Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021209b.jpg" width="353">
The decline in German industrial production from September to October was 2.1%, contrary to consensus expectations of a 0.9% increase. The decline was widespread, but production of capital goods suffered the least reduction of 0.8%. In all the other market sectors production declined by 2.5% or more. Production of consumer goods fell by 3.1%.
On a year over year basis, total production was down 1.4%, manufacturing and mining, down 0.5% and construction, down 10.4%. The indexes of total production and manufacturing and mining have shown year over year declines in each month of this year.

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<th scope="col" class="firstcol"></th>
<th scope="col">Oct</th>
<th scope="col">Sep</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production</td>
<td>109.7</td>
<td>112.0</td>
<td>-1.4%</td>
<td>113.3</td>
<td>113.4</td>
<td>107.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manuf&nbsp; &amp; Mining</td>
<td>116.8</td>
<td>119.3</td>
<td>-0.5%</td>
<td>120.0</td>
<td>119.1</td>
<td>111.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Construction</td>
<td>72.1</td>
<td>72.3</td>
<td>-10.4%</td>
<td>78.9</td>
<td>85.0</td>
<td>87.9</td>
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The decline in German industrial production from September to October was 2.1%, contrary to consensus expectations of a 0.9% increase. The decline was widespread, but production of capital goods suffered the least reduction of 0.8%. [...]

German Industrial Production Fell

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021209a.jpg" width="353">
Corporate bond yields have remained near their cycle lows as yields on US Treasuries have moved higher. The spread between corporates and Treasuries returned to the range of the last three years.
The Merrill Lynch Corporate Master Index of average corporate bond yields of varying type and quality remained below 5.5% as of the end of last week. Yields on 10 Year Treasuries moved to 4.09% versus the low of 3.61% set in early October.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W1/@WB21/@WB21.HTM">Merrill Lynch Bond Yields</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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</thead>
<tbody>
<tr>
<td class="firstcol">Corporate Total</td>
<td>5.62%</td>
<td>5.94%</td>
<td>6.04%</td>
<td>6.50%</td>
<td>7.82%</td>
<td>6.96%</td>
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Corporate bond yields have remained near their cycle lows as yields on US Treasuries have moved higher. The spread between corporates and Treasuries returned to the range of the last three years. The Merrill Lynch Corporate Master [...]

Credit Spreads Tighten

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021206a.jpg" width="353">
Nonfarm payrolls were weaker than expected last month, falling 40,000 instead of rising 30,000 as expected by Consensus estimates. Figures for October and September were revised up slightly due to slightly higher estimates of service sector (mostly government) employment.
The unemployment rate rose by more than expected. Employment fell a whopping 689,000 (0.1% YTD) following a large decline in October. The labor force fell 390,000 (0.3% YTD).
Amongst industries, factory sector jobs fell 45,000 (-3.0% YTD) following a downwardly revised October decline. The one-month diffusion index for the factory sector improved slightly to 41.5 but remained low enough to suggest further declines in manufacturing sector jobs. Construction jobs fell 4,000(-1.4% YTD). Jobs in service producing industries rose 11,000 (0.6% YTD). Government employment rose 8,000 (1.1% YTD).
The length of the workweek was unchanged last month but up slightly from the 3Q average. The index of aggregate hours worked (employment times hours worked) fell 0.1% following an upwardly revised 0.1% October decline. So far the 4Q average is 0.2% above 3Q. That followed a 0.2% 3Q decline.
Over the last ten years there has been a 52% correlation between the quarterly change in aggregate hours worked and real GDP. That correlation is down from 89% in the 1980s. The decline is due to the recent acceleration in productivity growth.
The one-month diffusion index for nonfarm payrolls rose slightly to 47.7 from a downwardly revised October level of 46.8. The three month diffusion index rose to 45.5. These levels suggest little or no employment growth near term. 
The gain in average hourly earnings (2.5% YTD) was as expected and October&#39;s gain was revised slightly higher.
The nonfarm payroll employment figures are based on reports provided to the US Labor Department by businesses, while the figures from which the unemployment rate is derived are based on a survey of US households.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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<td class="firstcol">Payroll Employment</td>
<td>-40,000</td>
<td>6,000</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-45,000</td>
<td>-59,000</td>
<td>-3.5%</td>
<td>-4.2%</td>
<td>-0.4%</td>
<td>-1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>34.2</td>
<td>34.2</td>
<td>34.1</td>
<td>34.2</td>
<td>34.4</td>
<td>34.5</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.3%</td>
<td>2.9%</td>
<td>4.1%</td>
<td>3.9%</td>
<td>3.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>6.0%</td>
<td>5.7%</td>
<td>5.6%</td>
<td>4.8%</td>
<td>4.0%</td>
<td>4.2%</td>
</tr>
</tbody>
</table>
Consumer Credit Much Weaker Than Expected 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 6, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021206b.jpg" width="353">
Consumer credit outstanding rose only $1.5B (0.1%) in October. Consensus expectations were for a $6.5B rise. August and September figures were revised down. So far this year, consumer credit outstanding has risen at a 4.0% annual rate. 
Revolving credit rose only 0.3%, the same as in September which was revised down from a 0.8% gain. Revolving credit growth was 4.1% (AR) through October.
Nonrevolving credit fell slightly in October, the second decline in three months. Nonrevolving extension was up 4.0% (AR) YTD.
Yesterday&#39;s Federal Reserve release of third quarter Flow of Funds indicated that credit market debt owed by the household sector grew at a 10.4% annual rate last quarter (9.2% y/y) while debt outstanding of the nonfinancial business sector fell (1.8% y/y).
According to the Flow of Funds figures, consumer credit liabilities grew at a 4.9% (5.5% y/y) rate last quarter while mortgage debt grew at a 13.9% (11.5% y/y) rate.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E103/@E10308/@E10308.HTM">Consumer Credit Outstanding</a></th>
<th scope="col">Oct m/m</th>
<th scope="col">Sept m/m</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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<td class="firstcol">Total</td>
<td>$1.5B</td>
<td>$4.7B</td>
<td>4.9%</td>
<td>6.9%</td>
<td>10.2%</td>
<td>7.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$2.4B</td>
<td>$1.8B</td>
<td>3.7%</td>
<td>5.0%</td>
<td>11.5%</td>
<td>6.3%</td>
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<tr class="odd">
<td class="firstcol">&nbsp; Nonrevolving</td>
<td>$-1.0B</td>
<td>$3.0B</td>
<td>5.8%</td>
<td>8.3%</td>
<td>9.2%</td>
<td>8.4%</td>
</tr>
</tbody>
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Nonfarm payrolls were weaker than expected last month, falling 40,000 instead of rising 30,000 as expected by Consensus estimates. Figures for October and September were revised up slightly due to slightly higher estimates of service [...]

Nonfarm Payrolls Fell Unexpectedly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021205a.jpg" width="353">
Initial claims for unemployment insurance fell unexpectedly last week and remained at the lowest level since early last year. Claims in the prior week were revised up slightly.
The latest decline in initial claims may reflect the late timing of the Thanksgiving holiday and the difficulties of seasonal adjustment.The four-week moving average of initial claims dropped to 376,500, down 14.3% y/y.
Continuing claims for unemployment insurance fell a sharp 3.4% to the lowest level since mid-July. The prior week&#39;s sharp increase was revised down. The latest figure is for the week before Thanksgiving. Regardless, the timing of holidays should not affect the seasonal patterns of continuing claims since claimants receive benefits by mail.
The insured rate of unemployment fell to 2.7%, the lowest level since early August, and the prior week&#39;s rate was revised down.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">11/30/02</th>
<th scope="col">11/23/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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<td class="firstcol">Initial Claims</td>
<td>355.0</td>
<td>368.0</td>
<td>-19.7%</td>
<td>405.8</td>
<td>299.8</td>
<td>297.7</td>
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<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,486</td>
<td>-2.7%</td>
<td>3,021</td>
<td>2,114</td>
<td>2,186</td>
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Initial claims for unemployment insurance fell unexpectedly last week and remained at the lowest level since early last year. Claims in the prior week were revised up slightly. The latest decline in initial claims may reflect the late [...]

Initial Claims for Jobless Insurance Fell Unexpectedly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021204a.jpg" width="353">
Nonfarm labor productivity last quarter was revised up more than expected. Consensus estimates were for a revision to 4.3%.
A large upward revision to output, following the upward revision to GDP growth, was the source of the upward revision. Output was revised to 5.1% growth from 4.0% (AR). Hours worked were unchanged in 3Q, as reported last month.
Unit Labor costs were revised down, declining for the fourth quarter in the last five. Compensation growth was little changed from the earlier report of strong growth.
Manufacturing sector productivity was revised down slightly to 5.5% (5.8% y/y) from 5.9% . Nevertheless, unit labor costs fell 1.0% (-2.1% y/y), the fifth consecutive quarterly decline.
Productivity in the nonfinancial corporate sector, a figure derived from the income side of the National Income and Product Accounts, grew 5.7% (6.7% y/y). Unit labor costs were unchanged (-2.5% y/y).

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Nonfarm Business Sector</a> (SAAR)</th>
<th scope="col">3Q &#39;02 Final</th>
<th scope="col">3Q &#39;02 Prelim.</th>
<th scope="col">2Q &#39;02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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</thead>
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<td class="firstcol">Output per Hour</td>
<td>5.1%</td>
<td>4.0%</td>
<td>1.7%</td>
<td>5.6%</td>
<td>1.1%</td>
<td>2.9%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>4.9%</td>
<td>4.8%</td>
<td>3.9%</td>
<td>3.3%</td>
<td>2.7%</td>
<td>6.9%</td>
<td>4.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>-0.2%</td>
<td>0.8%</td>
<td>2.2%</td>
<td>-2.2%</td>
<td>1.6%</td>
<td>3.9%</td>
<td>2.0%</td>
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</tbody>
</table>
ISM Nonmanufacturing Index Firm 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 4, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021204b.jpg" width="353">
The Institute for Supply Management business activity index of the nonmanufacturing sector was much stronger than expected last month, rising to the highest level since May. Consensus expectations were for a slight increase to 54.0. 
The overall index has remained above 50, the dividing line for expansion and contraction, since February.
Of the seasonally adjusted subgroups, new orders rose sharply and imports rose slightly, but employment fell. 
The not seasonally adjusted index of prices was unchanged and was down versus the highs of earlier this year. 
During the last five years, there has been a 62% correlation between the level of the NAPM nonmanufacturing index and the three month growth in service sector payrolls.
Business activity for the nonmanufacturing sector is a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index weights the components.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The nonmanufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>57.4</td>
<td>53.1</td>
<td>49.8</td>
<td>49.0</td>
<td>59.2</td>
<td>59.1</td>
</tr>
</tbody>
</table>
Factory Inventories Flat Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 4, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021204c.jpg" width="353">
Manufacturing inventories were unchanged in October after rising September. The initial report for September was of no change. During the last three months, factory inventories have risen 0.3%.
Excluding the transportation sector inventory accumulation has been slightly stronger than for the total - unchanged in October but up 0.7% since June.
Increases in inventories continued to be led by the nondurable goods sector, up 2.6% during the last five months. Gains have been strong for petroleum, textile products, plastics and basic chemicals.
Decumulation in the durable goods sector continued unabated, down 0.2% m/m and 4.5% YTD. Declines have been widespread amongst industries.
Factory shipments rose 1.0% following two months of decline. For the year shipments have risen 3.0%. Gains have been strongest in nondurable goods industries (3.0% YTD), notably petroleum. Less petroleum, nondurable shipments were up 1.2% YTD in October. Prior months&#39; figures were revised down. Shipments of durable goods rose a strong 1.3% in October (3.0% YTD.
Factory orders rose 1.5% following two months of decline led by higher orders for durable goods, up 2.4% and revised from the advance report of a 2.8% gain. The strong 4.5% rise in nondefense capital goods was little revised.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Inventories</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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</thead>
<tbody>
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<td class="firstcol">Mfg Inventories</td>
<td>0.0%</td>
<td>0.2%</td>
<td>-4.4%</td>
<td>-8.0%</td>
<td>4.5%</td>
<td>3.1%</td>
</tr>
</tbody>
</table>
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Nonfarm labor productivity last quarter was revised up more than expected. Consensus estimates were for a revision to 4.3%. A large upward revision to output, following the upward revision to GDP growth, was the source of the upward [...]

Revised Productivity Growth Stronger in 3Q

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021203c.jpg" width="353">
The unemployment rate for the Euro Zone rose to 8.4% in October from 8.3% in September.
Of the countries for which data are available for October, ten recorded an increase in their unemployment rates in the last twelve months. Among them were France which registered an increase from 8.5% to 8.8% and Germany which registered an increase from 7.9% to 8.3%. Only Sweden and Finland registered declines in their unemployment rates-- from 5.1% to 5.0% and from 9.2%. to 9.1% respectively.
Unemployment rates range from a low of 2.6% in Luxembourg to a high of 11.7% in Spain. Some 11.6 million workers are unemployed, an increase of .5 million from a year ago. 

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The unemployment rate for the Euro Zone rose to 8.4% in October from 8.3% in September. Of the countries for which data are available for October, ten recorded an increase in their unemployment rates in the last twelve months. Among [...]

Euro-zone Unemployment Rate Rose

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021203b.jpg" width="353">
Prices for existing homes rose last quarter by the smallest degree in nearly five years. With the exception of a 0.8% gain in 4Q 01, prices have risen between one and three percent each quarter since 1998 according to the government&#39;s Office of Federal Housing Enterprise Oversight.
The data cover only home mortgages repurchased by Fannie Mae and Freddie Mac and therefore do not cover high priced homes with mortgages over roughly $300,000 (roughly 25% of the market).
The data correct for &quot;mix shifts&quot;, i.e., changes in home quality, size and location.
Prices of existing homes as published by the National Association of Realtors rose 2.3% last quarter. Year to year, the Realtors&#39; price series rose 6.9% versus a 6.2% gain in the Government series. A strong gain in October home prices lifted the Y/Y comparison in the Realtors&#39; price series to 9.8%.

<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/@E9/@E911/@E911.HTM">House Price Index</a></th>
<th scope="col">3Q 02</th>
<th scope="col">2Q 02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">US Total, Q/Q %</td>
<td>0.8%</td>
<td>2.4%</td>
<td>6.2%</td>
<td>8.5%</td>
<td>7.7%</td>
<td>5.5%</td>
</tr>
</tbody>
</table>
Weekly Chain Store Sales Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 3, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021203a.jpg" width="353">
Chain store sales rose 0.3% last week according to the BTM-UBSW survey. The rise during Thanksgiving week was somewhat less ebullient than earlier reports from individual stores of holiday sales. The gain followed a 0.9% rise in sales the prior week.
Sales for the month of November were down 0.2% from the average level of October. October sales fell 1.5% from September.
Month to month comparisons, and certainly year to year comparisons, are difficult due to the late timing of Thanksgiving this year.
During the last ten years there has been a 48% correlation between the year-to-year percent change in monthly chain store sales and the change in GAF retail sales. That correlation rose to 63% during the last five years.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">11/30/02</th>
<th scope="col">11/23/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>402.0</td>
<td>400.8</td>
<td>4.0%</td>
<td>2.1%</td>
<td>3.4%</td>
<td>6.7%</td>
</tr>
</tbody>
</table>
Challenger Survey Showed Layoffs High in November 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 3, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021203d.jpg" width="353">
According to Challenger, Gray &amp; Christmas, announced job cuts remained high last month. The level of layoffs did fall 10.5% versus October, but layoffs during that month had more than doubled
The three month moving average of job cut announcements rose again to 134,525. That level was down 39.9% versus the high of late last year.
Lower announced job cuts were notable in the consumer goods, utility, retail, automotive and commodities industries. Layoff announcements rose broadly amongst other industries.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>157,508</td>
<td>176,010</td>
<td>-13.2%</td>
<td>1,956,876</td>
<td>613,980</td>
</tr>
</tbody>
</table>
U.S. Light Vehicle Sales Slightly Better Than Expected 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 3, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021203e.jpg" width="353">
Unit sales of light vehicles rose in November for the first month in three, up a modest 3.8% versus October. Sales were down 10.0% from last November. Sales were better than Consensus expectations for a 15.8M unit sales rate.
Sales through the first eleven months have averaged 16.64 mil. units, down 4% from the first eleven months of 2001.
Sales of domestically built vehicles rose 1.3% m/m following two months of decline. Auto sales rose 4.9% but sales of light trucks fell 1.4%.
Imported vehicle sales rose 14.7%, recouping nearly all of a sharp October decline. Imported auto sales rose 17.1% and truck sales rose 9.9%.
Imports&#39; share of the US light vehicle market surged to 20.9%, the highest monthly share for imports since a record 21.1% share this past January. Imports&#39; share of the US vehicle market year to date has averaged 19.6% versus 17.8% during all of last year. 

<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/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil.Units)</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>16.04</td>
<td>15.45</td>
<td>-10.0%</td>
<td>17.27</td>
<td>17.40</td>
<td>16.95</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Domestic</td>
<td>12.69</td>
<td>12.53</td>
<td>-12.8%</td>
<td>14.20</td>
<td>14.58</td>
<td>14.47</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imported</td>
<td>3.35</td>
<td>2.92</td>
<td>2.3%</td>
<td>3.07</td>
<td>2.82</td>
<td>2.48</td>
</tr>
</tbody>
</table>
</body>
</html>

Prices for existing homes rose last quarter by the smallest degree in nearly five years. With the exception of a 0.8% gain in 4Q 01, prices have risen between one and three percent each quarter since 1998 according to the government's [...]

Home Price Data Diverge

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021202b.jpg" width="353">
The ISM Composite Index of manufacturing sector activity rose less than expected last month and remained below 50 for the third month. The rise to 49.2 was less than suggested by the Chicago purchasing managers report and other regional reports of November business activity.
The production and inventory sub indexes rose, but new orders, employment and the supplier delivery indexes fell.
The separate index of inflation pressure fell for the third month in four to the lowest level since March. The percentage (NSA) of companies reporting higher prices fell to 18%.
Over the last ten years there has been a 57% correlation between the ISM Composite Index and the change in factory sector industrial production in the next month.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Index</td>
<td>49.2</td>
<td>48.5</td>
<td>44.7</td>
<td>43.9</td>
<td>51.6</td>
<td>54.6</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>55.7</td>
<td>58.3</td>
<td>32.0</td>
<td>43.0</td>
<td>64.8</td>
<td>54.2</td>
</tr>
</tbody>
</table>
Construction Spending Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 2, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021202a.jpg" width="353">
The value of construction put in place rose slightly more than expected in October due to higher nonresidential building. Figures for September and August were revised down.
Residential building was unchanged. A huge 1.0% gain in one-unit structures, the second spurt in two months, offset a 3.0% drop in spending on multi unit structures. 
Nonresidential building activity rose for the first monthly gain since April. Spending here was still down 14.2% YTD. The gain was due to widespread increases amongst categories, but spending on industrial and office structures continued down.
Public construction fell. Performance amongst categories was decidedly mixed

<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/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.3%</td>
<td>0.3%</td>
<td>-0.2%</td>
<td>2.5%</td>
<td>7.3%</td>
<td>8.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential</td>
<td>0.0%</td>
<td>0.7%</td>
<td>5.1%</td>
<td>3.3%</td>
<td>7.4%</td>
<td>11.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.1%</td>
<td>-2.0%</td>
<td>-16.7%</td>
<td>-3.1%</td>
<td>7.1%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Public</td>
<td>-0.3%</td>
<td>1.6%</td>
<td>6.4%</td>
<td>7.4%</td>
<td>5.4%</td>
<td>10.6%</td>
</tr>
</tbody>
</table>
</body>
</html>

The ISM Composite Index of manufacturing sector activity rose less than expected last month and remained below 50 for the third month. The rise to 49.2 was less than suggested by the Chicago purchasing managers report and other [...]

ISM Index Up Slightly

Latest PMIs show US losing momentum while RoW is gaining momentum

Sticky services prices behind sticky overall PCE inflation

Flash April PMIs point to slower growth in the US but a pickup in Europe and Japan

Outlook strengthens for US while it weakens for other major economies

Crude petroleum prices are having a big impact on inflation expectations

Inflation surprising to upside in the US; by contrast to the downside in the euro area

 Gross Domestic Income is catching up with GDP

FOMC expects GDP growth above trend over the next three years

US core CPI inflation has begun to reaccelerate

Fiscal-policy aided factory building in the U.S. provided an unusually large boost to growth last year

US consumers much more optimistic than those in the Euro area and the UK

  Job openings take a step down in 2024

Fed's super core services inflation measure pushing up core rate

Blue Chip forecasters expect significant monetary easing this year except in Japan

Euro area economy stagnating while US grows above trend

Chinese and Japanese equity markets are diverging markedly

Chinese population declines in 2023 for second consecutive year

Outlook for US GDP growth on the rise; declining in euro area, Japan and China

There are still 1.4 job openings for every unemployed person in the US

US PCE inflation over the past six months has slowed to the Fed's 2% target

FOMC think rate hikes are done and looks for 75bps of decline in 2024

Weaker economic data surprises pushing down US interest rates

Recent disinflation has been widespread across Europe and North America

Recent decline in US inflation expectations helping to lower interest rates

China is losing its luster as foreign direct investment heads out

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The U.S. Leading Economic Index fell 0.6% (-5.4% y/y) during April following an unrevised 0.3% March decline, according to a report by The Conference Board. These two changes followed a 0.2% February improvement. A 0.3% April shortfall had been expected in the Action Economics Forecast Survey.

Five of ten components contributed negatively to the overall index in April including the ISM new orders index, building permits, stock prices, the spread between the 10-year Treasury and the Fed funds rate, as well as consumer expectations for business/economic conditions. Initial claims for unemployment insurance and the leading credit index contributed positively. New orders for capital goods and new orders for consumer goods made minimal positive contributions to the index change while the length of the average workweek had no effect on the leading index change.

A 0.2% April increase in the Coincident Economic Index followed a 0.2% March gain, revised from 0.3%. These gains came after a 0.3% February rise. Three of the four components made positive contributions to the coincident index in April, including the changes in personal income less transfers, nonagricultural payroll employment and real manufacturing & trade sales. The change in industrial production had no effect on the coincident indicators.

The Lagging Economic Index rose 0.4% (1.4% y/y) after unrevised stability in March and a 0.2% February increase. Three of the index’s seven components made positive contributions last month including the average duration of unemployment, commercial & industrial loans outstanding and the ratio of consumer credit to income. The six-month change in unit labor costs made a minimally negative contribution while the six-month change in the services CPI, banks’ prime rate and the ratio of business inventories-to-sales were unchanged.

The ratio of the coincident index to the lagging index is also viewed as a leading indicator of economic activity. This measure fell 0.2% in April, following two straight monthly increases. It was 0.8% below its most recent peak in December of last year.

The Conference Board figures are available in Haver's **BCI** database; the components are available there, and most are also in **USECON**. The expectations are in the **AS1REPNA** database. Visit the Conference Board's [website](https://www.conference-board.org/us/) for coverage of leading indicator series from around the world.



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- Leading index decline is largest in six months.
- Coincident Indicators continue to increase moderately.
- Lagging index strengthens after holding steady.


U.S. Leading Economic Indicators Fall Sharply in April

Robert Brusca

240517e.jpg

**EMU Inflation Trends Offer Hope and Hype**- Inflation in the European Monetary Union rose by 0.2% month-to-month in April, the same as in March. Core inflation, however, picked up, rising by 0.4% but that was after being flat in March. The sequential growth rates from 12-months to six-months to three-months show the headline inflation rate at 2.4% over 12-months falling to 2% over 6-months, then rising to a 3% annual rate over three-months. The core rate for the monetary union rose 2.9% over 12-months at a 2.7% annual rate over six-months, it steps up to a 2.8% annual rate over three-months. Headline inflation is resisting moving down to the 2% level consistently while core inflation appears to be stuck just short of 3%. Whether these trends are good enough depends on whether the ECB sees itself implementing precision-guided policy or playing horseshoes and hand grenades.

**Headline Inflation: four largest EMU members**
Statistics for the largest four members of the monetary union show inflation worse in April on balance than for the monetary union as a whole. German inflation rose by 0.8% in April, in France it rose by 0.7%, in Spain at rose by 0.5%, while in Italy it rose by 0.3%. These are month-to-month gains. However, these figures followed either flat or declining inflation (price-) performance in March for each of these four countries. The progression of inflation for Germany, France, Italy, and Spain, however, still shows inflation resisting a consistent move down to 2%. German inflation runs at 2.6% over 12-months steps up to 2.7% over 6-months and reaches a 2.9% annual rate over 3-months. France’s 12-month inflation of 2.4% steps down to 2.2% over 6-months, then rises to a 3.2% annual rate over 3-months. In Italy, headline inflation is 1.1% over 12-months, similarly at a 1% annual rate over 6-months, then rises to a 1.7% annual rate over 3-months. Spain's inflation falls from 3.6% over 12-months to 3.2% over 6-months to 2.3% over 3-months- finally a European Monetary Union large country member with persistently decelerating inflation! On balance Italian inflation over 3-months is under the target that the ECB has for the monetary union as a whole, Spain’s inflation is transitioning from 12-months to 6-months to 3-months down close to the 2% mark, while Germany and France continue to show stubbornly too-high results for their headline inflation rates. All-in-all, that is not a great background to support a rate cut.

**Core inflation and its trends offer hope**
Core inflation rates produce much more beneficial results. Still, in April month-to-month core inflation increases are generally excessive for these four members. But that follows declining inflation – falling prices- for core rates in March. Germany is an exception to this pattern, but it still follows the rule of improvement because its inflation progress is flipped between the two months. Looking at sequential growth rates for core inflation or ex-energy inflation for these large country members, we find that inflation is persistently decelerating from 12-months to 6-months to 3-months for all of them except for France. France shows a pickup in inflation over 3-months compared to 6-months as core inflation rises to a 3-month rate of 2.9% after posting a 2.1% pace over 6-months. The 3-month pace for inflation x-energy for Germany is 2.1%, the core for Italy is at 1.7%, and the core for Spain is at 1.8%. All three-monthly core rates are at the doorstep or within the ECB's target range for headline EMU inflation. France is the exception. The 12-month core inflation rates are all above target but show signs of coming into line; German and French year-over-year inflation rates decline in April compared to March the Italian rate is unchanged year-over-year at 2.3% on the monthly comparison, while only Spain has an acceleration compared to a month ago and that's to a 3.3% rise from 3.1% in March.

**Is it good enough?**
The speed of inflation’s drop- Core inflation rates would seem to build a good enough base for the ECB to move ahead with rate cuts if it decides it wants to go that way. If it wants to be surer and clearer about reducing inflation it will pay more attention to the headline rates that are excessive- especially since no inflation metric is falling particularly fast anymore. The risk over ‘overshooting’ on the downside seems remote. Oil prices as measured by Brent in euros rose by 4.3% month-to-month in April after rising 1.6% in March. However, year-over-year Brent prices are down by 3.3%, so the impulse from oil is mixed across tenors. 

ECB credibility- A different view of reality looks at ECB inflation performance over five-years and finds all the metrics quite unacceptable. Over the last five years the compounded inflation rate for the monetary union is 3.7% and for the core it's 2.8%. For Germany it's 4.1%, for France it's 3.3%, and for Italy and Spain it's 3.4%. The core or X energy inflation rates do not behave much better, Germany is at 3.3% over five years on its core measure, France at 2.7%, Spain at 3%, and Italy at 2.5%. If the ECB is concerned about its credibility, then it's going to want to make sure that it gets inflation down inside of its target soon because the five-year compound inflation rates are so far over their target that clearly a central bank that claims to target 2% inflation cannot look at that five-year record and consider policies to have been a success. 

**Driving the road ahead**- Looking ahead it's very possible that inflation is on a downtrend and that policy is moving inflation in the right direction; the question remains concerns the certainty of that conclusion and the question ‘is inflation moving down fast enough?’  The ECB is going to have to measure the impact on its credibility against its desire to hit its inflation target in the short run and pay some attention to the effect that policy has on economic growth rates in the monetary union. On that score, unemployment rates throughout the European Monetary Union are still extremely low in historic comparisons… but, there has been a new sensitivity across central banks globally as they try to reduce their inflation rates ‘to target levels’ without having much impact on the unemployment rates at all - even though unemployment rates are in many places near some version of historic lows. Time will tell whether this sort of prevarication in inflation fighting that coddles the unemployment rate that is already so low is wise or has turned out to be foolhardy. 


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Europe

EMU Inflation Trends Offer Hope and Hype- Inflation in the European Monetary Union rose by 0.2% month-to-month in April, the same as in March. Core inflation, however, picked up, rising by 0.4% but that was after being flat in March. The sequential growth rates from 12-months to six-months to three-months show the headline inflation rate at 2.4% over 12-months falling to 2% over 6-months, then rising to a 3% annual rate over three-months. The core rate for the monetary union rose 2.9% over 12-months at a 2.7% annual rate over six-months, it steps up to a 2.8% annual rate over three-months. Headline inflation is resisting moving down to the 2% level consistently while core inflation appears to be stuck just short of 3%. Whether these trends are good enough depends on whether the ECB sees itself implementing precision-guided policy or playing horseshoes and hand grenades.

EMU Inflation Holds the line 2% Beckons

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Total housing starts increased 5.7% (-0.6% y/y) during April to 1.360 million units (SAAR) after falling 16.8% in March to 1.287 million units, revised from 1.321 million. Starts in February rose a little-revised 12.4% to 1.546 million units. Starts remained 24.6% below the most recent peak of 1.803 million in April 2022. The Action Economics Forecast Survey expected 1.420 million starts in April.

Housing starts by type were mixed last month. Starts of single-family units eased 0.4% (+17.7% y/y) to 1.031 million after declining 8.7% in March to 1.035 million, revised from 1.022 million. They reached a high of 1.286 units in December 2020. Multi-family starts increased 30.6% (-33.1% y/y) in April to 329,000 after falling 38.8% to 252,000 in March, revised from 299,000. They reached a high of 624,000 units in November 2022.

Regional activity was mixed in April. In the Northeast, the level of starts fell 22.6% (-43.8% y/y) to 72,000 units after declining 21.8% in March and 10.5% in February. Starts in the Midwest rose 19.1% (3.4% y/y) to 181,000 following a 36.4% March decline. Starts in the South improved 10.1% (4.9% y/y) to 799,000 after a 15.9% March decline. In the West, starts fell 2.5% (+1.7% y/y) to 308,000 after declining in each of the prior three months.

Building permits declined 3.0% (-2.0% y/y) in April 1.440 million units after falling 5.0% to 1.485 million in March, revised from 1.458 million. It was the lowest level of permits since December 2022. Single-family permits eased 0.8% (+11.4% y/y) to 976,000 in April following a 4.2% March decline and a 0.4% February slip. Multi-family permits weakened 7.4% (-21.9% y/y) to 464,000, after falling 6.5% in March.

The housing starts and permits figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.



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- Single-family starts decline but multi-family surge.
- Starts are mixed throughout the country.
- Building permits fall to lowest level in over one year.


U.S. Housing Starts Rise Modestly in April; Building Permits Fall

Sandy Batten

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Total industrial production was unchanged in April from March and 0.4% lower than a year ago. The previously released 0.4% rise in March was revised down to a meager 0.1% monthly gain. The Action Economics Forecast Survey expected a 0.1% increase in production last month. Manufacturing production slumped 0.3% m/m (-0.5% y/y) after a downwardly revised 0.2% monthly gain in March (initially reported as 0.5%). 

Mining activity declined for the third time in the past four months, falling 0.6% (-1.3% /y) following an upwardly revised 1.1% m/m decline in March (previously -1.4% m/m). Utilities output was the only positive part of industrial activity in April, rising 2.8% m/m (+2.3% y/y) on top of a downwardly revised 1.6% monthly gain in March (previously 2.0% m/m).

Amid the monthly volatility, manufacturing output has been relatively flat over the past nine months. In fact, the index level in April was 99.4, exactly the same as in August 2023. The manufacturing sector has been one of the most adversely affected by the Fed’s interest rate hikes. Since April 2022 (just after the Fed initiated it rate hikes in March 2022), manufacturing output has fallen 1.4%. Within the manufacturing sector in April, durable goods production fell 0.5% m/m, its first monthly decline in three months, led by a 2.0% m/m decline in motor vehicle production and a 1.9% m/m drop in the production of electrical equipment and appliances. Production of nondurable goods edged down 0.1% m/m in April following a 0.2% monthly increase in March. Production of selected high-technology industries increased 1.0% m/m. By contrast, petroleum and coal products output slumped 4.4%m/m, the first monthly decline in three months.

Manufacturing output excluding motor vehicles slipped 01% m/m in April after being unchanged in March. Manufacturing excluding selected high-tech industries fell 0.3% m/m in April versus a 0.1% monthly gain in March. Manufacturing output excluding both selected high-tech industries and motor vehicles decreased 0.2% m/m, its sixth monthly decline in the past seven months. Production of consumer goods inched up 0.1% m/m in April following a 0.5% monthly gain in March. Output of business equipment fell 0.5% m/m on top of a 0.2% monthly decline in March. 

Production of construction supplies fell 1.0% m/m in April, the sixth monthly decline in the past seven months. Materials output edged up 0.1% m/m in April, just offsetting a 0.1% m/m decline in March.

Total capacity utilization slipped to 78.4% in April from a slightly upward revised 78.5% in March (previously 78.4%). The April reading was exactly as expected by the Actions Economics Forecast Survey. The capacity utilization rate for manufacturing fell significantly to 76.9% from 77.2%. By contrast, the capacity rate for utilities rose to 71.0 from 69.2.

Industrial production and capacity data are in Haver’s **USECON** database. Additional detail on production and capacity utilization can be found in the **IP** database. The expectations figures come from the **AS1REPNA** database.



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- IP was unchanged in April with manufacturing falling 0.3% m/m
- Manufacturing decline led by 2.0% m/m drop in motor vehicle output
- Mining fell for the third month of the past four
- Capacity utilization slipped to 78.4%


U.S. Industrial Production Unchanged in April

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Import prices for all goods rose 0.9% (NSA) in April after a 0.6% March gain, revised from 0.4%, and a 0.2% February increase, according to the Bureau of Labor Statistics. A 0.2% April rise had been expected in the Action Economics Forecast Survey. The y/y change of 1.1% followed 12-month price declines all through 2023. 

Export prices increased 0.5% in April following a 0.1% March uptick, revised from 0.3%, and a minimally revised 0.7% February rise. A 0.2% price gain had been expected. These gains also followed a 0.7% January increase. The 1.0% y/y decline compared to an 11.8% y/y drop in June of last year. 

The monthly rise in April import prices was led by a 2.9% increase (5.2% y/y) in imported petroleum prices after they surged 6.7% in March. The April increase was the fourth consecutive monthly gain. The increase in imported petroleum costs was accompanied by a 9.2% decline in natural gas prices, off 42.5% y/y. Nonfuel import prices rose 0.7% (0.9% y/y) after a 0.2% March increase. Import prices for foods, feeds & beverages strengthened 1.7% (6.8% y/y), up for the fourth consecutive month. Motor vehicle & parts prices increased 0.3% (2.6% y/y) after a 0.2% rise. Capital goods prices edged 0.1% higher (-0.1% y/y) after a 0.2% decline while nonauto consumer goods prices also rose 0.1% (0.5% y/y) after falling 0.3% in March. 

The increase in April export prices included a 0.9% decline (-10.2% y/y) in agricultural export prices, which added to a 1.3% March drop . Nonagricultural export prices rose 0.7% (0.1% y/y), the fourth straight monthly gain. Export prices of industrial supplies & materials rose 1.0% (-1.7% y/y), the fourth straight month of firm gain. Automotive vehicles & parts export prices strengthened 0.8% (4.0% y/y) after easing 0.1% in March. Capital goods prices rose 0.4% (1.8% y/y) after edging 0.1% higher. A 0.1% uptick (-1.3% y/y) in nonauto consumer goods prices followed a 0.4% March rise. Foods, feeds & beverage prices were off 0.7% last month (-10.6% y/y) after falling 1.6% in March. 

The import and export price series can be found in Haver’s **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database. 


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- Import prices rise for fourth consecutive month.
- Excluding fuels, import prices edge up for sixth straight month.
- Export price gain improves. 


Economy in Brief: 2002

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