Tom Moeller

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<p></p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100525a.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100525b.jpg" style="width: 312px; height: 265px;">
<p></p>
<p>The recent improvement in home sales has not enhanced pricing
power by much, but at least it's ended earlier declines. Seasonally
adjusted, the Case-Shiller Home Price Index slipped just marginally
from February. That capped a 3.7% rise in prices since last May's low
following double-digit, y/y price declines dating back to early-2008.
Overall, home prices have fallen 29.8% since the April 2006 peak.</p>
<p>The narrower 10 City Composite Index rose a seasonally
adjusted 0.2%. Over the last year prices rose 1.5% and they're up 4.6%
since the low during May of last year.</p>
<p>The performance of home prices continued to vary around the
country. During March the 12-month gain in prices was strongest in the
West where in San Francisco they rose 16.3% and in San Diego by 10.8%.
Lesser price gains were logged in Los Angeles (6.1%) and Denver (4.1%).
Prices also rose in Cleveland (6.7%) Minneapolis (6.6%), Washington
D.C. (5.7%), Boston (3.9%), Dallas (3.1%) and Phoenix (2.5%).
Widespread, though lessened, price declines continued in Detroit
(-4.5%), Charlotte (-3.9%), Seattle (-3.5%), Portland (-2.7%), New York
(-2.4%) and Atlanta (-1.2%).</p>
<p>The Case-Shiller home price series are value-weighted, i.e., a
greater index weight is assigned to more expensive homes. The
S&amp;P/Case-Shiller home price series can be found in Haver's <b>USECON</b>
database and the city data highlighted below is in the <b>REGIONAL</b>
database.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100525c.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100525d.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>S&amp;P/Case-Shiller
Home Price Index (SA)</b></th>
<th scope="col"><b>March m/m</b></th>
<th scope="col"><b>February m/m</b></th>
<th scope="col"><b>January m/m</b></th>
<th scope="col"><b>March y/y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><b>20 City Composite Index</b></td>
<td>-0.0</td>
<td>-0.1</td>
<td>0.3</td>
<td>2.4</td>
<td>-13.3</td>
<td>-15.7</td>
<td>-3.8</td>
</tr>
<tr>
<td colspan="8" class="firstcol">&nbsp; <b>Regional
Indicators</b></td>
</tr>
<tr class="odd">
<td class="firstcol"><b>&nbsp;&nbsp;&nbsp;&nbsp;
Atlanta</b></td>
<td>-1.3</td>
<td>-0.7</td>
<td>-0.6</td>
<td>-1.2</td>
<td>-11.6</td>
<td>-8.5</td>
<td>0.7</td>
</tr>
<tr class="odd">
<td class="firstcol"><b>&nbsp;&nbsp;&nbsp;&nbsp;
Boston</b></td>
<td>0.3</td>
<td>-0.4</td>
<td>0.3</td>
<td>3.9</td>
<td>-4.9</td>
<td>-5.7</td>
<td>-4.0</td>
</tr>
<tr class="odd">
<td class="firstcol"><b>&nbsp;&nbsp;&nbsp;&nbsp;
Chicago</b></td>
<td>-2.0</td>
<td>-1.1</td>
<td>-0.5</td>
<td>-2.2</td>
<td>-14.2</td>
<td>-10.0</td>
<td>-1.0</td>
</tr>
<tr class="odd">
<td class="firstcol"><b>&nbsp;&nbsp;&nbsp;&nbsp;
Dallas</b></td>
<td>0.3</td>
<td>-1.3</td>
<td>-0.3</td>
<td>3.1</td>
<td>-2.3</td>
<td>-3.3</td>
<td>0.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;<b>&nbsp;&nbsp;&nbsp;
Denver</b></td>
<td>0.5</td>
<td>-0.0</td>
<td>-0.1</td>
<td>4.1</td>
<td>-2.8</td>
<td>-4.9</td>
<td>-1.7</td>
</tr>
<tr class="odd">
<td class="firstcol"><b>&nbsp;&nbsp;&nbsp;&nbsp;
Los Angeles</b></td>
<td>-0.3</td>
<td>0.1</td>
<td>1.9</td>
<td>6.1</td>
<td>-15.4</td>
<td>-24.2</td>
<td>-5.2</td>
</tr>
<tr class="odd">
<td class="firstcol"><b>&nbsp;&nbsp;&nbsp;&nbsp;
New York</b></td>
<td>-0.1</td>
<td>-0.1</td>
<td>-0.2</td>
<td>-2.4</td>
<td>-9.8</td>
<td>-7.4</td>
<td>-2.8</td>
</tr>
<tr class="odd">
<td class="firstcol"><b>&nbsp;&nbsp;&nbsp;&nbsp;
San Francisco</b></td>
<td>0.9</td>
<td>0.4</td>
<td>0.6</td>
<td>16.3</td>
<td>-18.4</td>
<td>-24.3</td>
<td>-4.5</td>
</tr>
<tr class="odd">
<td class="firstcol"><b>&nbsp;&nbsp;&nbsp;&nbsp;
Tampa&nbsp;&nbsp;&nbsp; </b></td>
<td>-0.0</td>
<td>-0.3</td>
<td>0.3</td>
<td>-3.5</td>
<td>-18.8</td>
<td>-19.2</td>
<td>-7.6</td>
</tr>
</tbody>
</table>
</body></html>

The recent improvement in home sales has not enhanced pricing power by much, but at least it's ended earlier declines. Seasonally adjusted, the Case-Shiller Home Price Index slipped just marginally from February. That capped a 3.7% [...]

Case-Shiller Home Price Index Improves Y/Y But Momentum Eases

Case-Shiller Home Price IndexImproves Y/Y But Momentum Eases

Louise Curley

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524l.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524m.jpg" style="width: 312px; height: 265px;">
<p></p>
<p>The
financial turmoil in the Euro Area has resulted in a sharp drop in
confidence in the Euro Area, as a whole.&nbsp; The ZEW Indicator of
Expectations for the entire Euro Area, released last week, fell from a
balance of optimists of 46.0% in April to 37.6% in May. Today, however,
Slovenia, one of the smaller nations and one of the more recent members
of the euro area.&nbsp; reported today an increase in
confidence.&nbsp; (Slovenia has a population of about 2 million and
entered the Euro Area on January 1, 2007) The Statistical Office of
Slovenia publishes an overall sentiment indicator, which is based on
three separate indicators: consumer confidence, confidence in retail
trade and in manufacturing.&nbsp; The indicators are in the form of
percent balances.&nbsp;</p>
<p>Although the overall indicator still shows
an excess of pessimists, the excess of pessimists declined in May to 9
from 12.&nbsp; This is the best balance since October of
2008.&nbsp; Business personnel in Slovenia appear to be more
positive than the consumer.&nbsp; In Retail trade, there is
actually a small excess-2%-of optimists over pessimists and in
Manufacturing, the pessimists outweigh the optimists by only
1%.&nbsp; There are, however, many more pessimists among the
consumers.&nbsp; They exceeded the optimists by 22% in May, but
this was an improvement over April's excess of pessimist of
24%.&nbsp; The percent balance of the four indicators are shown in
the first chart.&nbsp;&nbsp;</p>
<p>The improvement in confidence in
May in Slovenia, in contrast to a decline for the Euro Area as a whole,
may be due in part to Slovenia's relatively favorable financial
situation.&nbsp; Although its government deficit as a percentage of
GDP increased in 2009, part of the increase reflects the decline in GDP
and may improve as the economy recovers.&nbsp; The level of debt to
GDP is well below any danger point&nbsp; These ratios are shown in
the second chart.</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">SLOVENIA</th>
<th scope="col"><b>May 10&nbsp;</b></th>
<th scope="col"><b>Apr 10&nbsp;</b></th>
<th scope="col"><b>Mar 10</b></th>
<th scope="col"><b>Feb 10</b></th>
<th scope="col"><b>Jan 10</b></th>
<th scope="col"><b>Dec 09</b></th>
<th scope="col"><b>Nov 09</b></th>
<th scope="col"><b>Oct 09</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Combined Sentiment
Indicator (% Bal)</td>
<td>-9</td>
<td>-12</td>
<td>-15</td>
<td>-11</td>
<td>-10</td>
<td>-13</td>
<td>-15</td>
<td>-13</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Consumer Confidence Indicator (% Bal)</td>
<td>-22</td>
<td>-24</td>
<td>-26</td>
<td>-24</td>
<td>-26</td>
<td>-26</td>
<td>-24</td>
<td>-21</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Retail
Confidence Indicator (%
Bal)</td>
<td>2</td>
<td>2</td>
<td>-3</td>
<td>-4</td>
<td>-6</td>
<td>-4</td>
<td>-7</td>
<td>-6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Manufacturing Confidence Indicator
(%Bal)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>-1</td>
<td>-2</td>
<td>-6</td>
<td>-8</td>
<td>-7</td>
<td>-12</td>
<td>-13</td>
<td>-16</td>
</tr>
</tbody>
</table>
</span>
</body></html>

The financial turmoil in the Euro Area has resulted in a sharp drop in confidence in the Euro Area, as a whole. The ZEW Indicator of Expectations for the entire Euro Area, released last week, fell from a balance of optimists of 46.0% [...]

Confidence Improves In Slovenia, One Of The Smaller Euro Area Countries

Robert Brusca

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524k.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>After an encouraging spurt in January Japan&#8217;s overall sector
index has fallen back for two straight months and is back barely above
its level of December 2009. Only the industry index is up this month.
The industrial index is up in 12 of the last 13-months but the even the
pace of its increase is tailing off. The construction index is still
eroding. The tertiary index which is a measure of the performance of
the services sector is on a steady slow path of recovery but it fell
sharply in March and in February. The tertiary index is below its
December 2009 level.</p>
<p>The construction index is near the bottom of its five year
range of values. The services sector is in the bottom 12% of its five
year range. The industrial sector is the best performing sector but
stands only in the 60th percentile of its range. As a result of these
standings the overall business index resides in the 28th percentile of
its range.</p>
<p>The sector indices paint an unclear picture of the Japanese
economy. While the trends for the indices are still rising, except for
construction, the recent weakness for industry and services is
disturbing.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"><b>Key Japanese Sector Surveys</b> </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;" colspan="4">Raw readings of each
survey</td>
<td style="font-weight: bold;" colspan="3">Percent of 5Yr range*</td>
</tr>
<tr>
<td class="firstcol">Indices</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>Jan-10</td>
<td>Dec-09</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>Jan-10</td>
</tr>
<tr class="odd">
<td class="firstcol">Biz
Activity(METI:Indices)</td>
<td>93.8</td>
<td>94.6</td>
<td>96.8</td>
<td>93.6</td>
<td>28.4%</td>
<td>34.3%</td>
<td>50.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Construction</td>
<td>75.2</td>
<td>78.2</td>
<td>75.0</td>
<td>74.5</td>
<td>2.6%</td>
<td>13.9%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Industry</td>
<td>94.8</td>
<td>93.7</td>
<td>94.3</td>
<td>90.4</td>
<td>60.5%</td>
<td>57.6%</td>
<td>59.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Tertiary(serv)</td>
<td>95.5</td>
<td>98.5</td>
<td>98.8</td>
<td>96.0</td>
<td>12.1%</td>
<td>45.1%</td>
<td>48.4%</td>
</tr>
</tbody>
</table>
</body></html>

After an encouraging spurt in January Japan’s overall sector index has fallen back for two straight months and is back barely above its level of December 2009. Only the industry index is up this month. The industrial index is up in 12 [...]

Japan Sector Index Drops In March

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524h.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>Hopefully, recent improvement in existing single-family home
sales wasn't all due to buying ahead of the April 30th expiration of a
Federal home-buyer tax credit. Existing home sales rose 7.6% last month
to 5.770M (AR) according to the National Association of Realtors. The
gain followed a similar rise in March which followed declines during
the prior thee months. Sales in April exceeded Consensus expectations
for 5.65M. Total sales include sales of condos and co-ops. Sales of
existing single-family homes alone rose 7.4% from March to 5.050M.
(These data have a longer history than the total sales series). Sales
of condos and co-ops rose 42.3% from last year.</p>
<p>Sales have been helped by a tax credit for first-time home
buyers. Additionally, a credit of up to $6,500 was available to some
existing home owners who move. The full details of the home-buyer tax
credit can be found <a href="http://www.federalhousingtaxcredit.com/2009/faq.php">here</a>.</p>
<p>The median price of all existing homes also rose in April to
$173,100 but remained off roughly 25% from the 2007 peak. The price of
a single-family home rose 2.3% to $173,400 (4.5% y/y). Earlier price
weakness sharply raised home affordability -- by three-quarters from
the 2006 low. The median family income for existing home buyers was
$60,498 and mortgage payments amounted to 14.7% of that total.</p>
<p>The number of unsold homes (single-family &amp; co-ops)
for sale rose sharply m/m, up 2.7% y/y. At the current sales rate there
was an 8.4 months' supply of homes on the market. That was down from a
high of 10.1 months during April of 2008. For single-family homes, the
inventory rose m/m to an 8.2 months' supply.</p>
<p>The data on existing home sales, prices and affordability can
be found in Haver's <b>USECON</b> database. The regional
price, affordability and inventory data is available in the <b>REALTOR
</b>database.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524i.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524j.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Existing
Home Sales (Thous, SAAR)</b></th>
<th scope="col"><b>April</b></th>
<th scope="col"><b>March</b></th>
<th scope="col"><b>February</b></th>
<th scope="col"><b>April y/y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><b>Total</b></td>
<td>5,770</td>
<td>5,360</td>
<td>5,010</td>
<td>22.8%</td>
<td>5,160</td>
<td>4,893</td>
<td>5,674</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>1,090</td>
<td>900</td>
<td>840</td>
<td>41.6</td>
<td>863</td>
<td>845</td>
<td>1,010</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,330</td>
<td>1.210</td>
<td>1,110</td>
<td>29.1</td>
<td>1,166</td>
<td>1,130</td>
<td>1,331</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>2,140</td>
<td>1,970</td>
<td>1,840</td>
<td>23.0</td>
<td>1,913</td>
<td>1,860</td>
<td>2,243</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,210</td>
<td>1,290</td>
<td>1,220</td>
<td>5.2</td>
<td>1,216</td>
<td>1,064</td>
<td>1,095</td>
</tr>
<tr>
<td class="firstcol"><b>Single-Family Sales</b></td>
<td>5,050</td>
<td>4,700</td>
<td>4,360</td>
<td>20.5</td>
<td>4,573</td>
<td>4,341</td>
<td>4,960</td>
</tr>
<tr>
<td class="firstcol"><b>Median Price, Total, $
(NSA)</b></td>
<td>173,100</td>
<td>169,600</td>
<td>164,600</td>
<td>4.0</td>
<td>172,742</td>
<td>197,233</td>
<td>216,633</td>
</tr>
</tbody>
</table>
</body></html>

Hopefully, recent improvement in existing single-family home sales wasn't all due to buying ahead of the April 30th expiration of a Federal home-buyer tax credit. Existing home sales rose 7.6% last month to 5.770M (AR) according to [...]

U.S. Existing Home Sales Improve With Tax Credit Expiration

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524e.jpg" style="border: 0px solid ; width: 363px; height: 265px; float: left;" align="left"></p>
<p>Economic growth continued to improve last month. The Chicago
Fed indicated that its National Activity Index (CFNAI) rose to 0.29
from an upwardly revised March level. The increase was to the highest
level since 2006 and added to earlier gains from the series' low of
-4.14 reached in January '09. During the last ten years the has been a
76% correlation between the index level and the q/q change in real GDP.</p>
<p><b>The three-month moving average of the index, which
smoothes out some of the series' volatility, also rose to its highest
level since early-2007.</b></p>
<p>An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3.0%. The complete CFNAI report is available <a href="http://www.chicagofed.org/digital_assets/publications/cfnai/2010/cfnai_april2010.pdf">here</a>.</p>
<p>The Chicago Fed indicated that rebounds in the employment and
in the production components contributed to the total index
improvement. Overall, 51 of the 85 individual indicators made positive
contributions to the index while 34 made negative contributions. 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, manufacturing &amp; trade sales, and inventories &amp;
orders.</p>
<p>In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index improved during March to its highest level
since December 2008. Indicators for the auto, steel, machinery and
resource sectors each rose. The Chicago Federal Reserve figures are
available in Haver's <b>SURVEYS </b>database.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524f.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524g.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><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"><b>Chicago Fed</b></a></th>
<th scope="col"><b>April</b></th>
<th scope="col"><b>March</b></th>
<th scope="col"><b>February</b></th>
<th scope="col"><b>April '09</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">CFNAI</td>
<td>0.29</td>
<td>0.13</td>
<td>-0.52</td>
<td>-2.12</td>
<td>-1.61</td>
<td>-1.80</td>
<td>-0.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td>-0.03</td>
<td>-0.09</td>
<td>-0.29</td>
<td>-2.65</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Personal Consumption &amp; Housing&nbsp;</td>
<td>-0.41</td>
<td>-0.35</td>
<td>-0.38</td>
<td>-0.56</td>
<td>-0.49</td>
<td>-0.32</td>
<td>-0.09</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Employment, Unemployment &amp; Hours</td>
<td>0.23</td>
<td>0.16</td>
<td>-0.07</td>
<td>-0.89</td>
<td>-0.76</td>
<td>-0.67</td>
<td>-0.15</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Production &amp; Income</td>
<td>0.41</td>
<td>0.23</td>
<td>-0.16</td>
<td>-0.39</td>
<td>-0.23</td>
<td>-0.56</td>
<td>-0.05</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Sales, Inventories &amp; Orders</td>
<td>0.06</td>
<td>0.08</td>
<td>0.11</td>
<td>-0.28</td>
<td>-0.13</td>
<td>-0.25</td>
<td>-0.06</td>
</tr>
</tbody>
</table>
</body></html>

Economic growth continued to improve last month. The Chicago Fed indicated that its National Activity Index (CFNAI) rose to 0.29 from an upwardly revised March level. The increase was to the highest level since 2006 and added to [...]

Chicago Fed Index Improves To Highest Since 2006

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<p></p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524a.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524b.jpg" style="width: 312px; height: 265px;">&gt;
<p>The National Association For Business Economics (NABE)
indicated in its latest survey of 46 economists that economic growth
would continue this year and next at a 3.2% rate. Though that
expectation is slightly higher than the 3.1% growth forecasted in the
February survey, it remains well short of the four-to-seven percent
growth following past severe recessions.</p>
<p>Improved, but still subpar, growth in consumer spending is
expected to bolster the economic recovery. Growth of 2.6% and 2.8%
compares to the five percent growth after prior recessions.</p>
<p>Capital spending also is expected to improve -- and with more
momentum -- than the consumer's rebound. The 11% gains in equipment
spending this year and next are just shy of the higher double-digit
gains following earlier recessions. The recovery in residential
investment, while respectable at 12.6% in 2011, follows subpar growth
this year and compares to the up to 41% gains after earlier, severe
downturns.</p>
<p>As a result of the economic rebound, the unemployment rate is
expected to fall. Here again, however, the half a percentage point
decline is much smaller than the one-to-three point drops after earlier
recessions. That implied level of continued economic slack is expected
to leave core consumer price inflation roughly stable near 1.5%.
Overall inflation remains relatively higher at 2.0% due to higher oil
prices which is expected to average $88.80 per barrel of crude next
year while interest rates rise modestly with the economic recovery. <br>
<br>
</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524c.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524d.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Nat'l
Assn. For Business Economics Outlook</b></th>
<th scope="col"><b>2011</b></th>
<th scope="col"><b>2010</b></th>
<th scope="col"><b>2009</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real GDP (%)</td>
<td>3.2</td>
<td>3.2</td>
<td>-2.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Personal Consumption
Expenditures</td>
<td>2.8</td>
<td>2.6</td>
<td>-0.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital Spending -
Structures</td>
<td>-1.1</td>
<td>-12.6</td>
<td>-19.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital Spending -
Equipment &amp; Software</td>
<td>11.0</td>
<td>10.7</td>
<td>-16.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential
Investment</td>
<td>12.6</td>
<td>1.9</td>
<td>-20.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>9.0</td>
<td>9.6</td>
<td>9.3</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI</td>
<td>2.0</td>
<td>2.0</td>
<td>-0.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Price Index - PCE
Less Food &amp; Energy</td>
<td>1.7</td>
<td>1.3</td>
<td>1.4</td>
</tr>
<tr class="odd">
<td class="firstcol">10-Year Treasury Note</td>
<td>4.70</td>
<td>4.20</td>
<td>3.85</td>
</tr>
</tbody>
</table>
</body></html>

> The National Association For Business Economics (NABE) indicated in its latest survey of 46 economists that economic growth would continue this year and next at a 3.2% rate. Though that expectation is slightly higher than the 3.1% [...]

National Association For Business Economics Expects Positive Growth, Low Inflation & Higher Interest Rates

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<span id="articletext">
<p></p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524a.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524b.jpg" style="width: 312px; height: 265px;">&gt;
<p>The National Association For Business Economics (NABE)
indicated in its latest survey of 46 economists that economic growth
would continue this year and next at a 3.2% rate. Though that
expectation is slightly higher than the 3.1% growth forecasted in the
February survey, it remains well short of the four-to-seven percent
growth following past severe recessions.</p>
<p>Improved, but still subpar, growth in consumer spending is
expected to bolster the economic recovery. Growth of 2.6% and 2.8%
compares to the five percent growth after prior recessions.</p>
<p>Capital spending also is expected to improve -- and with more
momentum -- than the consumer's rebound. The 11% gains in equipment
spending this year and next are just shy of the higher double-digit
gains following earlier recessions. The recovery in residential
investment, while respectable at 12.6% in 2011, follows subpar growth
this year and compares to the up to 41% gains after earlier, severe
downturns.</p>
<p>As a result of the economic rebound, the unemployment rate is
expected to fall. Here again, however, the half a percentage point
decline is much smaller than the one-to-three point drops after earlier
recessions. That implied level of continued economic slack is expected
to leave core consumer price inflation roughly stable near 1.5%.
Overall inflation remains relatively higher at 2.0% due to higher oil
prices which is expected to average $88.80 per barrel of crude next
year while interest rates rise modestly with the economic recovery. <br>
<br>
</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524c.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524d.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Nat'l
Assn. For Business Economics Outlook</b></th>
<th scope="col"><b>2011</b></th>
<th scope="col"><b>2010</b></th>
<th scope="col"><b>2009</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real GDP (%)</td>
<td>3.2</td>
<td>3.2</td>
<td>-2.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Personal Consumption
Expenditures</td>
<td>2.8</td>
<td>2.6</td>
<td>-0.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital Spending -
Structures</td>
<td>-1.1</td>
<td>-12.6</td>
<td>-19.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital Spending -
Equipment &amp; Software</td>
<td>11.0</td>
<td>10.7</td>
<td>-16.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential
Investment</td>
<td>12.6</td>
<td>1.9</td>
<td>-20.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>9.0</td>
<td>9.6</td>
<td>9.3</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI</td>
<td>2.0</td>
<td>2.0</td>
<td>-0.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Price Index - PCE
Less Food &amp; Energy</td>
<td>1.7</td>
<td>1.3</td>
<td>1.4</td>
</tr>
<tr class="odd">
<td class="firstcol">10-Year Treasury Note</td>
<td>4.70</td>
<td>4.20</td>
<td>3.85</td>
</tr>
</tbody>
</table>
<span id="articletitle">Chicago Fed Index Improves To
Highest Since 2006 </span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom
Moeller</a> May 24, 2010</span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524e.jpg" style="border: 0px solid ; width: 363px; height: 265px; float: left;" align="left"></p>
<p>Economic growth continued to improve last month. The Chicago
Fed indicated that its National Activity Index (CFNAI) rose to 0.29
from an upwardly revised March level. The increase was to the highest
level since 2006 and added to earlier gains from the series' low of
-4.14 reached in January '09. During the last ten years the has been a
76% correlation between the index level and the q/q change in real GDP.</p>
<p><b>The three-month moving average of the index, which
smoothes out some of the series' volatility, also rose to its highest
level since early-2007.</b></p>
<p>An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3.0%. The complete CFNAI report is available <a href="http://www.chicagofed.org/digital_assets/publications/cfnai/2010/cfnai_april2010.pdf">here</a>.</p>
<p>The Chicago Fed indicated that rebounds in the employment and
in the production components contributed to the total index
improvement. Overall, 51 of the 85 individual indicators made positive
contributions to the index while 34 made negative contributions. 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, manufacturing &amp; trade sales, and inventories &amp;
orders.</p>
<p>In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index improved during March to its highest level
since December 2008. Indicators for the auto, steel, machinery and
resource sectors each rose. The Chicago Federal Reserve figures are
available in Haver's <b>SURVEYS </b>database.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524f.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524g.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><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"><b>Chicago
Fed</b></a></th>
<th scope="col"><b>April</b></th>
<th scope="col"><b>March</b></th>
<th scope="col"><b>February</b></th>
<th scope="col"><b>April '09</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">CFNAI</td>
<td>0.29</td>
<td>0.13</td>
<td>-0.52</td>
<td>-2.12</td>
<td>-1.61</td>
<td>-1.80</td>
<td>-0.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td>-0.03</td>
<td>-0.09</td>
<td>-0.29</td>
<td>-2.65</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Personal Consumption &amp; Housing&nbsp;</td>
<td>-0.41</td>
<td>-0.35</td>
<td>-0.38</td>
<td>-0.56</td>
<td>-0.49</td>
<td>-0.32</td>
<td>-0.09</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Employment, Unemployment &amp; Hours</td>
<td>0.23</td>
<td>0.16</td>
<td>-0.07</td>
<td>-0.89</td>
<td>-0.76</td>
<td>-0.67</td>
<td>-0.15</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Production &amp; Income</td>
<td>0.41</td>
<td>0.23</td>
<td>-0.16</td>
<td>-0.39</td>
<td>-0.23</td>
<td>-0.56</td>
<td>-0.05</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Sales, Inventories &amp; Orders</td>
<td>0.06</td>
<td>0.08</td>
<td>0.11</td>
<td>-0.28</td>
<td>-0.13</td>
<td>-0.25</td>
<td>-0.06</td>
</tr>
</tbody>
</table>
<span id="articletitle">U.S. Existing Home Sales Improve
With Tax Credit Expiration</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom
Moeller</a>May 24, 2010 </span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524h.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>Hopefully, recent improvement in existing single-family home
sales wasn't all due to buying ahead of the April 30th expiration of a
Federal home-buyer tax credit. Existing home sales rose 7.6% last month
to 5.770M (AR) according to the National Association of Realtors. The
gain followed a similar rise in March which followed declines during
the prior thee months. Sales in April exceeded Consensus expectations
for 5.65M. Total sales include sales of condos and co-ops. Sales of
existing single-family homes alone rose 7.4% from March to 5.050M.
(These data have a longer history than the total sales series). Sales
of condos and co-ops rose 42.3% from last year.</p>
<p>Sales have been helped by a tax credit for first-time home
buyers. Additionally, a credit of up to $6,500 was available to some
existing home owners who move. The full details of the home-buyer tax
credit can be found <a href="http://www.federalhousingtaxcredit.com/2009/faq.php">here</a>.</p>
<p>The median price of all existing homes also rose in April to
$173,100 but remained off roughly 25% from the 2007 peak. The price of
a single-family home rose 2.3% to $173,400 (4.5% y/y). Earlier price
weakness sharply raised home affordability -- by three-quarters from
the 2006 low. The median family income for existing home buyers was
$60,498 and mortgage payments amounted to 14.7% of that total.</p>
<p>The number of unsold homes (single-family &amp; co-ops)
for sale rose sharply m/m, up 2.7% y/y. At the current sales rate there
was an 8.4 months' supply of homes on the market. That was down from a
high of 10.1 months during April of 2008. For single-family homes, the
inventory rose m/m to an 8.2 months' supply.</p>
<p>The data on existing home sales, prices and affordability can
be found in Haver's <b>USECON</b> database. The regional
price, affordability and inventory data is available in the <b>REALTOR
</b>database.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524i.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524j.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Existing
Home Sales (Thous, SAAR)</b></th>
<th scope="col"><b>April</b></th>
<th scope="col"><b>March</b></th>
<th scope="col"><b>February</b></th>
<th scope="col"><b>April y/y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><b>Total</b></td>
<td>5,770</td>
<td>5,360</td>
<td>5,010</td>
<td>22.8%</td>
<td>5,160</td>
<td>4,893</td>
<td>5,674</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>1,090</td>
<td>900</td>
<td>840</td>
<td>41.6</td>
<td>863</td>
<td>845</td>
<td>1,010</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,330</td>
<td>1.210</td>
<td>1,110</td>
<td>29.1</td>
<td>1,166</td>
<td>1,130</td>
<td>1,331</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>2,140</td>
<td>1,970</td>
<td>1,840</td>
<td>23.0</td>
<td>1,913</td>
<td>1,860</td>
<td>2,243</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,210</td>
<td>1,290</td>
<td>1,220</td>
<td>5.2</td>
<td>1,216</td>
<td>1,064</td>
<td>1,095</td>
</tr>
<tr>
<td class="firstcol"><b>Single-Family Sales</b></td>
<td>5,050</td>
<td>4,700</td>
<td>4,360</td>
<td>20.5</td>
<td>4,573</td>
<td>4,341</td>
<td>4,960</td>
</tr>
<tr>
<td class="firstcol"><b>Median Price, Total, $
(NSA)</b></td>
<td>173,100</td>
<td>169,600</td>
<td>164,600</td>
<td>4.0</td>
<td>172,742</td>
<td>197,233</td>
<td>216,633</td>
</tr>
</tbody>
</table>
<span id="articletitle">Japan Sector Index Drops In March</span><br>
<span id="byline">by <a href="/comment/Brusca.html">Robert
Brusca</a> May 24, 2010</span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524k.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>After an encouraging spurt in January Japan&#8217;s overall sector
index has fallen back for two straight months and is back barely above
its level of December 2009. Only the industry index is up this month.
The industrial index is up in 12 of the last 13-months but the even the
pace of its increase is tailing off. The construction index is still
eroding. The tertiary index which is a measure of the performance of
the services sector is on a steady slow path of recovery but it fell
sharply in March and in February. The tertiary index is below its
December 2009 level.</p>
<p>The construction index is near the bottom of its five year
range of values. The services sector is in the bottom 12% of its five
year range. The industrial sector is the best performing sector but
stands only in the 60th percentile of its range. As a result of these
standings the overall business index resides in the 28th percentile of
its range.</p>
<p>The sector indices paint an unclear picture of the Japanese
economy. While the trends for the indices are still rising, except for
construction, the recent weakness for industry and services is
disturbing.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"><b>Key
Japanese Sector Surveys</b> </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;" colspan="4">Raw
readings of each
survey</td>
<td style="font-weight: bold;" colspan="3">Percent
of 5Yr range*</td>
</tr>
<tr>
<td class="firstcol">Indices</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>Jan-10</td>
<td>Dec-09</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>Jan-10</td>
</tr>
<tr class="odd">
<td class="firstcol">Biz
Activity(METI:Indices)</td>
<td>93.8</td>
<td>94.6</td>
<td>96.8</td>
<td>93.6</td>
<td>28.4%</td>
<td>34.3%</td>
<td>50.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Construction</td>
<td>75.2</td>
<td>78.2</td>
<td>75.0</td>
<td>74.5</td>
<td>2.6%</td>
<td>13.9%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Industry</td>
<td>94.8</td>
<td>93.7</td>
<td>94.3</td>
<td>90.4</td>
<td>60.5%</td>
<td>57.6%</td>
<td>59.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Tertiary(serv)</td>
<td>95.5</td>
<td>98.5</td>
<td>98.8</td>
<td>96.0</td>
<td>12.1%</td>
<td>45.1%</td>
<td>48.4%</td>
</tr>
</tbody>
</table>
<span id="articletitle">Confidence Improves In Slovenia,
One Of The Smaller Euro Area Countries </span><br>
<span id="byline">by <a href="/comment/Curley.html">Louise
Curley</a> May 24, 2010</span>
<span id="articletext">
<p></p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524l.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100524m.jpg" style="width: 312px; height: 265px;">
<p></p>
<p>The
financial turmoil in the Euro Area has resulted in a sharp drop in
confidence in the Euro Area, as a whole.&nbsp; The ZEW Indicator of
Expectations for the entire Euro Area, released last week, fell from a
balance of optimists of 46.0% in April to 37.6% in May. Today, however,
Slovenia, one of the smaller nations and one of the more recent members
of the euro area.&nbsp; reported today an increase in
confidence.&nbsp; (Slovenia has a population of about 2 million and
entered the Euro Area on January 1, 2007) The Statistical Office of
Slovenia publishes an overall sentiment indicator, which is based on
three separate indicators: consumer confidence, confidence in retail
trade and in manufacturing.&nbsp; The indicators are in the form of
percent balances.&nbsp;</p>
<p>Although the overall indicator still shows
an excess of pessimists, the excess of pessimists declined in May to 9
from 12.&nbsp; This is the best balance since October of
2008.&nbsp; Business personnel in Slovenia appear to be more
positive than the consumer.&nbsp; In Retail trade, there is
actually a small excess-2%-of optimists over pessimists and in
Manufacturing, the pessimists outweigh the optimists by only
1%.&nbsp; There are, however, many more pessimists among the
consumers.&nbsp; They exceeded the optimists by 22% in May, but
this was an improvement over April's excess of pessimist of
24%.&nbsp; The percent balance of the four indicators are shown in
the first chart.&nbsp;&nbsp;</p>
<p>The improvement in confidence in
May in Slovenia, in contrast to a decline for the Euro Area as a whole,
may be due in part to Slovenia's relatively favorable financial
situation.&nbsp; Although its government deficit as a percentage of
GDP increased in 2009, part of the increase reflects the decline in GDP
and may improve as the economy recovers.&nbsp; The level of debt to
GDP is well below any danger point&nbsp; These ratios are shown in
the second chart.</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">SLOVENIA</th>
<th scope="col"><b>May 10&nbsp;</b></th>
<th scope="col"><b>Apr 10&nbsp;</b></th>
<th scope="col"><b>Mar 10</b></th>
<th scope="col"><b>Feb 10</b></th>
<th scope="col"><b>Jan 10</b></th>
<th scope="col"><b>Dec 09</b></th>
<th scope="col"><b>Nov 09</b></th>
<th scope="col"><b>Oct 09</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Combined Sentiment
Indicator (% Bal)</td>
<td>-9</td>
<td>-12</td>
<td>-15</td>
<td>-11</td>
<td>-10</td>
<td>-13</td>
<td>-15</td>
<td>-13</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Consumer Confidence Indicator (% Bal)</td>
<td>-22</td>
<td>-24</td>
<td>-26</td>
<td>-24</td>
<td>-26</td>
<td>-26</td>
<td>-24</td>
<td>-21</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Retail
Confidence Indicator (%
Bal)</td>
<td>2</td>
<td>2</td>
<td>-3</td>
<td>-4</td>
<td>-6</td>
<td>-4</td>
<td>-7</td>
<td>-6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Manufacturing Confidence Indicator
(%Bal)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>-1</td>
<td>-2</td>
<td>-6</td>
<td>-8</td>
<td>-7</td>
<td>-12</td>
<td>-13</td>
<td>-16</td>
</tr>
</tbody>
</table>
</span>
</body></html>

National Association For BusinessEconomics Expects Positive Growth, Low Inflation & Higher Interest Rates

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 2010

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