Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030820c.jpg" width="353">
The ZEW Center for European Economic Research in Germany reported that its index of investor confidence rose to 52.5 in August, up from 41.9 in July. The increase follows a July increase that almost doubled the June level of 21.3. August was the first month since October, 2002 that the index showed a year-to-year increase.
The index, based on a survey of 310 analysts and institutional investors, tends to forecast business activity six months ahead.
Investors&#39; confidence has been strengthened by the rise in the stock market--the Morgan Stanley Capital Market Index of German Stocks on August 18th, has increased almost 54% since its low on March 12th,--and by corporate earnings reports that have exceeded expectations. In addition, both monetary and fiscal policy have become easier. The European Central Bank reduced its benchmark rate to 2% from 2.5% on June 5.and the Government has brought forward some 22 billion Euros ($25 billion) of tax reductions to early 2004.
Although it is based on a small sample, the ZEW index has a good reputation of anticipating the results of the broader IFO index that is widely regarded as an important leading indicator of the economy. The IFO index will be available later in the month.

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<th scope="col"></th>
<th scope="col"></th>
<th scope="col"></th>
Percent Change
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<th scope="col"></th>
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<td>Aug 03</td>
<td>July 03</td>
<td>Aug 02</td>
<td>M/M</td>
<td>Y/Y</td>
<td>2002</td>
<td>2001</td>
<td>2000</td>
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<td class="firstcol">ZEW</td>
<td>52.5</td>
<td>41.9</td>
<td>43.4</td>
<td>10.6</td>
<td>9.1</td>
<td>45.3</td>
<td>2.8</td>
<td>59.1</td>
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The ZEW Center for European Economic Research in Germany reported that its index of investor confidence rose to 52.5 in August, up from 41.9 in July. The increase follows a July increase that almost doubled the June level of 21.3. [...]

German Investor Confidence Strengthening

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030819b.jpg" width="353">
Housing starts were stronger than expected last month, rising 1.5% m/m to 1.87 mil. units. Consensus expectations had been for starts of 1.78 mil. July was the highest level of starts since April 1986. Starts had surged in May and June and the June level was revised up.
Single family starts rose 1.9% m/m to the highest level since November 1978. So far this year single family starts are up 4.5% from the 2002 average. June starts were revised up. 
Multi-family starts fell 0.6% last month for the second consecutive monthly decline. June multi family starts were revised up. Multi-family starts this year are down 4.3% versus 2002.
Building permits fell 2.4%, the first m/m decline in four months. Permits for 5 or more structures fell 12.2% (-22.2% y/y) while single family permits were off a slight 0.3% (8.5% y/y).

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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<td class="firstcol">Total</td>
<td>1,872</td>
<td>1,845</td>
<td>12.4%</td>
<td>1,711</td>
<td>1,601</td>
<td>1,573</td>
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<td class="firstcol">&nbsp; Single Family</td>
<td>1,521</td>
<td>1,492</td>
<td>14.4%</td>
<td>1,364</td>
<td>1,272</td>
<td>1,232</td>
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<td class="firstcol">&nbsp; Multi Family</td>
<td>351</td>
<td>353</td>
<td>4.2%</td>
<td>347</td>
<td>330</td>
<td>341</td>
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<td class="firstcol">Building Permits</td>
<td>1,780</td>
<td>1,823</td>
<td>2.2%</td>
<td>1,750</td>
<td>1,637</td>
<td>1,598</td>
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U.S. Consumer Sentiment Dipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 19, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030819a.jpg" width="353">
The University of Michigan&#146;s consumer sentiment index dipped a slight 0.8% in mid-August to 90.2 versus 90.9 in July. A reading of 91.0 had been expected by the Consensus of economists.
A 1.6% decline versus July in the reading for Current Economic Conditions led the dip in the overall Sentiment index. Nevertheless, that reading was up 2.0% y/y.
Consumer Expectations fell by a lesser 0.1% (3.7% y/y) but it was the third consecutive monthly decline.
Over the last ten years there has been a 69% correlation between the level of consumer sentiment and the y/y change in real PCE. The correlation over the last five years has been 82%.
The University of Michigan survey is not seasonally adjusted.It is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Mid-August</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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<td class="firstcol">Consumer Sentiment</td>
<td>90.2</td>
<td>90.9</td>
<td>89.7</td>
<td>89.6</td>
<td>89.2</td>
<td>107.6</td>
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Weekly Chain Store Sales Stall 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 19, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030819c.jpg" width="353">
Chain store sales fell 0.5% last week according to the BTM-UBSW survey. The decline followed a slight uptick the prior week and a 0.8% surge in the opening week of the month.
Despite the latest dip, the level of sales so far this month were 1.0% above the July average. July sales rose 1.4% from June.
During the last five years there has been a 62% correlation between the year-to-year percent change in chain store sales and the change in nonauto retail sales less gasoline.
The BTM-UBSW retail chain-store sales index is constructed from the sales results reported by seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">8/16/03</th>
<th scope="col">8/9/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>426.2</td>
<td>428.3</td>
<td>4.0%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
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Housing starts were stronger than expected last month, rising 1.5% m/m to 1.87 mil. units. Consensus expectations had been for starts of 1.78 mil. July was the highest level of starts since April 1986. Starts had surged in May and [...]

Housing Starts Highest Since 1986

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030818d.jpg" width="353">
The National Association of Home Builders (NAHB) reported that their Composite Housing Market Index rose in August to the highest level since January 2000. The index jumped 6 points from July to 71 and was up 29.9% from August of last year.
During the last fifteen years there has been a 68% correlation between the y/y change in the NAHB index and the change in new home sales.
The index of current market conditions for home sales rose to 77 (30.5% y/y) as the percentage of builders indicating &quot;good&quot; conditions rose to 61% from 51%.
The index which measures expected home sales in six months rose modestly to 78 (18.2% y/y) versus an average of 69 during all of last year.
Traffic of prospective buyers again rose sharply to the highest level since July 1999.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the National Association of Home Builders at <a href="http://www.nahb.org/">www.nahb.org</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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<td class="firstcol">Composite Housing Market Index</td>
<td>71</td>
<td>65</td>
<td>55</td>
<td>61</td>
<td>56</td>
<td>62</td>
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The National Association of Home Builders (NAHB) reported that their Composite Housing Market Index rose in August to the highest level since January 2000. The index jumped 6 points from July to 71 and was up 29.9% from August of last [...]

Housing Market Index Much Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030818b.jpg" width="353">
The Consumer Price Index (CPI-U) rose an expected 0.2% in July following a like increase in June.
The CPI less food and energy also rose 0.2%. That rise was stronger than Consensus expectations for a 0.1% increase. A 1.2% jump in tobacco prices and an uptick in services prices accounted for the surprise.
Continued deflation in the goods sector was led by lower prices for new and used vehicles (-2.3% y/y) and lower prices for household furnishings and operation (-1.9% y/y). Apparel prices were unchanged m/m but still are down 2.0% y/y.
Core services prices managed a moderate 0.3% gain following the weak 0.1% rise in June. Education and communication prices surged 0.5% (1.3% y/y) following four consecutive months of decline. A sharper increase in August may follow warned the Bureau of Labor Statistics. Shelter prices recovered 0.3% (2.4% y/y) versus the slight June decline. Medical care services prices rose 0.4% for the second month (4.3% y/y).Public transportation prices were strong, rising for the fifth straight month (3.3 y/y).
Energy prices increased moderately. Gasoline prices, up 1.2%, were strong for the second month and they have risen by more than double that degree so far in August. Fuel oil prices recovered 1.0% following three months of decline.
The chained CPI which adjusts for shifts in consumer buying behavior was unchanged m/m and during the last four months has fallen 0.3%. It is similar to the PCE price deflator. The core price measure rose 0.1% after the 0.2% drop in June.
Analysis from the Federal Reserve Bank of St. Louis titled &quot;Deflation, Corrosive and Otherwise&quot; can be found <a href="http://research.stlouisfed.org/publications/net/20030701/netpub.pdf">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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<td class="firstcol">Total&nbsp;</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.1%</td>
<td>1.6%</td>
<td>2.8%</td>
<td>3.4%</td>
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<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.0%</td>
<td>1.5%</td>
<td>2.3%</td>
<td>2.7%</td>
<td>2.4%</td>
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<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-1.8%</td>
<td>-1.1%</td>
<td>0.3%</td>
<td>0.5%</td>
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<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.3%</td>
<td>0.1%</td>
<td>2.9%</td>
<td>3.8%</td>
<td>3.7%</td>
<td>3.3%</td>
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<td class="firstcol">&nbsp;Energy</td>
<td>0.4%</td>
<td>0.8%</td>
<td>9.1%</td>
<td>-5.8%</td>
<td>3.7%</td>
<td>16.9%</td>
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<tr>
<td class="firstcol">&nbsp;Food &amp; Beverages</td>
<td>0.1%</td>
<td>0.4%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>3.1%</td>
<td>2.3%</td>
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<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a></td>
<td>0.0%</td>
<td>0.1%</td>
<td>1.7%</td>
<td>1.3%</td>
<td>2.3%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.1%</td>
<td>-0.2%</td>
<td>1.0%</td>
<td>1.8%</td>
<td>&nbsp;2.0%</td>
<td>1.4%</td>
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 Industrial Production Gain Boosted By Hot Weather 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 15, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030818c.jpg" width="353">
Industrial production in July rose more than Consensus expectations for a 0.2% gain. The 0.5% gain was boosted by a 3.8% surge in utility output which was only the second m/m increase since February. Modest May &amp; June gains in total output were revised down.
Output in the manufacturing sector rose a modest 0.2% (-1.3% y/y). The previously reported 0.5% surge in June was revised lower to 0.3%.
Output in selected high-technology industries rose strongly last month as it has all year. The 0.8% (9.3% y/y) gain was powered by a 1.6% (21.9% y/y) surge in computers and peripheral equipment output. Output of semiconductors and related equipment (15.9% y/y) also has been strong.
Excluding high-tech, factory output rose 0.1% (-2.0% y/y) in July. Motor vehicle output jumped 2.9% (-0.9% y/y) output of electrical equipment and appliances sagged 0.7% (-3.8% y/y). Output of furniture rose 2.3% (-2.3% y/y) but a 1.0% June gain was revised to a 0.8% decline. Output of nondurable goods fell 0.4% (-3.0% y/y)
Total capacity utilization rose slightly to 74.5%. Factory sector utilization rose to 72.8%. Growth in capacity remained slow at 1.1% y/y versus 1.5% growth last year and 3.2% growth in 2001. Growth in factory sector capacity has been an even slower 0.7% y/y versus 1.3% growth last year.
The influence of trend output growth on the US economy&#39;s &quot;speed limit&quot; is discussed by the Federal Reserve Bank of San Francisco <a href="http://www.frbsf.org/publications/economics/letter/2003/el2003-14.pdf">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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<td class="firstcol">Industrial Production</td>
<td>0.5%</td>
<td>0.0%</td>
<td>-1.4%</td>
<td>-0.8%</td>
<td>-3.5%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>74.5%</td>
<td>74.2%</td>
<td>76.4%(7/02)</td>
<td>75.6%</td>
<td>77.3%</td>
<td>82.7%</td>
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</tbody>
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Empire State Factory Survey Fell in August 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 15, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030818a.jpg" width="353">
The Empire State Index of General Business Conditions fell unexpectedly for August. The NY Fed&#39;s Manufacturing Survey indicated that the index fell to 9.98 this month versus Consensus expectations for a reading of 20.0.
Declines in the inventory and in the unfilled orders indexes may have accounted for much of the lower overall index. New orders fell just moderately while shipments and employment improved, the latter meaningfully.
The index of prices paid fell to a low 4.08. That&#39;s less than half the average reading so far this year.
The survey includes measures of business expectations six months ahead. This diffusion index improved substantially to 59.47 though expectations for capital expenditures fell.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question, not the components.
For the latest Empire State Manufacturing Survey report, click <a href="http://www.newyorkfed.org/rmaghome/regional/mfg_survey/index.html">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">General business conditions (diffusion index)</td>
<td>9.98</td>
<td>20.83</td>
<td>3.41</td>
<td>7.10</td>
<td>-13.02</td>
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The Consumer Price Index (CPI-U) rose an expected 0.2% in July following a like increase in June. The CPI less food and energy also rose 0.2%. That rise was stronger than Consensus expectations for a 0.1% increase. A 1.2% jump in [...]

CPI Up As Expected

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/030814d.jpg" width="353">
Growth in the Euro-Zone remained sluggish in the second quarter, according to the &quot;Flash&quot; estimate released by Eurostat on August 14. A flat quarter-on-quarter result pulled the year-to-year growth rate down to 0.4% from 0.9% in the first quarter. As seen in the accompanying chart, Germany experienced a modest outright decrease, which, along with a decline in the Netherlands, worked against a strong rise in Greece and a modest increase in Italy.. This lackluster performance are perhaps at least partially a consequence of the strong euro; for the entire first half of 2003, it was more than 20% higher than a year ago. And the Federal Statistics Office in Germany informs that the second quarter&#146;s weakness there was due to a reduction in exports. Numerical details will be reported August 21; meanwhile the Statistics Office press release explains that growth in domestic demand was insufficient to offset the shrinking export surplus.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">(Percent Changes)</th>
<th scope="col">Qtr/Qtr</th>
<th scope="col">Qtr/Qtr</th>
<th scope="col">Year/Year</th>
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td>2nd Qtr 2003</td>
<td>1st Qtr 2003 &nbsp;</td>
<td></td>
<td>2002</td>
<td>2001</td>
<td>2000</td>
</tr>
<tr>
<td class="firstcol">Euro-zone</td>
<td>0.0</td>
<td>0.1</td>
<td>0.4</td>
<td>1.2</td>
<td>0.6</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-.01</td>
<td>-0.2</td>
<td>-0.6</td>
<td>0.3</td>
<td>0.4</td>
<td>0.9</td>
</tr>
</tbody>
</table>
</body>
</html>

Growth in the Euro-Zone remained sluggish in the second quarter, according to the "Flash" estimate released by Eurostat on August 14. A flat quarter-on-quarter result pulled the year-to-year growth rate down to 0.4% from 0.9% in the [...]

Flash GDP Estimates Show Decline in Germany, Weak Growth in Euro-Zone

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030814a.jpg" width="353">
Finished producer prices matched Consensus expectations and rose 0.2% in July following a 0.1% June drop. Excluding food and energy prices rose 0.2%, a bit more than expectations for no change.
Higher prices for capital equipment led the advance in the core PPI. The gain reflected strong increases in the prices of civilian aircraft, office &amp; store machines and transformers &amp; power regulators.
Core finished consumer goods prices were tame, rising 0.1% (-0.1% y/y) following a 0.1% decline in June. Nondurables prices rose 0.1% (-0.2% y/y) and durables rose 0.2% (0.1% y/y).
Finished energy prices rose a modest 0.3% (14.6% y/y) following the strong 3.4% June gain. Gasoline prices rose 1.6% (16.2% y/y). Fuel oil prices rose 1.9% (18.9% y/y) and residential gas prices fell 0.8% (34.1% y/y). These energy product price series are NSA.
Intermediate goods prices rose 0.2% powered by a 1.3% gain in energy prices. A 44.6% (45.4% y/y) gain in residual fuel prices accounted for this strength. Core intermediate goods prices fell for the third month in the last four. 
Crude goods prices dropped 2.9% as energy prices fell 4.4% (53.9% y/y). Crude petroleum prices were down but crude natural gas prices slid 6.2% pulling them down by almost a third versus the March peak. Core crude prices rose a moderate 0.8%. Iron and steel scrap prices (a very sensitive indicator of activity in the factory sector) rose 3.6% (10.8% y/y) for the first gain in four months.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>0.1%</td>
<td>0.5%</td>
<td>3.0%</td>
<td>-1.3%</td>
<td>2.0%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.2%</td>
<td>0.5%</td>
<td>4.4%</td>
<td>-1.5%</td>
<td>0.4%</td>
<td>4.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>1.8%</td>
<td>-0.5%</td>
<td>-0.1%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-2.9%</td>
<td>4.5%</td>
<td>24.7%</td>
<td>-10.6%</td>
<td>0.3%</td>
<td>22.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.8%</td>
<td>0.6%</td>
<td>4.0%</td>
<td>3.8%</td>
<td>-10.0%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
 U.S. Trade Deficit Narrowed As Exports Rose 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 14, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030814b.jpg" width="353">
The U.S. foreign trade deficit narrowed unexpectedly to $39.5B in June versus Consensus expectations for a deficit of $41.6B. The deficit in May was revised slightly to $41.5B from $41.8B.
The narrower June trade deficit could lead to an upward revision of 2Q GDP growth.
For the first six months of this year, the trade deficit averaged a $488.6B annual rate.
Exports rose strongly for the second consecutive month, up 2.4%, and have risen at an 8.9% annual rate YTD. Exports of capital goods (15.4% YTD, AR) and nonauto consumer goods (20.6% YTD, AR) have been quite strong. Services exports surged 2.7% following a 3.4% gain in May.
Imports were unchanged in June reflecting a 4.4% m/m decline in imports of nonauto consumer goods that was offset by a gain in imports of autos and other goods. Petroleum imports rose 1.5% as the per barrel price of crude petroleum rose 5.8% to $25.50. The daily quantity of crude petroleum imports rose and is up 15.2% y/y.
The cover of the annual edition of International Economic Trends, titled &quot;Border Effects&quot;, from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/aiet/20030701/cover.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE03/@EE03.HTM">Foreign Trade</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Deficit</td>
<td>$39.5B</td>
<td>$41.5B</td>
<td>$35.6B(6/02)</td>
<td>$418.0B</td>
<td>$357.8B</td>
<td>$375.4B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>2.4%</td>
<td>1.7%</td>
<td>3.2%</td>
<td>-3.3%</td>
<td>-5.8%</td>
<td>11.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>0.0%</td>
<td>1.0%</td>
<td>5.6%</td>
<td>2.0%</td>
<td>-5.5%</td>
<td>18.5%</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 14, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030814c.jpg" width="353">
Initial claims for unemployment insurance rose a slight 2,000 to 398,000 and the prior week&#39;s level was revised up slightly. Consensus expectations had been for claims of 395,000.
The four-week moving average of initial claims fell to 394,250 (+2.6% y/y), the second consecutive and only the second week since late February below 400,000.
Continuing claims for unemployment insurance fell 6,000 (-0.2%) and the prior week&#39;s sharp increase was revised lower. It was the third decline in the last five weeks.
The insured rate of unemployment was stable at 2.9%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">8/09/03</th>
<th scope="col">8/02/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>398.0</td>
<td>396.0</td>
<td>2.3%</td>
<td>404.3</td>
<td>406.0</td>
<td>299.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,657</td>
<td>3.8%</td>
<td>3,575</td>
<td>3,022</td>
<td>2,114</td>
</tr>
</tbody>
</table>
</body>
</html>

Finished producer prices matched Consensus expectations and rose 0.2% in July following a 0.1% June drop. Excluding food and energy prices rose 0.2%, a bit more than expectations for no change. Higher prices for capital equipment led [...]

Producer Prices Up As Expected, But Core Prices Firmed

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030813e.jpg" width="353">
Labor markets in the UK improved moderately in the latest data reported Wednesday. Unemployment sustained a 5.0% level for a second month in these data reported as a 3-month centered moving average. This new report shows the averages for April through June and is recorded as a &quot;May&quot; figure; it thus covers the whole of the second quarter. Compared with the first quarter, the unemployment rate is down 0.1%. That for men improved to 5.5% from 5.7% in the first quarter and a high of 5.9% in the third quarter of last year. The rate for women decreased from 4.4% in the first quarter to 4.3%, a record low [these &quot;ILO definition&quot; unemployment data begin in 1992.].. The other side of the coin, employment, also shows modest improvement. It is up 63,000 on the quarter (0.2%) and 224,000 on the year (0.8%). Men fared better than women, however, gaining 85,000 over the first quarter, while women employees decreased by 21,000. The corresponding employment rate (similar to te US concept: the number employed as a ratio to the working age population over age 16) rose to a record high 59.9%. Average earnings, of key concern to policymakers in the UK, slowed to a 3.1% rate of gain in the three months to June, compared to 3.4% in the March period and 3.3% from a year earlier.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">All Data (% Change, Annual Rate)</th>
<th scope="col">&quot;May&quot; &nbsp;(3&nbsp; months ended Jun)</th>
<th scope="col">&quot;Feb&quot; &nbsp;(3 months ended Mar</th>
<th scope="col">Year Ago</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.0</td>
<td>5.1</td>
<td>5.1</td>
<td>5.2</td>
<td>5.1</td>
<td>5.4</td>
</tr>
<tr>
<td class="firstcol">Employment Rate</td>
<td>59.9</td>
<td>59.8</td>
<td>59.7</td>
<td>59.6</td>
<td>59.6</td>
<td>59.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Hourly Earnings (Annual % Change)</td>
<td>3.1</td>
<td>3.4</td>
<td>3.9</td>
<td>3.6</td>
<td>4.4</td>
<td>4.6</td>
</tr>
</tbody>
</table>
</body>
</html>

Labor markets in the UK improved moderately in the latest data reported Wednesday. Unemployment sustained a 5.0% level for a second month in these data reported as a 3-month centered moving average. This new report shows the averages [...]

Record High Employment Rate in UK; Wages Moderate

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: August 2003

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German Investor Confidence Strengthening

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Producer Prices Up As Expected, But Core Prices Firmed

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