Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030113a.jpg" width="353">
The OECD Index of Leading Indicators rose in November for the first month since May as a result of improvement in Continental Europe and in the US. Leaders in the UK and Japan continued a recent decline.
Real economic growth in the Major Seven OECD countries improved in 3Q as a result of respectable growth in the UK, the US and in Japan.
In Germany, real GDP growth was modest as industrial production fell hard in October for the fourth month in five. Retail sales volumes staged a modest recovery in November (-1.9% y/y) from a sharp October drop and were flat in 3Q. Harmonized consumer prices fell 0.5% in November and are down 0.7% from a July peak.
In the UK, production was flat in October following two months of moderate decline. Retail sales values were unchanged in November (3.2% y/y). Consumer prices were flat in November following little change in the months prior.
Production in France was erratic last year and showed little change through October. The leading indicators rose in November following five months of decline. Retail sales volumes have been firm (+2.5% y/y) and consumer prices fell in November (+2.1% y/y).
Production in Japan fell in October (5.5% y/y) for the second consecutive month. Retail sales values rose 2.2% in November and have moved sideways since the Spring. Prices actually rose in November (-0.3% y/y) for the first month in five.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/OECDMEI/OECDMEI.HTM">OECD Main Economic Indicators</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">OECD Total - Leading Index (Trend Restored)</td>
<td>120.1</td>
<td>119.8</td>
<td>4.2%</td>
<td>-2.1%</td>
<td>3.7%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>3Q02</td>
<td>2Q02</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Total</td>
<td>3.1%</td>
<td>2.2%</td>
<td>2.3%</td>
<td>0.8%</td>
<td>3.8%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Major Seven - GDP (Mil. 95 US$, SAAR)</td>
<td>3.1%</td>
<td>1.8%</td>
<td>2.2%</td>
<td>0.7%</td>
<td>3.4%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">European Union - GDP (Mil. 95 US$, SAAR)</td>
<td>1.7%</td>
<td>1.7%</td>
<td>1.1%</td>
<td>1.6%</td>
<td>3.6%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Germany - GDP (Bil. 95 Euros, SAAR)</td>
<td>1.1%</td>
<td>0.6%</td>
<td>0.4%</td>
<td>0.7%</td>
<td>3.1%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; United Kingdom - GDP (Mil. 95 Pounds, SAAR)</td>
<td>3.8%</td>
<td>2.6%</td>
<td>2.1%</td>
<td>2.0%</td>
<td>3.1%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Japan - GDP (Bil. 95 Yen, SAAR)</td>
<td>3.0%</td>
<td>4.2%</td>
<td>1.5%</td>
<td>-0.9%</td>
<td>2.2%</td>
<td>0.7%</td>
</tr>
</tbody>
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The OECD Index of Leading Indicators rose in November for the first month since May as a result of improvement in Continental Europe and in the US. Leaders in the UK and Japan continued a recent decline. Real economic growth in the [...]

OECD Leaders On the Mend?

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030110a.jpg" width="353">
Nonfarm payrolls were quite weak last month, falling 101,000 instead of rising 20,000 as expected by Consensus estimates. The decline in November payrolls was about doubled (mostly due to lowered private services) but figures for October were revised up.
Last month&#39;s decline in payrolls was the third in four months, rounding out the weakest year for the US job market since 1991.
The one-month diffusion index for nonfarm payrolls was hardly changed at 45.5. November&#39;s level was revised down. The three month diffusion index fell to 42.8. These indices are leading indicators and suggest negative employment growth near term.
As expected, the unemployment rate held its high level of the month prior. Employment fell 273,000 (-0.1% y/y), the third consecutive large decline. The labor force fell 191,000 (0.2% y/y), also the third consecutive decline.
Amongst industries the number of factory sector jobs continued down, falling 65,000 (-3.5% y/y). It was the largest monthly percentage decline (0.4%) in manufacturing jobs since February. The one-month diffusion index for the factory sector dropped to 37.5, its lowest level since February and suggested further declines in factory sector jobs. Construction jobs rose a slight 3,000 (-1.4% y/y) following two months of decline. Jobs in service producing industries rose 42,000 (0.5% y/y), the second consecutive decline. Government employment rose 14,000 (1.2% y/y).
The length of the workweek fell slightly last month. For the quarter the workweek was up slightly versus 3Q. The index of aggregate hours worked (employment times hours worked) fell to the lowest level since July. The 4Q average was unchanged from 3Q.
Over the last ten years there has been a 53% 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 0.3% gain in average hourly earnings was as expected.
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">Dec</th>
<th scope="col">Nov</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">Payroll Employment</td>
<td>-101,000</td>
<td>-88,000</td>
<td>-0.1%</td>
<td>-0.9%</td>
<td>0.2%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-65,000</td>
<td>-57,000</td>
<td>-3.5%</td>
<td>-5.5%</td>
<td>-4.2%</td>
<td>-0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>34.1</td>
<td>34.2</td>
<td>34.1</td>
<td>34.2</td>
<td>34.2</td>
<td>34.4</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.2%</td>
<td>3.0%</td>
<td>3.2%</td>
<td>4.0%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>6.0%</td>
<td>6.0%</td>
<td>5.8%</td>
<td>5.8%</td>
<td>4.8%</td>
<td>4.0%</td>
</tr>
</tbody>
</table>
ECRI Leading Indicators Recover 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 10, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030110b.jpg" width="353">
The Weekly Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) rose sharply in the opening week of 2003.
The level of the leading index added to a slight gain in December. In November, the index rose meaningfully from the October low. Despite these gains, the six-month growth rate of the index remained negative at -2.4%.
Construction of the ECRI Leading Index differs from the Index of Leading Economic Indicators published by the Conference Board. Nevertheless there has been an 80% correlation between the annual percent change in the two over the last 20 years.
The components of the index are money supply plus stock &amp; bond mutual funds, the JOC-ECRI industrial materials price index, mortgage applications, bond quality spreads, stock prices, bond yields, and initial jobless insurance claims.
The median lead of the ECRI index at business cycle peaks has been 10.5 months and at cycle troughs 3.0 months. The sideways movement of the leading index in 2002 may or may not signal something about the economy&#39;s growth rate.
For more on ECRI and the Weekly Leading Index click <a href="http://www.businesscycle.com/">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/weekly/@W8/@W801/@W801.HTM">ECRI</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</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">Leading Index</td>
<td>118.2</td>
<td>118.1</td>
<td>-1.1%</td>
<td>0.9%</td>
<td>-5.2%</td>
<td>1.0%</td>
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</tbody>
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Nonfarm payrolls were quite weak last month, falling 101,000 instead of rising 20,000 as expected by Consensus estimates. The decline in November payrolls was about doubled (mostly due to lowered private services) but figures for [...]

Nonfarm Payrolls Again Fell Unexpectedly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030109a.jpg" width="353">
Initial claims for unemployment insurance were lower than expected during New Year&#39;s week. Claims fell 19,000 from the prior week&#39;s level which was revised slightly higher. The incidence of two holidays in back to back weeks historically has generated volatility in these seasonally adjusted figures.
The four-week moving average of initial claims fell to 406,000, down 0.2% y/y.
Continuing claims for unemployment insurance rose 1.0%. The prior week&#39;s level was revised down slightly.
The insured rate of unemployment was 2.7% for the fifth week in six.

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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">1/04/03</th>
<th scope="col">12/28/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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</thead>
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<td class="firstcol">Initial Claims</td>
<td>389.0</td>
<td>408.0</td>
<td>-2.3%</td>
<td>405.0</td>
<td>405.8</td>
<td>299.8</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,445</td>
<td>0.0%</td>
<td>3,588</td>
<td>3,021</td>
<td>2,114</td>
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Initial claims for unemployment insurance were lower than expected during New Year's week. Claims fell 19,000 from the prior week's level which was revised slightly higher. The incidence of two holidays in back to back weeks [...]

Initial Claims for Unemployment Insurance Fell Slightly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030108a.jpg" width="353">
The index of mortgage applications, compiled by the Mortgage Bankers Association, jumped 24.3% in the opening week of 2003.
Mortgage applications to refinance popped 29.1%, up 55% from four weeks earlier. Through 3Q02, Freddie Mac reported that 45% of mortgage refinancings were for a loan amount that was 5% higher.
Interest rates on conventional 30 Year mortgages rose to 5.85% from the low of 5.69% one week earlier.
Mortgage applications for home purchase also rose strongly following two weeks of decline.
For analysis by the Federal Reserve of mortgage refinancing trends, click <a href="http://www.federalreserve.gov/pubs/bulletin/2002/1202lead.pdf">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">1/03/03</th>
<th scope="col">12/06/02</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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<td class="firstcol">Total Market Index</td>
<td>1,182.3</td>
<td>862.7</td>
<td>799.7</td>
<td>625.6</td>
<td>322.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>376.2</td>
<td>358.8</td>
<td>354.7</td>
<td>304.9</td>
<td>302.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>5,871.1</td>
<td>3,793.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
<td>438.8</td>
</tr>
</tbody>
</table>
Consumer Credit Outstanding Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 8, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030108b.jpg" width="353">
Consumer credit outstanding fell unexpectedly in November. Consensus expectations were for roughly a $4.0B rise. October figures were little revised. So far this year, consumer credit outstanding has risen at a 3.5% annual rate.
Nonrevolving credit fell for the second consecutive month and for the third month in four. Nonrevolving extension was up 3.6% (AR) YTD.
Revolving credit also fell for the first time since February. Revolving credit growth was 3.5% (AR) through November.

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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">Nov m/m</th>
<th scope="col">Oct 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>$-2.2B</td>
<td>$1.6B</td>
<td>3.5%</td>
<td>6.9%</td>
<td>10.2%</td>
<td>7.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$-1.6B</td>
<td>$2.4B</td>
<td>2.4%</td>
<td>5.0%</td>
<td>11.5%</td>
<td>6.3%</td>
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<tr class="odd">
<td class="firstcol">&nbsp; Nonrevolving</td>
<td>$-0.7B</td>
<td>$-0.9B</td>
<td>4.2%</td>
<td>8.3%</td>
<td>9.2%</td>
<td>8.4%</td>
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The index of mortgage applications, compiled by the Mortgage Bankers Association, jumped 24.3% in the opening week of 2003. Mortgage applications to refinance popped 29.1%, up 55% from four weeks earlier. Through 3Q02, Freddie Mac [...]

Mortgage Applications Surged

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030107x.jpg" width="353">
After improving slightly earlier in 2002, Euro-zone consumer confidence has weakened since mid year. Eurostat reported that the percent balance of respondents to their survey questions, reporting an increase less the percent reporting a decrease, fell from -14% in November to -16% in December, the lowest level since early 1997.
The overall balance of consumer confidence is based on consumers&#146; expectations, over the next twelve months, for the financial situation, general economic climate, unemployment and savings rate. From November to December, consumers reported no change in the outlook for their financial situation, a worsening in the economic climate, a rise in unemployment and a drop in savings rate. As can be seen in the attached chart, the overall index is heavily influenced by consumers&#146; expectations of unemployment.

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<th scope="col" class="firstcol">&nbsp;Percent Balance</th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Dec/Nov</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">Consumer Confidence</td>
<td>-16</td>
<td>-14</td>
<td>-2</td>
<td>-5</td>
<td>-11</td>
<td>-5</td>
<td>1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Expectations:</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
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<td class="firstcol">&nbsp;&nbsp;&nbsp; Financial Situation</td>
<td>-4</td>
<td>-4</td>
<td>0</td>
<td>-4</td>
<td>-1</td>
<td>2</td>
<td>4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; General Econ Climate</td>
<td>-19</td>
<td>-15</td>
<td>-4</td>
<td>-3</td>
<td>-12</td>
<td>-9</td>
<td>1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Unemployment</td>
<td>33</td>
<td>30</td>
<td>3</td>
<td>3</td>
<td>26</td>
<td>13</td>
<td>1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Savings</td>
<td>-9</td>
<td>-7</td>
<td>-2</td>
<td>-10</td>
<td>-3</td>
<td>1</td>
<td>0</td>
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After improving slightly earlier in 2002, Euro-zone consumer confidence has weakened since mid year. Eurostat reported that the percent balance of respondents to their survey questions, reporting an increase less the percent reporting [...]

Euro-zone Consumer Confidence Weakens

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030107b.jpg" width="353">
Manufacturing inventories fell in November following a slight decline the month prior that initially was reported as no change. The declines follow a brief two months of accumulation.
The figures are broadly consistent with the ISM survey which indicated that inventories continued to run off, though at a rate slower than early in 2002 and 2001.
Inventory decumulation in November was significant in the transportation sector, but outside of automobiles which have risen for the last three months.
Inventory declines also continued in a broad range of durable goods industries including electrical equipment, machinery, fabricated metals. Inventories of computers and furniture rose.
Nondurable goods inventories fell 0.4% (0.4% y/y) following five months of gain.
For analysis by the Federal Reserve Bank of New York of how inventory dynamics have changed, click <a href="http://www.newyorkfed.org/rmaghome/staff_rp/2002/sr156.html">here</a>.
Factory shipments fell sharply, nearly reversing all of the prior month&#39;s gain. For the year shipments have risen 2.4%. Gains for the year have been dominated by increases in the primary metals and miscellaneous categories.
Factory orders fell 0.8%, slightly more than expectations based on the advance report that durable goods orders fell 1.4%. That decline was revised to -1.5% (1.3% YTD).

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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</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">Inventories</td>
<td>-0.3%</td>
<td>-0.1%</td>
<td>-3.6%</td>
<td>-8.0%</td>
<td>4.5%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>-0.8%</td>
<td>1.4%</td>
<td>3.5%</td>
<td>-7.2%</td>
<td>5.2%</td>
<td>4.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-0.8%</td>
<td>1.2%</td>
<td>2.7%</td>
<td>-5.3%</td>
<td>4.4%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
Chain Store Sales Fell Slightly 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 7, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030107a.jpg" width="353">
Chain store sales fell during the final week of last year, but gave back just 0.2% of the huge 2.1% gain during Christmas week, according to the BTM-UBSW survey.
December sales rose 0.1% (2.8% y/y) from the November average.
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">1/04/03</th>
<th scope="col">12/28/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>408.0</td>
<td>409.0</td>
<td>3.3%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

Manufacturing inventories fell in November following a slight decline the month prior that initially was reported as no change. The declines follow a brief two months of accumulation. The figures are broadly consistent with the ISM [...]

Factory Inventories Resumed Decumulation

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030106a.jpg" width="353">
Unit sales of light vehicles surged in December to the highest level since August as zero percent financing incentives again took hold. Sales fell for the second consecutive calendar year since the high of 2000. December sales were much better than Consensus expectations for a 16.1M unit sales rate.
Sales of domestically built vehicles rose 17.7% m/m. Nevertheless, sales were well off the monthly high sales rate of 17.7M units in October 2001. Auto sales rose 10.0% m/m but sales of light trucks surged 23.8%.
Imported vehicle sales rose 0.9% m/m following the strong 14.7% gain in November. Imported auto sales fell 1.4% but truck sales rose 5.8%.
Imports&#39; share of the US light vehicle market fell to 18.4% in December. For the year, imports&#39; share of the US vehicle market averaged 19.5% versus 17.8% during 2001. 

<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">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>18.32</td>
<td>16.04</td>
<td>10.7%</td>
<td>16.78</td>
<td>17.26</td>
<td>17.40</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Domestic</td>
<td>14.94</td>
<td>12.69</td>
<td>12.3%</td>
<td>13.51</td>
<td>14.19</td>
<td>14.58</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imported</td>
<td>3.38</td>
<td>3.35</td>
<td>4.2%</td>
<td>3.27</td>
<td>3.07</td>
<td>2.82</td>
</tr>
</tbody>
</table>
ISM Nonmanufacturing Index Eased 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 6, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030106b.jpg" width="353">
The Institute for Supply Management business activity index of the nonmanufacturing sector fell last month but remained at the second highest level since June. Consensus expectations were for a decline to 55.5.
Of the seasonally adjusted subgroups, the employment index rose modestly to its highest level since August. The new orders index fell slightly to a still high 56.3 and imports fell.
Business activity for the nonmanufacturing sector is a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index weights the components.
The not seasonally adjusted index of prices fell sharply to the lowest level since February.
During the last five years, there has been a 57% correlation between the level of the price index in the NAPM nonmanufacturing survey and the three month growth in the CPI for services less rent of shelter.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The nonmanufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>54.7</td>
<td>57.4</td>
<td>50.1</td>
<td>55.1</td>
<td>49.0</td>
<td>59.2</td>
</tr>
</tbody>
</table>
Challenger Survey Shows Layoffs Plunged in December 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 6, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030106c.jpg" width="353">
According to Challenger, Gray &amp; Christmas, announced job cuts plunged last month from the elevated levels of October and November.
Because of the earlier surge in layoffs, the three month moving average of job cut announcements rose again to 142,145, the highest level since March. Nevertheless, layoffs were still well below the highs of late 2001.
Announcements of job cuts varied greatly amongst industries with large decline in the electronics, entertainment and financial industries offset by huge increases in health care, pharmaceutical and retail.

<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">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>92,917</td>
<td>157,508</td>
<td>-42.5%</td>
<td>1,431,052</td>
<td>1,956,876</td>
</tr>
</tbody>
</table>
</body>
</html>

Unit sales of light vehicles surged in December to the highest level since August as zero percent financing incentives again took hold. Sales fell for the second consecutive calendar year since the high of 2000. December sales were [...]

U.S. Light Vehicle Sales Surge

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030103a.jpg" width="353">
The value of construction put in place rose about as expected in November, but the figures for October were revised up sharply due to raised estimates of residential construction.
In constant 1996 dollars, overall construction spending was unchanged and was down 1.4% YTD. Real residential spending was up 4.7% YTD but nonresidential activity fell 14.7% in real terms.
Residential building rose 0.9%, the fourth strong gain in five months. Spending on one-unit structures rose 1.6%, the third consecutive month of strong gain. 
Nonresidential building activity declined slightly following the October bounce. Spending here was down 13.9% YTD. Spending on industrial buildings fell 1.5% (-41.3% YTD).
Public construction rose led by broad based gains amongst categories.

<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">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>0.3%</td>
<td>1.0%</td>
<td>0.8%</td>
<td>2.5%</td>
<td>7.3%</td>
<td>8.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential</td>
<td>0.9%</td>
<td>1.2%</td>
<td>6.7%</td>
<td>3.3%</td>
<td>7.4%</td>
<td>11.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.1%</td>
<td>1.5%</td>
<td>-14.4%</td>
<td>-3.1%</td>
<td>7.1%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Public</td>
<td>1.5%</td>
<td>-0.4%</td>
<td>5.6%</td>
<td>7.4%</td>
<td>5.4%</td>
<td>10.6%</td>
</tr>
</tbody>
</table>
</body>
</html>

The value of construction put in place rose about as expected in November, but the figures for October were revised up sharply due to raised estimates of residential construction. In constant 1996 dollars, overall construction [...]

Construction Spending 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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240517g5.jpg

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.



240517h5.jpg

240517i5.jpg

- 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. 


240517.jpg

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: January 2003

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