the one bright spot in the German economy during 2002, are now showing signs of weakening as the rise in the Euro over the past years has begun to take its toll. The monthly average Euro/dollar exchange rate has risen 23% between March of 2002 and March 0f 2003. Exports appear to have peaked in September of 2002 at 57.2 billion euros. With declines in February and March exports are now almost 5% below the peak.
Total industrial production dropped 1.06% from February to March. Excluding construction, industrial production was down almost 2% in the month. The more volatile construction series rose almost 9% in March, nevertheless, the longer term downward trend in construction appears to be still in progress.
Earlier in the week data on unemployment were released. In April there were about 4.5 million unemployed persons in Germany or 10.7% of the labor force. The unemployment rate has been rising steadily since the low of 9.2% in May of 2001.

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<th scope="col" class="firstcol">Germany</th>
<th scope="col">Mar2003</th>
<th scope="col">Feb 2003</th>
<th scope="col">M/M %Chg</th>
<th scope="col">Y/Y %Chg</th>
<th scope="col">2002 %Chg</th>
<th scope="col">2001 %Chg</th>
<th scope="col">2000 %Chg</th>
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<td class="firstcol">Exports (Bil.Euros)</td>
<td>54.5</td>
<td>54.8</td>
<td>-.0.55</td>
<td>0.093</td>
<td>1.62</td>
<td>7.42</td>
<td>12.86</td>
</tr>
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<td class="firstcol">Euro/US$</td>
<td>1.079</td>
<td>1.078</td>
<td>0.11</td>
<td>23.17</td>
<td>5.56</td>
<td>-3.02</td>
<td>-13.43</td>
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<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
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<td class="firstcol">Industrial Production (1995=100)</td>
<td>111.5</td>
<td>112.7</td>
<td>-1.06</td>
<td>-0.45</td>
<td>-1.28</td>
<td>-0.13</td>
<td>5.26</td>
</tr>
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<td class="firstcol">&nbsp; Total excl construction</td>
<td>116.5</td>
<td>118.8</td>
<td>-1.94</td>
<td>0.26</td>
<td>-1.15</td>
<td>0.53</td>
<td>6.17</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>73.7</td>
<td>67.8</td>
<td>8.7</td>
<td>-8.33</td>
<td>-2.85</td>
<td>-7.13</td>
<td>-3.28</td>
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<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
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<td class="firstcol"></td>
<td>Apr2003</td>
<td>Mar 2003</td>
<td>Feb2003</td>
<td>Apr2002</td>
<td>2002</td>
<td>2001</td>
<td>2000</td>
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<td class="firstcol">Unemployment Rate</td>
<td>10.7</td>
<td>10.6</td>
<td>10.5</td>
<td>9.6</td>
<td>9.8</td>
<td>9.4</td>
<td>9.6</td>
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<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
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Data on German industrial production and exports, released today, give little cause for cheer. Exports, which had been the one bright spot in the German economy during 2002, are now showing signs of weakening as the rise in the Euro [...]

The Economic News from Germany Continues to be Discouraging

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030509a.jpg" width="353">
Retail gasoline prices continued the recent decline last week to an average of $1.51 per gallon. The decline since the peak of $1.73 in mid-March totaled 12.4%.
Crude oil prices during the two month period fell sharply. The price of West Texas Intermediate crude averaged $25.73 per barrel last week (-3.4% y/y) but prices very recently seem to have stabilized.
Wholesale natural gas prices averaged $5.26/mmbtu last week, down from the cold-weather spike over $12.00 in late February. Recent natural gas prices were roughly double last year&#39;s level, however, in the Consumer Price Index the price of piped gas &amp; electricity was up about 10% y/y through March.
For a discussion of residential natural gas prices by the US Department of Energy click <a href="http://www.eia.doe.gov/oil_gas/natural_gas/analysis_publications/natbro/gasprices.htm">here</a>.
For the latest Short Term Energy Outlook from the US Department of Energy click <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/weekly/@W4/@W403/@W40303/@W40303.HTM">US Retail Gasoline Prices</a></th>
<th scope="col">05/05/03</th>
<th scope="col">12/30/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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</thead>
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<td class="firstcol">All Formulations ($/Gal.)</td>
<td>$1.51</td>
<td>$1.44</td>
<td>8.5%</td>
<td>$1.34</td>
<td>$1.42</td>
<td>$1.48</td>
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Retail gasoline prices continued the recent decline last week to an average of $1.51 per gallon. The decline since the peak of $1.73 in mid-March totaled 12.4%. Crude oil prices during the two month period fell sharply. The price of [...]

Gasoline Prices Fell Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030508a.jpg" width="353">
Initial claims for unemployment insurance fell slightly more than Consensus expectations for a decline to 435,000. Initial claims fell 6.2% w/w to 425,000. That added to a 1.3% decline the week earlier which was revised shallower.
The four-week moving average of initial claims rose to 446,000 (4.8% y/y), the highest level since mid-April 2002.
During the last ten years there has been an 81% (inverse) correlation between the level of initial jobless insurance claims and the y/y change in real GDP.
Continuing claims for unemployment insurance rose 0.2% w/w to the highest level since early-October. The prior week&#39;s figure was revised down.
The insured rate of unemployment was stable at 2.9% for the second week.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">5/03/03</th>
<th scope="col">4/26/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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<td class="firstcol">Initial Claims</td>
<td>425.0</td>
<td>453.0</td>
<td>3.2%</td>
<td>404.3</td>
<td>406.0</td>
<td>299.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,665</td>
<td>-0.1%</td>
<td>3,575</td>
<td>3,022</td>
<td>2,114</td>
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Initial claims for unemployment insurance fell slightly more than Consensus expectations for a decline to 435,000. Initial claims fell 6.2% w/w to 425,000. That added to a 1.3% decline the week earlier which was revised shallower. The [...]

Initial Jobless Insurance Claims Fell Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030507a.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association jumped 18.6% last week and erased the declines of the three prior weeks. Despite the latest rise, applications were 25.5% below the peak level of mid-March.
Last week&#39;s increase was due to huge gains in mortgage applications both for home purchase and refinance. Mortgage applications for home purchase surged 16.9% (8.7% y/y) last week to a record high level.
During the last ten years there has been a 52% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Refinancing applications rose 19.4% w/w but nevertheless were off 35.3% from the March peak.
The average size of a mortgage loan application surged to $185,400 (-0.5% y/y). The average size of an application for home purchase fell slightly to $196,900 (+7.0% y/y). The average size of an application to refinance jumped 6.6% to $180,200 (-5.1% y/y).
Interest rates on a conventional 30-Year mortgage ticked up with the effective rate at 5.83% versus 5.80% the prior week. The effective rate on a 15-year mortgage was 5.21%.
Visit the Mortgage Bankers Association site at <a href="http://www.mbaa.org/">www.mbaa.org.</a>

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">5/02/03</th>
<th scope="col">4/25/03</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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</thead>
<tbody>
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<td class="firstcol">Total Market Index</td>
<td>1,246.6</td>
<td>1,050.8</td>
<td>799.7</td>
<td>625.6</td>
<td>322.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>416.0</td>
<td>356.0</td>
<td>354.7</td>
<td>304.9</td>
<td>302.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>6,077.8</td>
<td>5,092.0</td>
<td>3,388.0</td>
<td>2,491.0</td>
<td>438.8</td>
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</tbody>
</table>
US Dollar Down Broadly 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 7, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030507b.jpg" width="353">
The US dollar has been under broad pressure due to little evidence that US interest rates will rise anytime soon. Yesterday&#39;s announcement by the FOMC dropped the trade weighted dollar&#39;s value another 0.6% versus major currencies. The dollar&#39;s decline is versus a peak early last year and now has come to 17%.
The Euro has been above parity with the US dollar since November of last year, but erratic gains extend back to late 2000. Since then the Euro is up by almost one third, 29% since early 2000.
Against the Canadian dollar the US currency has suffered declines not seen since the late 1980s. Since early last year the C$ is up roughly 12% with virtually all of that gain since last Winter.
Versus the Japanese Yen, the dollar has traded narrowly since the middle of last year. That followed dollar declines early in the year which came to over 10%.
Exchange rate puzzles are explored <a href="http://www.frbsf.org/publications/economics/review/2002/article4.pdf">here</a> by the Federal Reserve Bank of San Francisco.
The differing behavior of the US Federal Reserve System and the Eurosystem is explored by the Federal Reserve Bank of New York <a href="http://www.newyorkfed.org/rmaghome/staff_rp/2003/sr165.html">here</a>.

Consumer Credit Usage Remained Weak 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 7, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030507c.jpg" width="353">
Consumer credit outstanding (which excludes mortgages) rose $0.9B (0.6% AR) in March. Consensus expectations had been for a $3.0B rise. 
The preliminary report of a $1.5B rise in February was revised down slightly to $1.3B. Revolving credit usage was revised down but a drop in nonrevolving was lessened. 
Revolving credit rose 3.9% (AR) following a 5.9% February gain. The six month growth was a barely positive 1.0%. 
Nonrevolving credit fell again in March, at a 1.7% rate following the 2.7% February decline.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E103/@E10308/@E10308.HTM">Consumer Credit Outstanding</a></th>
<th scope="col">Mar m/m</th>
<th scope="col">Feb m/m</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$0.9B</td>
<td>$1.3B</td>
<td>3.3%</td>
<td>3.6%</td>
<td>6.9%</td>
<td>10.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$2.3B</td>
<td>$3.6B</td>
<td>2.4%</td>
<td>1.6%</td>
<td>5.1%</td>
<td>11.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonrevolving</td>
<td>$-1.5B</td>
<td>$-2.2B</td>
<td>3.8%</td>
<td>5.0%</td>
<td>8.2%</td>
<td>9.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

The index of mortgage applications compiled by the Mortgage Bankers Association jumped 18.6% last week and erased the declines of the three prior weeks. Despite the latest rise, applications were 25.5% below the peak level of mid- [...]

Mortgage Applications Surged, Purchase Applications Set Record

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030506a.jpg" width="353">
Chain store sales jumped 2.1% in the opening week of May according to the BTM-UBSW survey. The rise more than recouped a 1.6% decline the prior week and pulled this measure of consumer spending to a record level.
April sales rose 0.1% from the March average. The latest weekly index level was 4.3% above the December average.
During the last ten years there has been a 58% correlation between the year-to-year percent change in these chain store sales and the change in nonauto retail sales less gasoline.
The BTM-UBSW retail chain-store sales index is constructed from the sales results reported by seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">5/03/03</th>
<th scope="col">4/26/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>417.7</td>
<td>409.1</td>
<td>2.5%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
FOMC Left Interest Rates Unchanged 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 6, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030506b.jpg" width="353">
The Federal Reserve left the federal funds target rate unchanged at 1.25%, the lowest level since 1961. The decision was unanimous and as expected by most economists. 
The discount rate remained unchanged with primary credit available at 2.25%.
The press release which accompanied the Fed&#146;s action contained the following statement. &quot;Recent readings on production and employment, though mostly reflecting decisions made before the conclusion of hostilities, have proven disappointing. However, the ebbing of geopolitical tensions has rolled back oil prices, bolstered consumer confidence, and strengthened debt and equity markets. These developments, along with the accommodative stance of monetary policy and ongoing growth in productivity, should foster an improving economic climate over time.&quot;
With regard to the risks to the economic outlook, the Fed stated that &quot;the upside and downside risks to the attainment of sustainable growth are roughly equal.&quot; The Fed statement added that &quot;the probability of an unwelcome substantial fall in inflation, though minor, exceeds that of a pickup in inflation from its already low level.&quot;
<a href="http://www.federalreserve.gov/boarddocs/press/monetary/2003/20030506/default.htm">Here</a> is the complete text of the Fed&#39;s latest press release.
Analysis by the Federal Reserve Bank of St. Louis of new credit programs at the Discount Window can be found <a href="http://research.stlouisfed.org/publications/mt/cover.pdf">here</a>.

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Chain store sales jumped 2.1% in the opening week of May according to the BTM-UBSW survey. The rise more than recouped a 1.6% decline the prior week and pulled this measure of consumer spending to a record level. April sales rose 0.1% [...]

Chain Store Sales Surged to Record Level

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030505a.jpg" width="353">
The Chicago Fed National Activity Index (CFNAI) improved in March, but the index level still was negative as it has been for most of the last three years. . A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth (just over 3% p.a. during the last ten years).
The three-month moving average of the CFNAI was -0.43. That&#39;s consistent with roughly 1-2% growth in real GDP.
During the last ten years there has been a 73% correlation between the level of the CFNAI and quarterly growth in real GDP.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production &amp; income, the labor market, personal consumption &amp; housing, mfg. &amp; trade sales, and inventories &amp; orders.
For a complete discussion of the latest Chicago Fed&#39;s National Activity Index click <a href="http://www.chicagofed.org/economicresearchanddata/national/index.cfm">here</a>.
A discussion of the CFNAI and its role as a business cycle indicator can be found <a href="http://www.chicagofed.org/publications/economicperspectives/2002/3qepart2.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#39;02</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-0.67</td>
<td>-1.24</td>
<td>-0.28</td>
<td>-0.31</td>
<td>-1.13</td>
<td>-0.13</td>
</tr>
</tbody>
</table>
ISM Nonmanufacturing Index Rebounded 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 5, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030505b.jpg" width="353">
The Institute for Supply Management business activity index of the nonmanufacturing sector rose last month to 50.7. That was more than Consensus expectations for a smaller gain to 49.0.
The 2.8 point rise recouped just half of the sharp decline in the prior month.
During the last five years, there has been a 70% correlation between the level of the Business Activity Index from the ISM nonmanufacturing survey and quarterly growth in real GDP in the service sector plus structures.
The seasonally adjusted new orders index rose modestly to 50.6 as did the employment index to 48.2.
Business activity for the nonmanufacturing sector is a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index weights the components.
The seasonally adjusted index of prices fell to 56.7, the lowest level this year.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The nonmanufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>50.7</td>
<td>47.9</td>
<td>54.9</td>
<td>55.1</td>
<td>49.0</td>
<td>59.3</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>56.7</td>
<td>62.0</td>
<td>54.8</td>
<td>53.9</td>
<td>51.6</td>
<td>63.5</td>
</tr>
</tbody>
</table>
Challenger Survey of Layoff Announcements Up Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 5, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030505c.jpg" width="353">
According to Challenger, Gray &amp; Christmas, announced job cuts surged in April to the highest level since November. The rise followed a sharp decline in March and pulled the three month moving average of job cut announcements more than one third higher than last summer.
Job cut announcements differ from layoffs in that many are achieved through attrition or just never occur.
Announcements of job cuts rose in most industries except computers where they fell for the second month. Layoff announcements also fell in the transportation, electronics and health care industries.
During the last ten years there has been a (negative) 75% correlation between the level of announced job cuts and the y/y percent change in nonfarm payrolls.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>146,399</td>
<td>85,396</td>
<td>30.0%</td>
<td>1,431,052</td>
<td>1,956,876</td>
</tr>
</tbody>
</table>


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The Chicago Fed National Activity Index (CFNAI) improved in March, but the index level still was negative as it has been for most of the last three years. . A zero value of the CFNAI indicates that the economy is expanding at its [...]

Chicago Fed National Activity Index Negative

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: May 2003

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