Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050726a.jpg" width="353">
Consumer Confidence in July retraced the prior month&#39;s upwardly revised increase and fell 2.8% to 103.2 according to the Conference Board. Consensus expectations had been for stability at 106.2.
During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
Consumers&#39; assessment of the present situation slipped for only the second month this year and the index remained up 11.4% y/y. Jobs were viewed as hard to get by 23.8% of survey participants, a slight m/m increase, but the 28.7% of participants who thought that business conditions were good was the highest in four years.
Consumer expectations fell 3.5% (-11.7% y/y) to the lowest level since April. Expectations for business conditions slipped the most though expectations that jobs would increase improved and expectations that income would rise only fell modestly.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>103.2</td>
<td>106.2</td>
<td>-2.4%</td>
<td>96.1</td>
<td>79.8</td>
<td>96.6</td>
</tr>
</tbody>
</table>
</body>
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Consumer Confidence in July retraced the prior month's upwardly revised increase and fell 2.8% to 103.2 according to the Conference Board. Consensus expectations had been for stability at 106.2. During the last twenty years there has [...]

Consumer Confidence Retraced Earlier Gain

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050726a.jpg" width="353">
Consumer Confidence in July retraced the prior month&#39;s upwardly revised increase and fell 2.8% to 103.2 according to the Conference Board. Consensus expectations had been for stability at 106.2.
During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
Consumers&#39; assessment of the present situation slipped for only the second month this year and the index remained up 11.4% y/y. Jobs were viewed as hard to get by 23.8% of survey participants, a slight m/m increase, but the 28.7% of participants who thought that business conditions were good was the highest in four years.
Consumer expectations fell 3.5% (-11.7% y/y) to the lowest level since April. Expectations for business conditions slipped the most though expectations that jobs would increase improved and expectations that income would rise only fell modestly.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>103.2</td>
<td>106.2</td>
<td>-2.4%</td>
<td>96.1</td>
<td>79.8</td>
<td>96.6</td>
</tr>
</tbody>
</table>
Gasoline Prices Dipped Last Week, Up 6.2% in July 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 26, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050726b.jpg" width="353">
In the US, the average price for unleaded regular gasoline dipped to $2.29 per gallon last week from $2.32 or more during the prior two weeks. Early month strength lifted the July average so far 6.2% above June. In 2005 gasoline prices have averaged $2.10 per gallon of regular grade versus $1.85 last year.
The price of crude oil also has fallen of late with a barrel of West Texas Intermediate crude yesterday at $56.01. Earlier in the month crude oil prices briefly touched $61.29/bbl. and have averaged $58.60 in July versus $41.44 during 2004.
Wholesale natural gas prices held steady at $7.77/mmbtu (33.0% y/y) last week. The average price during July is up 7.2% versus June.
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/daily/@D3/@D306/@D306.HTM">Energy Prices</a></th>
<th scope="col">07/25/05</th>
<th scope="col">12/31/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">US Retail Gasoline, Regular ($/Gal.)</td>
<td>$2.29</td>
<td>$1.79</td>
<td>20.2%</td>
<td>$1.85</td>
<td>$1.56</td>
<td>$1.35</td>
</tr>
<tr>
<td class="firstcol">Domestic Spot Market Price: West Texas Intermediate ($/Barrel)</td>
<td>$57.47</td>
<td>$41.78</td>
<td>40.7%</td>
<td>$41.78</td>
<td>$32.78</td>
<td>$31.23</td>
</tr>
</tbody>
</table>
Chain Store Sales Post Another Solid Gain 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 26, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050726c.jpg" width="353">
Chain store sales increased 0.4% last week according to the International Council of Shopping Centers (ICSC)-UBS survey. This fourth consecutive gain lifted sales so far in July 0.5% higher than during June when sales fell 0.4% versus May.
During the last ten years there has been a 56% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The leading indicator of chain store sales from ICSC recovered a piece of the prior week&#39;s sharp decline with a 0.3% w/w (0.3% y/y) rise.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">07/23/05</th>
<th scope="col">07/16/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>458.5</td>
<td>456.9</td>
<td>4.2%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
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</table>
Currency Declines Boost Business Confidence in Italy, Germany and the U. K. but Fail to Do So in the Netherlands 
by <a href="/comment/Curley.html">Louise Curley</a> July 26, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050726d.jpg" width="353">
The decline of 11% in the euro to around 1.20 against the US dollar from 1.35 at the end of last year seems to have boosted business confidence in Germany and Italy. Business confidence in Italy and Germany rose for the second month in July to five month highs. In Italy, the ISAE (Institute of Studies and Economic Analyses) index of business confidence rose 1.3% from June to July, but was still 5.1% below July of last year. The IFO (Institut fur Wirtschaftsforschung) index in Germany rose 1.8% from June to July and was only 0.5% below July, 2004. Business confidence in Italy is some 14% below 2000 while that of Germany is only 5% below 2000. The first chart shows the business confidence indexes for Germany and Italy.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050726e.jpg" width="353">
The 9% decline in the British pound from $1.92 at the end of last year to around $1.75 currently may also have accounted for the improvement in confidence shown in the CBI (Confederation of British Industries) Industrial Trends Survey. As in Italy, the improvement is from a low level. The balance of respondents reporting on the volume of their order books rose to a negative 20 from a negative 25 from June to July. Despite the decline of the euro, business confidence in the Netherlands continued to weaken. In July pessimists in the Netherlands out weighed the optimists by 3.7% a 2 point increase from the 1.7% in June. The second charts shows the percent balances for the U. K. and the Netherlands.

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<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Jul&nbsp; 05</th>
<th scope="col">Jun 05</th>
<th scope="col">Jul 04</th>
<th scope="col">M/M%</th>
<th scope="col">Y/Y%</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp;2002</th>
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<td class="firstcol">Germany: IFO (2000=100)</td>
<td>95.0</td>
<td>93.3</td>
<td>95.5</td>
<td>1.82</td>
<td>-0.52</td>
<td>95.7</td>
<td>91.7</td>
<td>89.4</td>
</tr>
<tr>
<td class="firstcol">Italy ISAE (2000=100)</td>
<td>86.0</td>
<td>84.9</td>
<td>90.6</td>
<td>1.30</td>
<td>-5.08</td>
<td>89.5</td>
<td>88.0</td>
<td>90.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Netherlands Producer Confidence (% balance)</td>
<td>-3.7</td>
<td>-1.7</td>
<td>0.7</td>
<td>-2.0</td>
<td>-4.4</td>
<td>0.1</td>
<td>-5.6</td>
<td>-1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">U.K. CBI Industrial Trends Survey Order Book in volume (% balance)</td>
<td>-20</td>
<td>-25</td>
<td>-7</td>
<td>5</td>
<td>-13</td>
<td>-9</td>
<td>-29</td>
<td>-27</td>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050725c.jpg" width="353">
Mexico&#39;s trade deficit improved in June to -$270.6 million from -$579.7 million in May and was $526.6 million better than June, 2004. As a developing country, Mexico typically runs a trade deficit, which is offset by a capital inflow. The improvement in the balance was due to a 0.7% rise in exports and a 0.2% decline in imports.
Exports were up 0.7% from May to June and were 13.0% above the year ago figure. Petroleum exports were up 11.0% for the month and 45.6% for the year. Higher prices, no doubt, accounted for much of the rises in petroleum. Non petroleum exports declined 1.6% in June, but were almost 5% above the year ago figures. The year-to-year changes in non petroleum exports have tended to be much smaller than the swings in the year-to-year changes in petroleum exports as shown in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050725b.jpg" width="353">
Imports decreased by 0.2% in June from May but were still 8.4% above June, 2004. The bulk of Mexico&#39;s imports consists of intermediate goods for further assembly and processing.These goods declined 4.1% from May to June, but were 3.3% above the June 2004. Over the past five years they have accounted for between 70% and 80% of total imports.The relative importance of capital and consumer goods has been changing in recent years with consumer goods rising in importance relative to capital goods, as shown in the second chart.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGELA/@E6/@E6.HTM">Mexico</a> Million US Dollars</th>
<th scope="col">Jun 05</th>
<th scope="col">May 05</th>
<th scope="col">Jun 04</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y&nbsp;&nbsp; %</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp;2002</th>
</tr>
</thead>
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<td class="firstcol">Exports&nbsp;</td>
<td>17618.4</td>
<td>17503.1</td>
<td>15591.8</td>
<td>0.66</td>
<td>13.0</td>
<td>187475</td>
<td>164868</td>
<td>160899</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>2661.1</td>
<td>2397.0</td>
<td>1828.2</td>
<td>11.02</td>
<td>45.56</td>
<td>23656</td>
<td>18623</td>
<td>14853</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non Petroleum</td>
<td>15124.2</td>
<td>15368.1</td>
<td>14421.3</td>
<td>-1.59</td>
<td>4.89</td>
<td>164404</td>
<td>146262</td>
<td>146278</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>17823.8</td>
<td>17851.2</td>
<td>16437.0</td>
<td>-0.15</td>
<td>8.42</td>
<td>195825</td>
<td>170576</td>
<td>168482</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>2597.5</td>
<td>2366.2</td>
<td>2163.9</td>
<td>9.78</td>
<td>20.04</td>
<td>25402</td>
<td>21509</td>
<td>21178</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital Goods</td>
<td>2174.5</td>
<td>1995.0</td>
<td>1977.6</td>
<td>9.55</td>
<td>9.96</td>
<td>22597</td>
<td>20205</td>
<td>20992</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Intermediate Goods</td>
<td>13373.1</td>
<td>13940.1</td>
<td>12949.3</td>
<td>-4.07</td>
<td>3.27</td>
<td>148813</td>
<td>128831</td>
<td>126508</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>M/M chg</td>
<td>Y/Y chg</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Trade Balance</td>
<td>-270.6</td>
<td>-579.7</td>
<td>-797.2</td>
<td>109.1</td>
<td>526.6</td>
<td>-8724</td>
<td>-5710</td>
<td>-7538.6</td>
</tr>
</tbody>
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Mexico's trade deficit improved in June to -$270.6 million from -$579.7 million in May and was $526.6 million better than June, 2004. As a developing country, Mexico typically runs a trade deficit, which is offset by a capital inflow. [...]

A Smaller Trade Deficit for Mexico in June

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050725a.jpg" width="353">
The median price of an existing single family home jumped 7.3% m/m in June to another record level, $218,600 (14.5% y/y). In just the first six month of this year prices have risen 15.7%.
June sales of existing homes rose 2.7% to a record 7.330M following a slight 0.6% dip in May that was revised shallower, according to the National Association of Realtors. Consensus expectations had been for sales of 7.13M.
The data reflect closings of home sales in earlier months.
Sales of single-family homes more than reversed the prior month&#39;s decline and rose 2.4% to 6.370M. Sales were strongest in the West and rose 5.4% (4.0% y/y) while sales in the Northeast rose 2.4% (3.6% y/y). In the Midwest sales rose 2.1% (-0.7% y/y) and in the South sales reversed the decline in May and rose 1.2% (6.0% y/y).
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/research.nsf/pages/EHSPage?OpenDocument">here</a>.
The Minutes to the latest meeting of the Federal Open Market Committee can be found <a href="http://www.federalreserve.gov/fomc/minutes/20050630.htm"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Home Sales</td>
<td>7,330</td>
<td>7,140</td>
<td>4.4%</td>
<td>6,723</td>
<td>6,170</td>
<td>5,653</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family Home Sales</td>
<td>6,370</td>
<td>6,220</td>
<td>3.2%</td>
<td>5,913</td>
<td>5,441</td>
<td>4,995</td>
</tr>
</tbody>
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The median price of an existing single family home jumped 7.3% m/m in June to another record level, $218,600 (14.5% y/y). In just the first six month of this year prices have risen 15.7%. June sales of existing homes rose 2.7% to a [...]

U.S. Existing Home Prices & Sales Hot

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050623b.jpg" width="353">
The median price of an existing single family home jumped 7.3% m/m in June to another record level, $218,600 (14.5% y/y). In just the first six month of this year prices have risen 15.7%.
June sales of existing homes rose 2.7% to a record 7.330M following a slight 0.6% dip in May that was revised shallower, according to the National Association of Realtors. Consensus expectations had been for sales of 7.13M.
The data reflect closings of home sales in earlier months.
Sales of single-family homes more than reversed the prior month&#39;s decline and rose 2.4% to 6.370M. Sales were strongest in the West and rose 5.4% (4.0% y/y) while sales in the Northeast rose 2.4% (3.6% y/y). In the Midwest sales rose 2.1% (-0.7% y/y) and in the South sales reversed the decline in May and rose 1.2% (6.0% y/y).
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/research.nsf/pages/EHSPage?OpenDocument">here</a>.
The Minutes to the latest meeting of the Federal Open Market Committee can be found <a href="http://www.federalreserve.gov/fomc/minutes/20050630.htm"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Home Sales</td>
<td>7,330</td>
<td>7,140</td>
<td>4.4%</td>
<td>6,723</td>
<td>6,170</td>
<td>5,653</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family Home Sales</td>
<td>6,370</td>
<td>6,220</td>
<td>3.2%</td>
<td>5,913</td>
<td>5,441</td>
<td>4,995</td>
</tr>
</tbody>
</table>
A Smaller Trade Deficit for Mexico in June 
by <a href="/comment/Curley.html">Louise Curley</a> July 25, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050725c.jpg" width="353">
Mexico&#39;s trade deficit improved in June to -$270.6 million from -$579.7 million in May and was $526.6 million better than June, 2004. As a developing country, Mexico typically runs a trade deficit, which is offset by a capital inflow. The improvement in the balance was due to a 0.7% rise in exports and a 0.2% decline in imports.
Exports were up 0.7% from May to June and were 13.0% above the year ago figure. Petroleum exports were up 11.0% for the month and 45.6% for the year. Higher prices, no doubt, accounted for much of the rises in petroleum. Non petroleum exports declined 1.6% in June, but were almost 5% above the year ago figures. The year-to-year changes in non petroleum exports have tended to be much smaller than the swings in the year-to-year changes in petroleum exports as shown in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050725b.jpg" width="353">
Imports decreased by 0.2% in June from May but were still 8.4% above June, 2004. The bulk of Mexico&#39;s imports consists of intermediate goods for further assembly and processing.These goods declined 4.1% from May to June, but were 3.3% above the June 2004. Over the past five years they have accounted for between 70% and 80% of total imports.The relative importance of capital and consumer goods has been changing in recent years with consumer goods rising in importance relative to capital goods, as shown in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGELA/@E6/@E6.HTM">Mexico</a> Million US Dollars</th>
<th scope="col">Jun 05</th>
<th scope="col">May 05</th>
<th scope="col">Jun 04</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y&nbsp;&nbsp; %</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp;2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Exports&nbsp;</td>
<td>17618.4</td>
<td>17503.1</td>
<td>15591.8</td>
<td>0.66</td>
<td>13.0</td>
<td>187475</td>
<td>164868</td>
<td>160899</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>2661.1</td>
<td>2397.0</td>
<td>1828.2</td>
<td>11.02</td>
<td>45.56</td>
<td>23656</td>
<td>18623</td>
<td>14853</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non Petroleum</td>
<td>15124.2</td>
<td>15368.1</td>
<td>14421.3</td>
<td>-1.59</td>
<td>4.89</td>
<td>164404</td>
<td>146262</td>
<td>146278</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>17823.8</td>
<td>17851.2</td>
<td>16437.0</td>
<td>-0.15</td>
<td>8.42</td>
<td>195825</td>
<td>170576</td>
<td>168482</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>2597.5</td>
<td>2366.2</td>
<td>2163.9</td>
<td>9.78</td>
<td>20.04</td>
<td>25402</td>
<td>21509</td>
<td>21178</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital Goods</td>
<td>2174.5</td>
<td>1995.0</td>
<td>1977.6</td>
<td>9.55</td>
<td>9.96</td>
<td>22597</td>
<td>20205</td>
<td>20992</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Intermediate Goods</td>
<td>13373.1</td>
<td>13940.1</td>
<td>12949.3</td>
<td>-4.07</td>
<td>3.27</td>
<td>148813</td>
<td>128831</td>
<td>126508</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>M/M chg</td>
<td>Y/Y chg</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Trade Balance</td>
<td>-270.6</td>
<td>-579.7</td>
<td>-797.2</td>
<td>109.1</td>
<td>526.6</td>
<td>-8724</td>
<td>-5710</td>
<td>-7538.6</td>
</tr>
</tbody>
</table>
</body>
</html>

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050722d.jpg" width="353">
UK GDP grew 0.4% in Q2, according to Office of National Statistics &quot;Preliminary Estimate&quot;, the same as in Q1. This early estimate is compiled from industrial production and other industry data. It shows that manufacturing lost 0.7% on the quarter, a somewhat smaller decline than in Q1; the year-on-year performance in manufacturing saw shrinkage of 1.7%, the second period of decrease after five straight quarters of year-on-year growth.
Services had moderate gains totaling 0.6% on the quarter, with three of the four major sectors participating: trade and other consumer services, business and financial services and government. Transportation and communications was flat. The overall performance for services was slightly weaker than 0.7% in Q1 and yielded a year-over-year increase of 2.5%, the slowest since the spring of 2003.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050722e.jpg" width="353">
If these two bellwether sectors, manufacturing and services, were down or slower, how was Q2 GDP growth maintained at the Q1 rate? Mining activity including oil and gas extraction turned up after three successive, sizable declines. Renewed expansion in this industry sounds quite reasonable in view of the rapidly rising prices, but it remains to be seen if it will continue; during its general downtrend of the last three years, there have been isolated quarters of advance. The other expanding sector in Q1 was energy production, that is, electricity and other utilities. Construction output rose 0.4%, somewhat less than the 0.6% in Q1.
So all of this produced total GDP growth of 1.7% year-on-year, the smallest such increase since Q1 1993. We&#39;d surmise that escalating energy costs are weighing on real growth. Also in the UK, base lending rates have been 4.75% for roughly the past year; in the face of just 2% consumer price inflation over that period, &quot;real&quot; interest charges are also exerting downward pressure. It shows.

<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/UK/UK.HTM">United Kingdom</a></th>
<th scope="col">Q2 2005</th>
<th scope="col">Q1 2005</th>
<th scope="col">Year/Year</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>0.4</td>
<td>0.4</td>
<td>1.7</td>
<td>3.2</td>
<td>2.5</td>
<td>2.0</td>
</tr>
<tr>
<td class="firstcol">Manufacturing </td>
<td>-0.7</td>
<td>-1.0</td>
<td>-1.7</td>
<td>1.9</td>
<td>0.1</td>
<td>-3.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Mining inc Oil Extraction</td>
<td>1.4</td>
<td>-0.5</td>
<td>-7.3</td>
<td>-7.9</td>
<td>-5.2</td>
<td>-0.3</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>0.6</td>
<td>0.7</td>
<td>2.5</td>
<td>3.9</td>
<td>2.7</td>
<td>2.7</td>
</tr>
</tbody>
</table>
</body>
</html>

UK GDP grew 0.4% in Q2, according to Office of National Statistics "Preliminary Estimate", the same as in Q1. This early estimate is compiled from industrial production and other industry data. It shows that manufacturing lost 0.7% on [...]

UK GDP Rises 0.4%, with Declining Factory Output Offset by Greater Oil & Gas Activity

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050722b.jpg" width="353">
The 2Q&#39;05 Composite Business Index published by the Manufacturers&#39; Alliance/MAPI fell to 68 from 71 the prior quarter. The latest level is the lowest level since 3Q&#39;03.
During the last ten years there has been a 66% correlation between the Composite Index Level and quarterly growth in US factory sector output.
The current orders index continued a slide begun one year ago. While the index level of 86 is down from it&#39;s peak of 93, the figures compare favorably to the lows around 30 during 2001.
The export orders index for 2Q slipped to 86 from the record level in 1Q of 90. Again, the figures remain elevated versus the average of 37 during 2001. During the last ten years there has been a 73% correlation between the export orders index and the y/y change in real US exports.
The profit margins index likewise moved lower to the lowest level since 3Q&#39;03.Conversely, capital spending intentions for the coming year moved higher to the highest level since 4Q&#39;03 and during the last ten years there has been a 74% correlation between the capital spending index a y/y growth in business investment in equipment &amp; software.
For the latest US Business Outlook from the MAPI click <a href="http://www.mapi.net/html/prelease.cfm?release_id=1886">here</a>.
Future Oil from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20050701/cover.pdf"> here</a>.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050722a.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050722c.jpg" width="353">

<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/@SE/@SE.HTM">Manufacturers&#39; Alliance/MAPI Survey</a></th>
<th scope="col">2Q&#39;05</th>
<th scope="col">1Q&#39;05</th>
<th scope="col">2Q&#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Business Index</td>
<td>68</td>
<td>71</td>
<td>80</td>
<td>76</td>
<td>67</td>
<td>60</td>
</tr>
</tbody>
</table>
</body>
</html>

The 2Q'05 Composite Business Index published by the Manufacturers' Alliance/MAPI fell to 68 from 71 the prior quarter. The latest level is the lowest level since 3Q'03. During the last ten years there has been a 66% correlation [...]

MAPI Business Outlook Survey Down in 2Q to the Lowest in Two Years

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050722b.jpg" width="353">
The 2Q&#39;05 Composite Business Index published by the Manufacturers&#39; Alliance/MAPI fell to 68 from 71 the prior quarter. The latest level is the lowest level since 3Q&#39;03.
During the last ten years there has been a 66% correlation between the Composite Index Level and quarterly growth in US factory sector output.
The current orders index continued a slide begun one year ago. While the index level of 86 is down from it&#39;s peak of 93, the figures compare favorably to the lows around 30 during 2001.
The export orders index for 2Q slipped to 86 from the record level in 1Q of 90. Again, the figures remain elevated versus the average of 37 during 2001. During the last ten years there has been a 73% correlation between the export orders index and the y/y change in real US exports.
The profit margins index likewise moved lower to the lowest level since 3Q&#39;03.Conversely, capital spending intentions for the coming year moved higher to the highest level since 4Q&#39;03 and during the last ten years there has been a 74% correlation between the capital spending index a y/y growth in business investment in equipment &amp; software.
For the latest US Business Outlook from the MAPI click <a href="http://www.mapi.net/html/prelease.cfm?release_id=1886">here</a>.
Future Oil from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20050701/cover.pdf"> here</a>.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050722a.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050722c.jpg" width="353">

<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/@SE/@SE.HTM">Manufacturers&#39; Alliance/MAPI Survey</a></th>
<th scope="col">2Q&#39;05</th>
<th scope="col">1Q&#39;05</th>
<th scope="col">2Q&#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Business Index</td>
<td>68</td>
<td>71</td>
<td>80</td>
<td>76</td>
<td>67</td>
<td>60</td>
</tr>
</tbody>
</table>
UK GDP Rises 0.4%, with Declining Factory Output Offset by Greater Oil & Gas Activity   
by <a href="/comment/Stone.html">Carol Stone</a> July 22, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050722d.jpg" width="353">
UK GDP grew 0.4% in Q2, according to Office of National Statistics &quot;Preliminary Estimate&quot;, the same as in Q1. This early estimate is compiled from industrial production and other industry data. It shows that manufacturing lost 0.7% on the quarter, a somewhat smaller decline than in Q1; the year-on-year performance in manufacturing saw shrinkage of 1.7%, the second period of decrease after five straight quarters of year-on-year growth.
Services had moderate gains totaling 0.6% on the quarter, with three of the four major sectors participating: trade and other consumer services, business and financial services and government. Transportation and communications was flat. The overall performance for services was slightly weaker than 0.7% in Q1 and yielded a year-over-year increase of 2.5%, the slowest since the spring of 2003.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050722e.jpg" width="353">
If these two bellwether sectors, manufacturing and services, were down or slower, how was Q2 GDP growth maintained at the Q1 rate? Mining activity including oil and gas extraction turned up after three successive, sizable declines. Renewed expansion in this industry sounds quite reasonable in view of the rapidly rising prices, but it remains to be seen if it will continue; during its general downtrend of the last three years, there have been isolated quarters of advance. The other expanding sector in Q1 was energy production, that is, electricity and other utilities. Construction output rose 0.4%, somewhat less than the 0.6% in Q1.
So all of this produced total GDP growth of 1.7% year-on-year, the smallest such increase since Q1 1993. We&#39;d surmise that escalating energy costs are weighing on real growth. Also in the UK, base lending rates have been 4.75% for roughly the past year; in the face of just 2% consumer price inflation over that period, &quot;real&quot; interest charges are also exerting downward pressure. It shows.

<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/UK/UK.HTM">United Kingdom</a></th>
<th scope="col">Q2 2005</th>
<th scope="col">Q1 2005</th>
<th scope="col">Year/Year</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>0.4</td>
<td>0.4</td>
<td>1.7</td>
<td>3.2</td>
<td>2.5</td>
<td>2.0</td>
</tr>
<tr>
<td class="firstcol">Manufacturing </td>
<td>-0.7</td>
<td>-1.0</td>
<td>-1.7</td>
<td>1.9</td>
<td>0.1</td>
<td>-3.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Mining inc Oil Extraction</td>
<td>1.4</td>
<td>-0.5</td>
<td>-7.3</td>
<td>-7.9</td>
<td>-5.2</td>
<td>-0.3</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>0.6</td>
<td>0.7</td>
<td>2.5</td>
<td>3.9</td>
<td>2.7</td>
<td>2.7</td>
</tr>
</tbody>
</table>
</body>
</html>

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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Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

250501Z1.jpg

**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

250501Z2.jpg

**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

250501Z3.jpg

**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

250501Z4.jpg

**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

250501Z5.jpg

**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

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Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

Charts of the Week: Tariff Truce, Tenuous Trust

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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.

Economy in Brief: July 2005

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Consumer Confidence Retraced Earlier Gain

Consumer Confidence Retraced Earlier Gain

A Smaller Trade Deficit for Mexico in June

U.S. Existing Home Prices & Sales Hot

U.S. Existing Home Prices & Sales Hot

UK GDP Rises 0.4%, with Declining Factory Output Offset by Greater Oil & Gas Activity

MAPI Business Outlook Survey Down in 2Q to the Lowest in Two Years

MAPI Business Outlook Survey Down in 2Q to the Lowest in Two Years