Carol Stone, CBE

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Real gross domestic product increased 3.4% (AR, 3.0% y/y) during Q3'18, a downward revision of 0.1% from November's second estimate. This followed a 4.2% rise during the second quarter. Participants in the Actions Economics Forecast Survey had expected no change from the 3.5% rate.

Third-quarter corporate profits data were also revised and now show 3.5% growth from Q2 (19.6% y/y) including adjustments for inventory valuation and depreciation, up from 3.3% reported last month. The rise followed 2.1% growth in the second quarter. Profits without inventory & depreciation allowances rose 0.9% (6.1% y/y), also up 0.2% from last month's report, following a 3.3% Q2 increase.

Domestic final sales increased 2.9% (3.2% y/y), which is revised down 0.2% from November's estimate. Personal consumption expenditures were revised down to 3.5% growth (2.9% y/y) from 3.6%. Spending on durable goods was reduced to 3.7% (5.6% y/y) from 3.9%. Motor vehicle purchases fell at a 1.8% rate (1.5% y/y), revised from -1.5%. Recreational vehicle purchases growth was reduced from 9.1% to 8.9% (9.3% y/y) and spending growth on home furnishings of 6.3% (6.4% y/y) was revised from 6.8%.

Nondurable goods purchases grew at a 4.6% rate (3.2% y/y), revised from 5.3%. Clothing purchases strengthened 11.0% (5.2% y/y), still the quickest growth since Q4'05, and food & beverages expenditures rose 3.4% (3.6% y/y), revised from 3.8%. Gasoline & fuel oil buying dropped at a 3.4% pace (-1.0% y/y), revised from a 1.2% decrease reported last month.

Spending on services increased at a 3.2% pace (2.5% y/y). It remained the quickest growth since late 2014. Outlays at restaurants & hotels gained 7.1% (4.2% y/y) which followed an 8.1% Q2 rise. Health care outlays increased 4.7% (2.7% y/y) and financial services insurance rose 1.4% (0.4% y/y), revised from 1.0%. Housing & utilities outlays rose 1.0% (0.5% y/y) while recreation spending fell 1.3% (+0.7% y/y), revised from -0.2%.


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Government sector spending also was reduced to 2.6% (2.3 y/y) from 3.3% reported before. Federal government outlays growth was unrevised at 3.5% both q/q and y/y. National defense spending remained at 4.9% growth in the quarter and the 4.2% y/y increase was the strongest since Q1 2010. Outlays by state & local governments were also unrevised, showing a 2.0% growth rate in the quarter (1.5% y/y).

Growth in business fixed investment remained at a 2.5% pace (6.8% y/y). Structures investment, however, was revised to a decline of 3.4% (6.3%) from the -1.7% reported last month. Industrial equipment spending growth was trimmed to 9.5% (4.5% y/y) from 9.8% in last month's report, while information processing equipment investment grew 7.2% (9.6% y/y). Transportation equipment expenditures declined 3.6% (+5.3% y/y), a slight improvement from last month's -3.9%. Investment in intellectual products did better than seen before, growing at a 5.6% (7.6% y/y) pace, up from last month's 4.3% estimate.

Residential investment was revised down to a 3.6% (+0.5% y/y) decline from -2.6%. It remained the third straight quarter of decline.

The chain type GDP prices index was revised upward marginally to a 1.8% increase (2.3% y/y), compared with the Action Economics survey's 1.7% forecast, following the 3.0% increase in Q2. The PCE price index was increased to 1.6% (2.2% y/y) from 1.5% in last month's report. Business fixed investment prices increased at a 1.6% pace (1.2% y/y), a bit stronger than the already firm 1.5% of last month's estimates, making the last two quarters the strongest since 2014. The residential investment price index increased 3.6% (5.7% y/y), unchanged from last month's tabulation and roughly half the growth during the prior two quarters.

The GDP figures can be found in Haver's USECON and USNA database.
USNA contains virtually all of the Bureau of Economic Analysis' detail in the national accounts.
Both databases include tables of the newly published not seasonally adjusted data. The Action
Economics consensus estimates can be found in AS1REPNA.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM" ;>Chained
 2012 $ (%, AR</a>)</th>
 <th scope="col" >Q3'18 (Third Estimate)</th>
 <th scope="col" >Q3'18 (Second Estimate)</th>
 <th scope="col" >Q2'18</th>
 <th scope="col" >Q1'18</th>
 <th scope="col" >Q3'18 Y/Y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 <tbody>
 <tr>
 <td class="firstcol" >Gross Domestic Product</td>
 <td >3.4</td>
 <td >3.5</td>
 <td >4.2</td>
 <td >2.2</td>
 <td >3.0</td>
 <td >2.2</td>
 <td >1.6</td>
 <td >2.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Inventory Effect</td>
 <td >2.3</td>
 <td >2.3</td>
 <td >-1.2</td>
 <td >0.3</td>
 <td >0.1</td>
 <td >0.0</td>
 <td >-0.5</td>
 <td >0.3</td>
 </tr>
 <tr>
 <td class="firstcol" >Final Sales</td>
 <td >1.0</td>
 <td >1.2</td>
 <td >5.4</td>
 <td >1.9</td>
 <td >2.9</td>
 <td >2.2</td>
 <td >2.1</td>
 <td >2.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Foreign Trade Effect</td>
 <td >-2.0</td>
 <td >-1.9</td>
 <td >1.2</td>
 <td >0.0</td>
 <td >-0.4</td>
 <td >-0.3</td>
 <td >-0.3</td>
 <td >-0.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Domestic Final Sales</td>
 <td >2.9</td>
 <td >3.1</td>
 <td >4.0</td>
 <td >1.9</td>
 <td >3.3</td>
 <td >2.5</td>
 <td >2.3</td>
 <td >3.3</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="9" >Demand Components</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Personal Consumption Expenditure</td>
 <td >3.5</td>
 <td >3.6</td>
 <td >3.8</td>
 <td >0.5</td>
 <td >3.0</td>
 <td >2.5</td>
 <td >2.7</td>
 <td >3.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Nonresidential Business Fixed
 Investment</td>
 <td >2.5</td>
 <td >2.5</td>
 <td >8.7</td>
 <td >11.5</td>
 <td >6.8</td>
 <td >5.3</td>
 <td >0.5</td>
 <td >1.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Residential Investment</td>
 <td >-2.6</td>
 <td >-2.6</td>
 <td >-1.4</td>
 <td >-3.4</td>
 <td >0.8</td>
 <td >3.3</td>
 <td >6.5</td>
 <td >10.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Government Spending</td>
 <td >2.6</td>
 <td >2.6</td>
 <td >2.5</td>
 <td >1.5</td>
 <td >2.3</td>
 <td >-0.1</td>
 <td >1.4</td>
 <td >1.9</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="9" >Chain-Type Price Index</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; GDP</td>
 <td >1.8</td>
 <td >1.7</td>
 <td >3.0</td>
 <td >2.0</td>
 <td >2.3</td>
 <td >1.9</td>
 <td >1.1</td>
 <td >1.0</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Personal Consumption
 Expenditures</td>
 <td >1.6</td>
 <td >1.5</td>
 <td >2.0</td>
 <td >2.5</td>
 <td >2.2</td>
 <td >1.8</td>
 <td >1.1</td>
 <td >0.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Nonresidential
 Investment</td>
 <td >1.6</td>
 <td >1.5</td>
 <td >2.0</td>
 <td >0.7</td>
 <td >1.2</td>
 <td >0.7</td>
 <td >-0.8</td>
 <td >0.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Residential Investment</td>
 <td >3.6</td>
 <td >3.6</td>
 <td >7.3</td>
 <td >8.8</td>
 <td >5.7</td>
 <td >4.5</td>
 <td >3.6</td>
 <td >2.7</td>
 </tr>
 </tbody>
 
 
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Real gross domestic product increased 3.4% (AR, 3.0% y/y) during Q3'18, a downward revision of 0.1% from November's second estimate. This followed a 4.2% rise during the second quarter. Participants in the Actions Economics Forecast [...]

U.S. GDP Growth Revised Down 0.1%; Profits Growth Modestly Higher

Robert Brusca

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GfK provides a forward-looking peek at German consumer confidence. Its estimate for January sees confidence at the same level as in December at an index reading of 10.4. This reading is in the 91st percentile of all readings since January 2002. The German climate remains rarified.

However, the economic climate (where readings are only up-to-date through December) is considerably less robust, having fallen off for a series of months; now the economic climate standing is only in its 59.8 percentile, still North of its median but far closer to being 'average' than to being 'wonderful.'

Income expectations (that also lag by one month) rebounded in December but the series has a legacy of recent weakness. Still, income expectations have a very strong standing at their 88th percentile.

Finally, the propensity to buy (where the reading is up-to-date through December) has fallen off in December after popping higher in November. The propensity to buy has a standing in its 78.4 percentile, a relatively firm reading that I would judge as solid but short of being 'strong.'

These ratings wrap up the GfK story for January. Despite turbulence in the EMU stemming from conflict with Italy and Brexit negotiations with the U.K. and some domestic political rejiggering, Germany's assessment of its confidence is still quite strong although we need to watch the clearly deteriorating views of the economy itself. At some point, consumer confidence has to be underpinned by economic performance (except maybe in Italy but more on that below).

The table offers the most up-to-date views available on Italy, France and the U.K. the next largest economies in the EU (at least for a while longer). These readings are only up-to-date through November and lag the GfK message by a whopping two months.

Italy continues oddly to post queue standings for confidence that rival Germany's. This is odd because while German GDP has advanced strongly since the Great Recession, Italy still has real GDP below its cycle peak after a decade of 'growth.' Yet, Italian confidence is nearly 'on the moon' with a 90th percentile standing. France does not yet show readings for the period of the yellow vest protests, but already in November the French reading is below its median (which occurs at a queue standing of 50) with a queue or count percentile standing at its 41.4 percentile. Confidence in France notched lower in October and stayed there in November. The U.K. also slumped in October and stabilized in November. Like France, U.K. confidence is close to the 40th percentile mark (39.9%). Of course, the U.K. is battling for its Brexit deal. These data are not fresh enough to include any of the new disappointment about the way the EU has played hard-ball with the U.K. over Brexit or the rising prospects for a 'hard' Brexit. Still, U.K. confidence is lagging. French confidence is lagging. Italians may be raising a stink about their allowable fiscal deficit, but none of that seems to affect their perceptions of prospects for 'la Dolce Vita.'


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GfK provides a forward-looking peek at German consumer confidence. Its estimate for January sees confidence at the same level as in December at an index reading of 10.4. This reading is in the 91st percentile of all readings since [...]

GfK Consumer Climate Is Unchanged Month-to-Month

Tom Moeller

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New orders for durable goods rebounded last month. Overall
durable goods orders increased 0.8% (5.3% y/y) during November following a 4.3% October
decline. A 1.5% increase had been expected in the Action
Economics Forecast Survey. Orders for defense aircraft &amp; parts led the gain
with a nearly one-third increase, and they rose by three-quarters y/y. Orders
for civilian aircraft also were firm and posted a 6.7% rise. Orders for motor
vehicles parts eased 0.2% (+8.7% y/y) after a 0.5% rise. Excluding the
transportation sector entirely, durable goods bookings slipped 0.3% (+4.9% y/y)
after a 0.4% increase.

In the capital goods sector, the gain in civilian aircraft
lifted nondefense orders by 0.7%. Elsewhere, orders weakened. Nondefense capital
goods orders less aircraft fell 0.6% (+6.5% y/y), the third decline in the last four months.

Increased orders for metals accounted for the remainder of
last month's rise in orders overall. Primary metals orders rose 1.0% (9.1% y/y)
and fabricated metals increased 0.5% (5.1% y/y). Working the other way,
machinery bookings declined 1.7% (+7.2 y/y) after three consecutive 0.2% gains.
Orders for electrical equipment &amp; appliances fell 0.7% (+5.7% y/y) after a
1.1% rise. Computer &amp; electronic product orders held steady (6.4% y/y) after
a 2.9% jump. Within that grouping, communication product orders rose 0.8% (5.8% y/y).

Shipments of durable goods rose 0.7% during November (6.2%
y/y) following a 0.4% easing. Excluding the transportation sector, however,
shipments held steady (4.6% y/y) after a 3.3% rise. Unfilled orders for durable
goods eased 0.1% (+4.6% y/y) and excluding transportation, order backlogs rose
0.2% (4.9% y/y). Inventories of durable goods rose 0.3% (4.7% y/y) after a 0.2%
improvement. Excluding transportation, inventories increased 0.3% (5.4% y/y)
following a 0.1% uptick.

The durable goods figures are available in Haver's USECON
database. The Action Economics consensus forecast figure is in the AS1REPNA database.

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 <thead>
 <tr>
 <th class="firstcol" scope="col" >Durable Goods NAICS
 Classification</th>
 <th>Nov</th>
 <th>Oct</th>
 <th>Sep</th>
 <th>Nov Y/Y</th>
 <th>2017</th>
 <th>2016</th>
 <th>2015</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >New Orders (SA, % chg)</td>
 <td >0.8</td>
 <td >-4.3</td>
 <td >-0.0</td>
 <td >5.3</td>
 <td >5.4</td>
 <td >-1.7</td>
 <td >-5.0</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Transportation</td>
 <td >2.9</td>
 <td >-12.3</td>
 <td >0.9</td>
 <td >6.1</td>
 <td >3.4</td>
 <td >-0.7</td>
 <td >-6.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Total Excluding Transportation</td>
 <td >-0.3</td>
 <td >0.4</td>
 <td >-0.5</td>
 <td >4.9</td>
 <td >6.5</td>
 <td >-2.3</td>
 <td >-4.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Nondefense Capital Goods</td>
 <td >0.7</td>
 <td >-4.7</td>
 <td >-3.2</td>
 <td >0.5</td>
 <td >9.1</td>
 <td >-5.8</td>
 <td >-11.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Excluding Aircraft</td>
 <td >-0.6</td>
 <td >0.5</td>
 <td >-0.6</td>
 <td >6.5</td>
 <td >6.7</td>
 <td >-4.5</td>
 <td >-5.5</td>
 </tr>
 <tr>
 <td class="firstcol" >Shipments</td>
 <td >0.7</td>
 <td >-0.4</td>
 <td >0.9</td>
 <td >6.2</td>
 <td >4.0</td>
 <td >-2.4</td>
 <td >-0.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Unfilled Orders</td>
 <td >-0.1</td>
 <td >-0.2</td>
 <td >0.7</td>
 <td >4.6</td>
 <td >2.0</td>
 <td >-1.2</td>
 <td >-2.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Inventories</td>
 <td >0.3</td>
 <td >0.2</td>
 <td >0.8</td>
 <td >4.7</td>
 <td >4.6</td>
 <td >-3.0</td>
 <td >0.9</td>
 </tr>
 </tbody>
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New orders for durable goods rebounded last month. Overall durable goods orders increased 0.8% (5.3% y/y) during November following a 4.3% October decline. A 1.5% increase had been expected in the Action Economics Forecast Survey. [...]

U.S. Durable Goods Orders Improvement Paced by Aircraft

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Initial unemployment insurance applications increased to
214,000 (-12.4% y/y) during the week ended December 15 from an unrevised 206,000
during the prior week. Initial claims remained near the lowest level since 1969.
The Action Economics Forecast Survey expected 215,000 initial claims. The
four-week moving average of initial claims eased to 222,000. 
The latest claims figure covers the survey period for
December nonfarm payrolls, and there was a 4.9% decline from the November
period. During the last ten years, there has been a 73% correlation between the
level of initial claims and the m/m change in nonfarm payrolls.
Continuing claims for unemployment insurance rose to 1.688
million (-13.4% y/y) in the week ending December 8 from 1.661 million in the
prior week. The four-week moving average of continuing claims rose to 1.673
million.
The insured unemployment rate held steady at 1.2%, near the
record low. The insured unemployment figures date back to 1971.
Insured rates of unemployment vary widely by state. During
the week ending December 1, the lowest rates were in South Dakota (0.40%), North
Carolina (0.43%), Nebraska (0.44%), Indiana (0.49%) and Florida (0.44%). The
highest rates were in Illinois (1.53%), Connecticut (1.78%), California (1.92%),
New Jersey (2.06%) and Alaska (3.10%). Among the other largest states by
population, the rate was 0.96% in Ohio, 0.93% in Texas, 1.41% in New York, 0.57%
in Georgia and 0.52% in Virginia. These state data are not seasonally adjusted.
Data on weekly unemployment claims going back to 1967 are
contained in Haver's WEEKLY database, and they are summarized monthly in USECON.
Data for individual states are in REGIONW. The expectations figure is
from the Action Economics Forecast Survey, carried in the AS1REPNA
database.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" width="734">Unemployment Insurance (SA, 000s)</th>
 <th width="161">12/15/18</th>
 <th width="162">12/08/18</th>
 <th width="162">12/01/18</th>
 <th width="162">Y/Y %</th>
 <th width="162">2017</th>
 <th width="162">2016</th>
 <th width="162">2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="734">Initial Claims</td>
 <td align="center" width="161">214</td>
 <td align="center" width="162">206</td>
 <td align="center" width="162">233</td>
 <td align="center" width="162">-12.4</td>
 <td align="center" width="162">245</td>
 <td align="center" width="162">263</td>
 <td align="center" width="162">278</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="734">Continuing Claims</td>
 <td align="center" width="161">--</td>
 <td align="center" width="162">1,688</td>
 <td align="center" width="162">1,661</td>
 <td align="center" width="162">-13.4</td>
 <td align="center" width="162">1,961</td>
 <td align="center" width="162">2,136</td>
 <td align="center" width="162">2,267</td>
 </tr>
 <tr>
 <td class="firstcol" width="734">Insured Unemployment Rate (%)</td>
 <td align="center" width="161">--</td>
 <td align="center" width="162">1.2</td>
 <td align="center" width="162">1.2</td>
 <td align="center" width="162">
 1.3 
 (Dec. 2017)
 </td>
 <td align="center" width="162">1.4</td>
 <td align="center" width="162">1.6</td>
 <td align="center" width="162">1.7</td>
 </tr>
 </tbody>
</table>
&nbsp;
&nbsp;
Philadelphia Fed Manufacturing Index Declines; Pricing Pressure Holds Steady 
by <a href="http://www.haver.com/comment/Moeller.html">Tom
Moeller</a>&nbsp;&nbsp; December 20, 2018
The Philadelphia Federal Reserve reported that its General
Factory Sector Business Conditions Index declined to 9.4 during December from
12.9 in November. The Action Economics Forecast Survey median estimate was 15.7.
During all of 2018, the index level eased to 21.1 from 27.4 in 2017. These
figures are diffusion indexes where readings above zero indicate expansion. The
percentage of firms reporting an improvement in business activity fell to 26.4%,
down from the high of 48.2% in May of last year. The number reporting a
weakening environment also fell to 17.0%.
Haver Analytics constructs an ISM-Adjusted General Business
Conditions Index and it eased to 54.6 in December from 55.8 in November. This
measure hit a cycle high of 61.9 in March. During the last ten years, there has
been a 65% correlation between the quarterly ISM-adjusted Philadelphia Fed Index
and quarterly real GDP growth.
Working lower was the shipments index to the lowest point in
just over two years. and the inventories series reversed its November increase.
The new orders index actually reversed most of the deterioration in November.
Unfilled orders also rose while the rise in the delivery times index indicated
slightly slower product delivery speeds. 
The employment index held fairly steady near the level of
this past June. During the last ten years there has been a 79% correlation
between the employment index and the month-to-month change in factory sector
payrolls. Twenty-four percent of respondents reported increased hiring, down
from 30%, while a lessened six percent indicated a decrease. The average
workweek reading fell sharply to its lowest level since late-2016. The index of
future employment improved this month, but remained well below its May high.
The index of prices paid was little changed, but the prices
received index improved to the highest level in four months. Forty-two percent
of firms reported higher prices paid, down from 63.1% in August while a higher
four percent paid less, though this was increased from July's reading of 0%. The
future prices paid index was steady m/m and remained down from the April high.
The index measuring expectations of future business
conditions improved m/m, but remained well below its high early last year.
The survey panel consists of 150 manufacturing companies in
the third Federal Reserve District (which consists of southeastern PA, southern
NJ and Delaware). The diffusion indexes represent the percentage of respondents
indicating an increase minus the percentage indicating a decrease in activity.
The ISM-adjusted figure, calculated by Haver Analytics, is the average of five
diffusion indexes: new orders, shipments, employment, delivery times and
inventories with equal weights (20% each). Each ISM-adjusted index is the sum of
the percent responding &quot;higher&quot; and one-half of the percent responding
&quot;same.&quot;
The figures from the Philadelphia Federal Reserve dating back
to 1968 can be found in Haver's SURVEYS database. The expectation from
the Action Economics Forecast Survey is available in AS1REPNA.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" width="1208">Philadelphia Fed - Manufacturing
 Business Outlook Survey (%, SA)</th>
 <th scope="col" width="94">Dec</th>
 <th scope="col" width="94">Nov</th>
 <th scope="col" width="94">Oct</th>
 <th scope="col" width="94">Dec'17</th>
 <th scope="col" width="94">2018</th>
 <th scope="col" width="94">2017</th>
 <th scope="col" width="94">2016</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="1208">General Factory Sector Business
 Conditions</td>
 <td align="center" width="94">9.4</td>
 <td align="center" width="94">12.9</td>
 <td align="center" width="94">22.2</td>
 <td align="center" width="94">27.9</td>
 <td align="center" width="94">21.1</td>
 <td align="center" width="94">27.4</td>
 <td align="center" width="94">4.9</td>
 </tr>
 <tr>
 <td class="firstcol" width="1208">ISM-Adjusted Business Conditions</td>
 <td align="center" width="94">54.6</td>
 <td align="center" width="94">55.8</td>
 <td align="center" width="94">55.7</td>
 <td align="center" width="94">57.5</td>
 <td align="center" width="94">57.7</td>
 <td align="center" width="94">57.2</td>
 <td align="center" width="94">48.3</td>
 </tr>
 <tr>
 <td class="firstcol" width="1208">&nbsp;&nbsp;New Orders</td>
 <td align="center" width="94">14.5</td>
 <td align="center" width="94">9.1</td>
 <td align="center" width="94">19.3</td>
 <td align="center" width="94">28.2</td>
 <td align="center" width="94">21.1</td>
 <td align="center" width="94">25.4</td>
 <td align="center" width="94">4.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1208">&nbsp;&nbsp;Shipments</td>
 <td align="center" width="94">10.0</td>
 <td align="center" width="94">21.6</td>
 <td align="center" width="94">24.5</td>
 <td align="center" width="94">23.9</td>
 <td align="center" width="94">22.8</td>
 <td align="center" width="94">26.8</td>
 <td align="center" width="94">6.9</td>
 </tr>
 <tr>
 <td class="firstcol" width="1208">&nbsp;&nbsp;Unfilled Orders</td>
 <td align="center" width="94">9.7</td>
 <td align="center" width="94">-4.8</td>
 <td align="center" width="94">-2.3</td>
 <td align="center" width="94">12.8</td>
 <td align="center" width="94">7.1</td>
 <td align="center" width="94">11.9</td>
 <td align="center" width="94">-5.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1208">&nbsp;&nbsp;Delivery Time</td>
 <td align="center" width="94">6.7</td>
 <td align="center" width="94">5.0</td>
 <td align="center" width="94">0.2</td>
 <td align="center" width="94">11.0</td>
 <td align="center" width="94">9.5</td>
 <td align="center" width="94">10.6</td>
 <td align="center" width="94">-4.6</td>
 </tr>
 <tr>
 <td class="firstcol" width="1208">&nbsp;&nbsp;Inventories</td>
 <td align="center" width="94">-0.2</td>
 <td align="center" width="94">9.5</td>
 <td align="center" width="94">-0.8</td>
 <td align="center" width="94">-1.1</td>
 <td align="center" width="94">7.3</td>
 <td align="center" width="94">2.8</td>
 <td align="center" width="94">-9.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1208">&nbsp;&nbsp;Number of Employees</td>
 <td align="center" width="94">18.3</td>
 <td align="center" width="94">16.3</td>
 <td align="center" width="94">19.5</td>
 <td align="center" width="94">19.7</td>
 <td align="center" width="94">21.5</td>
 <td align="center" width="94">16.2</td>
 <td align="center" width="94">-5.6</td>
 </tr>
 <tr>
 <td class="firstcol" width="1208">&nbsp; Average Workweek</td>
 <td align="center" width="94">0.5</td>
 <td align="center" width="94">6.3</td>
 <td align="center" width="94">20.8</td>
 <td align="center" width="94">12.6</td>
 <td align="center" width="94">15.8</td>
 <td align="center" width="94">14.9</td>
 <td align="center" width="94">-5.4</td>
 </tr>
 <tr>
 <td class="firstcol" width="1208">&nbsp; Prices Paid</td>
 <td align="center" width="94">38.0</td>
 <td align="center" width="94">39.3</td>
 <td align="center" width="94">38.2</td>
 <td align="center" width="94">27.8</td>
 <td align="center" width="94">46.2</td>
 <td align="center" width="94">30.4</td>
 <td align="center" width="94">13.5</td>
 </tr>
 <tr>
 <td class="firstcol" width="1208">Expectations - General Business
 Conditions; Six Months Ahead</td>
 <td align="center" width="94">31.7</td>
 <td align="center" width="94">27.2</td>
 <td align="center" width="94">33.8</td>
 <td align="center" width="94">52.7</td>
 <td align="center" width="94">36.9</td>
 <td align="center" width="94">47.1</td>
 <td align="center" width="94">33.7</td>
 </tr>
 </tbody>
</table>

&nbsp;
U.S. Leading Economic Indicators Rise Slightly 
by <a href="http://www.haver.com/comment/Moeller.html">Tom
Moeller</a>&nbsp; December 20, 2018
The Conference Board's Composite Index of Leading Economic
Indicators edged 0.1% higher (5.9% y/y) during October following a 0.6%
September gain, revised from 0.5%. It was the smallest rise since May. No change
in the index level had been expected in the Action Economics Forecast Survey.
The series is comprised of 10 components which tend to precede changes in the
overall economy.
Movement amongst the components of the index remained mixed
last month. Weakness was led by declines in the unemployment insurance claims
component as well as lower stock prices and fewer building permits. Offsetting
these negative influences were improved consumer expectations for
business/economic conditions, a steeper interest rate spread between 10-Year
Treasuries &amp; Fed funds, higher ISM New Orders index and more nondefense
capital goods orders. The average workweek and new orders for consumer goods had
no effect on the index.
Three-month growth in the leading index declined to 4.8%
(AR), the weakest growth since June.
The Index of Coincident Economic Indicators increased 0.2%
(2.2% y/y) in October following a 0.1% uptick. Each of the index components
contributed positively including changes in personal income less transfer
payments, industrial production, nonagricultural payroll employment and
manufacturing &amp; trade sales.
Three-month growth in the coincident index held steady at
2.3% (AR). It remained improved from 1.6% growth early in the year, but below
its 3.6% peak as of December.
The Index of Lagging Economic Indicators increased 0.4% (2.4%
y/y) after a 0.2% decline, revised from -0.1%. It was the largest rise since
May. The median duration of unemployment, the average prime rate charged by
banks, the CPI for services and the consumer installment credit/personal income
ratio contributed positively to the index change. The change in commercial &amp;
industrial loans outstanding and the change in unit labor costs contributed
negatively to the index change. The ratio of business inventories-to-sales had
no effect on the index change.
The three-month growth in the lagging index jumped to 1.9%,
the quickest growth since June.
The ratio of coincident-to-lagging indicators is often
considered to be another leading indicator of economic activity. As economic
slack diminishes relative to current performance, the ratio will rise. It eased
to 99.2 last month and reversed most of its September rise.
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 <a href="http://www.conference-board.org/">site</a> for coverage of
leading indicator series from around the world.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="831">Business Cycle Indicators (%)</th>
 <th scope="col" width="148">Nov</th>
 <th scope="col" width="148">Oct</th>
 <th scope="col" width="148">Sep</th>
 <th scope="col" width="148">Nov Y/Y</th>
 <th scope="col" width="148">2017</th>
 <th scope="col" width="148">2016</th>
 <th scope="col" width="148">2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="831">Leading</td>
 <td align="center" width="148"></td>
 <td align="center" width="148">0.1</td>
 <td align="center" width="148">0.6</td>
 <td align="center" width="148">5.9</td>
 <td align="center" width="148">4.1</td>
 <td align="center" width="148">1.2</td>
 <td align="center" width="148">4.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="831">Coincident</td>
 <td align="center" width="148"></td>
 <td align="center" width="148">0.2</td>
 <td align="center" width="148">0.1</td>
 <td align="center" width="148">2.2</td>
 <td align="center" width="148">1.8</td>
 <td align="center" width="148">1.3</td>
 <td align="center" width="148">2.2</td>
 </tr>
 <tr>
 <td class="firstcol" width="831">Lagging</td>
 <td align="center" width="148"></td>
 <td align="center" width="148">0.4</td>
 <td align="center" width="148">-0.2</td>
 <td align="center" width="148">2.4</td>
 <td align="center" width="148">2.6</td>
 <td align="center" width="148">2.9</td>
 <td align="center" width="148">3.7</td>
 </tr>
 </tbody>
</table>


</body>

</html>

Initial unemployment insurance applications increased to 214,000 (-12.4% y/y) during the week ended December 15 from an unrevised 206,000 during the prior week. Initial claims remained near the lowest level since 1969. The Action [...]

U.S. Initial Claims for Unemployment Insurance Rise

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The Conference Board's Composite Index of Leading Economic
Indicators improved 0.2% (5.2% y/y) during November following a 0.3% October
decline, revised from +0.1%. No change in the index level had been expected in
the Action Economics Forecast Survey. The series is comprised of 10 components
which tend to precede changes in the overall economy.

Movement amongst the components of the index remained mixed
last month. Positive influences on the index were a greater number of building
permits, a higher ISM new orders index, improved consumer expectations for
business/economic conditions, a steeper interest rate spread between 10-Year
Treasuries &amp; Fed funds, more nondefense capital goods orders as well as more
consumer goods &amp; material orders. Negative influences on the index was
provided by lower stock prices, a decline in average weekly hours-worked and
higher initial unemployment insurance claims.

Three-month growth in the leading index declined to 2.2%
(AR), the weakest growth in two years.

The Index of Coincident Economic Indicators increased 0.2%
(2.1% y/y) in November following a 0.1% uptick during October, revised from
0.2%. Each of the index components contributed positively including changes in
personal income less transfer payments, industrial production, nonagricultural
payroll employment and manufacturing &amp; trade sales.

Three-month growth in the coincident index eased to 1.9%
(AR). That was below the 3.6% peak as of December 2017 and below the 3.1% growth
rate in August.

The Index of Lagging Economic Indicators increased 0.4% last
month (2.8% y/y) following a 0.5% October rise, revised from 0.4%. The change in
commercial &amp; industrial loans outstanding, the average duration of
unemployment, the six-month change in unit labor costs and the consumer
installment credit/personal income ratio contributed positively to the index
change. Six-month growth in the services CPI contributed negatively. The average
prime rate and the ratio of business inventories-to-sales had no effect on the
index change.

The three-month growth in the lagging index strengthened
2.7%, the quickest growth since June and up from no change as of August.

The ratio of coincident-to-lagging indicators is often
considered to be another leading indicator of economic activity. As economic
slack diminishes relative to current performance, the ratio will rise. It eased
to 99.0 last month, the lowest level since June.

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 <a href="http://www.conference-board.org/">site</a> for coverage of
leading indicator series from around the world.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Business Cycle Indicators (%)</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Nov Y/Y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Leading</td>
 <td >0.2</td>
 <td >-0.3</td>
 <td >0.6</td>
 <td >5.2</td>
 <td >4.1</td>
 <td >1.2</td>
 <td >4.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Coincident</td>
 <td >0.2</td>
 <td >0.1</td>
 <td >0.2</td>
 <td >2.1</td>
 <td >1.8</td>
 <td >1.3</td>
 <td >2.2</td>
 </tr>
 <tr>
 <td class="firstcol" >Lagging</td>
 <td >0.4</td>
 <td >0.5</td>
 <td >-0.2</td>
 <td >2.8</td>
 <td >2.6</td>
 <td >2.9</td>
 <td >3.7</td>
 </tr>
 </tbody>
 </table>
 
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The Conference Board's Composite Index of Leading Economic Indicators improved 0.2% (5.2% y/y) during November following a 0.3% October decline, revised from +0.1%. No change in the index level had been expected in the Action [...]

U.S. Leading Economic Indicators Increase

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U.K. retail sales in November were bolstered by solid 'Black Friday' sales as the holiday selling period kicked off. Despite the November jolt in sales that reverses two straight months of declines, U.K. retail sales are still trending lower as 12-month growth at 5% erodes to an annualized pace of 4.6% over six months and to 2.9% over three months. Over the same monthly sequences, real retail sales (sales volume) slow from a rise at a 3.7% pace over 12 months to 3.1% over six months and 2.3% over three months.

Also disturbing is the ongoing weakness in passenger car registrations. Registrations fell by 3.1% over 12 months after a 13.9% drop in the 12-month period before that. Over short horizons, registration weakness has persisted and even intensified with six-month registrations off at a 19.3% annual rate and three-month registrations off at a 65.7% annual rate.

The retail surveys and the actual retail sales data both show some irregularity in terms of their strength. Since you can't compare a year-on-year sales gain to a sales survey diffusion response directly, I have subjected all the series in the table to a queue ranking process that permits some direct comparisons. I rank retail sales based on year-on-year growth and I rank the CBI survey responses on their survey diffusion metrics. Nominal retail sales show an 82nd percentile queue standing, higher than the 71st percentile standing for retail volume also ranked as a 12-month growth rate. Year-over-year passenger car registrations percentage changes have a lower 30th percentile ranking – quite poor. The CBI sales for the time of year response has a low 38th percentile standing but the volume of retail orders year-on-year survey response has a 78 percentile standing, more in line with real and nominal retail sales. Separately consumer confidence (ranked as an index rather than on is annual growth rate) has a 34th percentile standing.

U.K. inflation on the HICP measure is at 2.3% year-on-year, 2.4% over six months and 1.7% over three months.


<img border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/181220.png" width="660" height="350">


BREXIT! 
Of course, there is no talking about the U.K. and its prospects without a word about Brexit. So here it is Word: Brexit!

Brexit is coming. But no one is quite sure of what it will be. It's like the old joke about the 'Viper.' A secretary gets a call and man's voice says, “I am the viper!” She hangs up. Then it happens again. She calls the police. The next day, with an officer protecting her, there is a knock on the door. She opens it. And old man with a moustache, a bucket and a squeegee says “I am the viper, I've come to vipe your vindows! I tried to make an appointment but someone kept hanging up on me….”

So Brexit is coming. But what will it be? Theresa May says she has cut the best deal possible and it should be approved; it is the will of the people. But there is opposition to it. It is possible but not likely that the EU would be willing to make some further accommodation if Parliament rejects this deal, but not much.

Some think that when Brexit was voted on, people had a distorted view of what it would mean. Now after countless negotiations, Britain knows more or less what Brexit actually will mean. Some think that a hard Brexit is so bad that if there were a new referendum the vote might switch to 'remain.' Of course, no one really knows. And last time the polls on this were terribly wrong. So even a new referendum is a roll of the dice. But it would be a vote taken with a much clearer idea of what is being voted on. You know, if the secretary in the story above knew who/what the viper was, she never would have called the police in the first place. But hindsight is often 20/20. A new referendum would be like stepping into a time capsule and re-voting…but with more knowledge, but still not exactly that.

For its part, the Bank of England has cut its forecast based on the notion that Brexit is coming and on the growing probability that it will be a hard Brexit. The bank sees inflation coming down into line at the same time. If there is a new referendum with a changed result, the new BOE forecast will have to be redone as well.

The Brexit process has been difficult for everyone. If the U.K. were to re-referendum and were the result to switch to 'remain,' would all the lost City of London jobs come back? Would the U.K. retrieve the EU ministries that had migrated across the channel? Would all the departed bankers return? How much would things actually go back to 'the same' normal? Would the dispelled expats come back? Would Scotland still go ahead with its talk of another referendum on its membership in the U.K. or would continued EU membership placate them?

Some things never can go back the way they were. With the revote situation in mind, I still wonder what the U.K. would see. I wonder if relations with Spain have been irreparably harmed over its stance regarding Gibraltar. A new referendum even with a changed vote result still comes with its own bundle of uncertainty. Mr. Carney could breathe a sigh of relief and prepare for his own exit. PM May would probably face all sorts challenges to her government once the future had been made clear and the no-win stand-off vs. the EU had been set aside. Suddenly, being PM would be attractive again. But that too is a speculative future.
</html>

U.K. retail sales in November were bolstered by solid 'Black Friday' sales as the holiday selling period kicked off. Despite the November jolt in sales that reverses two straight months of declines, U.K. retail sales are still [...]

U.K. Retail Sales Advance on Strong 'Black Friday' Sales, But Weakness Has Not Been Reversed

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The Philadelphia Federal Reserve reported that its General
Factory Sector Business Conditions Index declined to 9.4 during December from
12.9 in November. The Action Economics Forecast Survey median estimate was 15.7.
During all of 2018, the index level eased to 21.1 from 27.4 in 2017. These
figures are diffusion indexes where readings above zero indicate expansion. The
percentage of firms reporting an improvement in business activity fell to 26.4%,
down from the high of 48.2% in May of last year. The number reporting a
weakening environment also fell to 17.0%.

Haver Analytics constructs an ISM-Adjusted General Business
Conditions Index and it eased to 54.6 in December from 55.8 in November. This
measure hit a cycle high of 61.9 in March. During the last ten years, there has
been a 65% correlation between the quarterly ISM-adjusted Philadelphia Fed Index
and quarterly real GDP growth.

Working lower was the shipments index to the lowest point in
just over two years. and the inventories series reversed its November increase.
The new orders index actually reversed most of the deterioration in November.
Unfilled orders also rose while the rise in the delivery times index indicated
slightly slower product delivery speeds.

The employment index held fairly steady near the level of
this past June. During the last ten years there has been a 79% correlation
between the employment index and the month-to-month change in factory sector
payrolls. Twenty-four percent of respondents reported increased hiring, down
from 30%, while a lessened six percent indicated a decrease. The average
workweek reading fell sharply to its lowest level since late-2016. The index of
future employment improved this month, but remained well below its May high.

The index of prices paid was little changed, but the prices
received index improved to the highest level in four months. Forty-two percent
of firms reported higher prices paid, down from 63.1% in August while a higher
four percent paid less, though this was increased from July's reading of 0%. The
future prices paid index was steady m/m and remained down from the April high.

The index measuring expectations of future business
conditions improved m/m, but remained well below its high early last year.

The survey panel consists of 150 manufacturing companies in
the third Federal Reserve District (which consists of southeastern PA, southern
NJ and Delaware). The diffusion indexes represent the percentage of respondents
indicating an increase minus the percentage indicating a decrease in activity.
The ISM-adjusted figure, calculated by Haver Analytics, is the average of five
diffusion indexes: new orders, shipments, employment, delivery times and
inventories with equal weights (20% each). Each ISM-adjusted index is the sum of
the percent responding &quot;higher&quot; and one-half of the percent responding
&quot;same.&quot;

The figures from the Philadelphia Federal Reserve dating back
to 1968 can be found in Haver's SURVEYS database. The expectation from
the Action Economics Forecast Survey is available in AS1REPNA.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" >Philadelphia Fed - Manufacturing
 Business Outlook Survey (%, SA)</th>
 <th scope="col" >Dec</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Dec'17</th>
 <th scope="col" >2018</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >General Factory Sector Business
 Conditions</td>
 <td >9.4</td>
 <td >12.9</td>
 <td >22.2</td>
 <td >27.9</td>
 <td >21.1</td>
 <td >27.4</td>
 <td >4.9</td>
 </tr>
 <tr>
 <td class="firstcol" >ISM-Adjusted Business Conditions</td>
 <td >54.6</td>
 <td >55.8</td>
 <td >55.7</td>
 <td >57.5</td>
 <td >57.7</td>
 <td >57.2</td>
 <td >48.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;New Orders</td>
 <td >14.5</td>
 <td >9.1</td>
 <td >19.3</td>
 <td >28.2</td>
 <td >21.1</td>
 <td >25.4</td>
 <td >4.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Shipments</td>
 <td >10.0</td>
 <td >21.6</td>
 <td >24.5</td>
 <td >23.9</td>
 <td >22.8</td>
 <td >26.8</td>
 <td >6.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Unfilled Orders</td>
 <td >9.7</td>
 <td >-4.8</td>
 <td >-2.3</td>
 <td >12.8</td>
 <td >7.1</td>
 <td >11.9</td>
 <td >-5.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Delivery Time</td>
 <td >6.7</td>
 <td >5.0</td>
 <td >0.2</td>
 <td >11.0</td>
 <td >9.5</td>
 <td >10.6</td>
 <td >-4.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Inventories</td>
 <td >-0.2</td>
 <td >9.5</td>
 <td >-0.8</td>
 <td >-1.1</td>
 <td >7.3</td>
 <td >2.8</td>
 <td >-9.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Number of Employees</td>
 <td >18.3</td>
 <td >16.3</td>
 <td >19.5</td>
 <td >19.7</td>
 <td >21.5</td>
 <td >16.2</td>
 <td >-5.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Average Workweek</td>
 <td >0.5</td>
 <td >6.3</td>
 <td >20.8</td>
 <td >12.6</td>
 <td >15.8</td>
 <td >14.9</td>
 <td >-5.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Prices Paid</td>
 <td >38.0</td>
 <td >39.3</td>
 <td >38.2</td>
 <td >27.8</td>
 <td >46.2</td>
 <td >30.4</td>
 <td >13.5</td>
 </tr>
 <tr>
 <td class="firstcol" >Expectations - General Business
 Conditions; Six Months Ahead</td>
 <td >31.7</td>
 <td >27.2</td>
 <td >33.8</td>
 <td >52.7</td>
 <td >36.9</td>
 <td >47.1</td>
 <td >33.7</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

The Philadelphia Federal Reserve reported that its General Factory Sector Business Conditions Index declined to 9.4 during December from 12.9 in November. The Action Economics Forecast Survey median estimate was 15.7. During all of [...]

Philadelphia Fed Manufacturing Index Declines; Pricing Pressure Holds Steady

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Initial unemployment insurance applications increased to
214,000 (-12.4% y/y) during the week ended December 15 from an unrevised 206,000
during the prior week. Initial claims remained near the lowest level since 1969.
The Action Economics Forecast Survey expected 215,000 initial claims. The
four-week moving average of initial claims eased to 222,000.

The latest claims figure covers the survey period for
December nonfarm payrolls, and there was a 4.9% decline from the November
period. During the last ten years, there has been a 73% correlation between the
level of initial claims and the m/m change in nonfarm payrolls.

Continuing claims for unemployment insurance rose to 1.688
million (-13.4% y/y) in the week ending December 8 from 1.661 million in the
prior week. The four-week moving average of continuing claims rose to 1.673 million.

The insured unemployment rate held steady at 1.2%, near the
record low. The insured unemployment figures date back to 1971.

Insured rates of unemployment vary widely by state. During
the week ending December 1, the lowest rates were in South Dakota (0.40%), North
Carolina (0.43%), Nebraska (0.44%), Indiana (0.49%) and Florida (0.44%). The
highest rates were in Illinois (1.53%), Connecticut (1.78%), California (1.92%),
New Jersey (2.06%) and Alaska (3.10%). Among the other largest states by
population, the rate was 0.96% in Ohio, 0.93% in Texas, 1.41% in New York, 0.57%
in Georgia and 0.52% in Virginia. These state data are not seasonally adjusted.

Data on weekly unemployment claims going back to 1967 are
contained in Haver's WEEKLY database, and they are summarized monthly in USECON.
Data for individual states are in REGIONW. The expectations figure is
from the Action Economics Forecast Survey, carried in the AS1REPNA database.

<a href="/comment/181220c.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/181220c.png"></a>
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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" >Unemployment Insurance (SA, 000s)</th>
 <th>12/15/18</th>
 <th>12/08/18</th>
 <th>12/01/18</th>
 <th>Y/Y %</th>
 <th>2017</th>
 <th>2016</th>
 <th>2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Initial Claims</td>
 <td >214</td>
 <td >206</td>
 <td >233</td>
 <td >-12.4</td>
 <td >245</td>
 <td >263</td>
 <td >278</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Continuing Claims</td>
 <td >--</td>
 <td >1,688</td>
 <td >1,661</td>
 <td >-13.4</td>
 <td >1,961</td>
 <td >2,136</td>
 <td >2,267</td>
 </tr>
 <tr>
 <td class="firstcol" >Insured Unemployment Rate (%)</td>
 <td >--</td>
 <td >1.2</td>
 <td >1.2</td>
 <td >
 1.3 
 (Dec. 2017)
 </td>
 <td >1.4</td>
 <td >1.6</td>
 <td >1.7</td>
 </tr>
 </tbody>
 </table>
 
</html>

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

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Nonfarm labor productivity fell 0.8% (SAAR) during Q1’25 after increasing 1.7% in Q4’24, revised from 1.5%. A 0.6% decline had been expected in the Action Economics Forecast Survey. It was the first productivity decline since Q2’22. The y/y increase during Q1 fell to 1.4% from 2.1% in Q4. It was below a 3.3% high in the first quarter of last year. Productivity fell as real value-added output dropped 0.3% last quarter (+2.2% y/y) after increasing 2.5% in Q4, and hours worked lengthened 0.6% (0.8% y/y) following a 0.8% gain.

Compensation per hour increased 4.8% last quarter following a 3.7% Q4 rise. Despite the strength of these last two increases, y/y growth decelerated to 2.7% from a 6.8% high one year earlier. Nevertheless, the productivity decline raised unit labor costs by 5.7% (1.3% y/y) in Q1 versus expectations for a 5.2% increase. It followed a 2.0% gain during Q4 and was the strongest quarterly increase in a year.

Factory sector productivity surged 4.5% (1.5% y/y) during Q1’25 following three consecutive increases of roughly 0.5%. This strength was accompanied by a 6.2% rise (2.2% y/y) in hourly compensation which came after two consecutive increases of approximately 4.1%. The strength in productivity lowered the rise in unit labor costs to 1.6% from 3.8% in Q4. The y/y gain fell to 0.7% from 2.0% in Q4 and stood below the 6.2% y/y increase in Q1’24.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

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- Productivity declines with lower output.
- Compensation surge exacerbates labor market stress.
- Factory sector productivity surge lessens cost pressure.

U.S. Productivity Declines in Q1’25; Unit Labor Costs Surge

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The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) rose 0.6% (3.2% y/y) in March to 103.2 after rising 0.9% to 102.6 in February and rising 0.8% in January to 101.7. The level of home affordability has risen 14.8% from its low of 89.9 in October 2023. It remains 42.4% below the high of 179.2 in April 2020.

The rise in affordability in March occurred as the median price of an existing single-family home rose 1.8% (2.9% y/y) to $408,000 which was offset by a decline in mortgage rates to 6.73% from 6.92% in February. The price compared to the record $432,900 in June 2024. The decline in mortgage rates compared to a recent low of 6.26% in September of last year and a 7.70% high during October of 2023. It remained well above a December 2020 low of 2.73%. These changes lowered the principal & interest payment by 0.2% (+1.1% y/y) to $2,113 per month. That was well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged a lessened 24.2% of income during March. They remained up from a low of 14.0% of income in April 2020.

The rise in housing costs in March was accompanied by improvement in median family income. It increased 0.4% (4.4% y/y) to a record $104,705 after rising 0.4% in February and 0.7% in January.

Housing affordability improved m/m across the country in March. The index edged 0.1% higher (2.8% y/y) to 134.5 in the Midwest. It remains the most affordable region of the country. In the South, the index 0.9% (5.4% y/y) to 106.6 and the affordability index in the Northeast increased 2.1% (-2.6% y/y) to 95.7. In the West, where homes are the least affordable, the index rose 0.8% (3.3% y/y) to 71.8 in March.

The Housing Affordability Index (HAI) equals 100 when a median-income borrower qualifies for an 80% mortgage on a median-priced existing single-family home. The HAI had exceeded 100 in each month since July 1990 and reached its all-time high of 213.3 in January 2013; since then, it fell below 100 for the first time in June 2022.

Data on Housing Affordability can be found in Haver’s **REALTOR** database. Median home sales prices are also available in **USECON**. Higher frequency interest rate data are found in **SURVEYS**, **WEEKLY**, and **DAILY**.

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- Home prices rise but mortgage rates decline.
- Median income improves.
- Affordability increases across the country.

U.S. Housing Affordability Improves Slightly in March

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Initial claims for unemployment insurance were 228,000 seasonally adjusted in the week ended May 3, down from 241,000 in the previous week, which was unrevised. For the latest week, the Action Economics Forecast Survey had expected a smaller decline to 233,000.

In the week ended April 26, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – was 1.879 million, down from 1.908 million in the April 19 week.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, returned to its longstanding rate of 1.2% in the April 26 week; this rate has held that amount since continuously since the week of January 6, 2024, except for the prior week’s 1.3%.

As we do highlight in every week’s discussion, economic conditions vary widely across individual states and territories. In the week ended April 19, the highest unemployment rates were in New Jersey and Rhode Island (both at 2.48%), California (2.26%), Washington (2.14%) and New York (1.85%). The lowest were in Florida (0.36%), South Dakota (0.37%), Alabama (0.41%), Virginia (0.45%) and Nebraska (0.47%). Rates in other notable states include Illinois (1.78%), Pennsylvania (1.53%) and Texas (1.14%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Continued claims for unemployment insurance decreased 29, 000 in the week ended April 26.
- Insured unemployment rate returns to longstanding 1.2%.
- Across the states, the insured unemployment rate ranges from 0.36% to 2.48%.

U.S. Initial Unemployment Insurance Claims Ease 13,000 in the May 3 Week

Andrew Cates

**The global business cycle** 
The recent sharp decline in the Future Output Balance in the global composite PMI survey reflects a sudden deterioration in global business expectations. The sweeping tariffs, introduced in April 2025, have generated heightened uncertainty around trade policy and sparked fears of retaliatory actions from key trading partners. As a result, businesses worldwide are scaling back their expectations for future output, wary of rising costs, disrupted demand flows, and a broader shift toward protectionism that could undermine global economic momentum.

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Note: The extreme declines in the Future Output Balance that were recorded in the early months of 2020 (at the height of the COVID pandemic) have been removed from this chart.

**Global supply chain pressures**
Still, despite the marked deterioration in global business expectations, this second chart below provides a reassuring counterpoint: as of now, there is little evidence that global supply chain pressures have materially intensified. Both the New York Fed’s Global Supply Chain Pressure Index and the Baltic Exchange Dry Index remain relatively subdued, especially compared to the pandemic-era spikes of 2020–2022. While there has been heightened concern following the April 2025 US tariff announcements, these trade policy shifts have yet to translate into measurable physical disruption in logistics or freight rates. The stability of these indices suggests that although sentiment has taken a hit, global shipping networks and supply flows are, for now, absorbing the shock. However, this calm may prove fragile if the policy environment hardens further or retaliatory trade actions begin to compound the strain.

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**Expectations for central banks’ policy rates** 
Adding to the picture of mounting economic caution, the latest Blue Chip Financial Forecasts survey reveals that expectations for policy easing over the next 12 months have become even more pronounced than in previous months. While earlier surveys had already pointed to a further extension of the global rate-cutting cycle, the latest results suggest forecasters now anticipate a deeper and more aggressive round of monetary easing—most notably from the US Federal Reserve, which is now expected to deliver nearly a full percentage point in rate cuts over the next 12 months. The sharp deterioration in business sentiment is reshaping the macro narrative: central banks are no longer simply guiding inflation lower, but are instead preparing to confront the risk of a deeper, demand-driven slowdown.

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**Energy prices and inflation** 
Adding further context to the growing expectations for policy easing, oil prices have dropped sharply in recent weeks—driven by mounting concerns over global growth, as reflected in weakening business sentiment and softer demand indicators. The chart below provides a longer-run perspective on why this matters: energy prices have historically played a central role in shaping the global inflation trajectory. The strong positive correlation (r = 0.83) between median world energy price inflation and median core consumer price inflation underscores the powerful pass-through effects energy costs can have on broader price dynamics. While core inflation tends to be stickier, this historical relationship makes clear that sustained declines in energy prices often foreshadow broader disinflationary trends.

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**Intangibles versus tangibles** 
Shifting focus from short-term cyclical risks to longer-term structural dynamics, the next chart below underscores a fundamental transformation in the composition of US investment: the economy has increasingly been built on intangibles. Over the past several decades, investment in intangible assets—such as software, intellectual property, R&D, and brand equity—has steadily climbed and, since the mid-2010s, has overtaken investment in both structures and equipment as a share of GDP. This shift reflects the rise of a knowledge-based, innovation-driven economy, but it also introduces new forms of vulnerability. Unlike physical capital, intangible assets rely heavily on trust, reputation, legal protections, and global openness. In this context, escalating trade frictions and a more confrontational US economic stance—as signalled by the recent tariff wave—risk eroding the goodwill and institutional credibility that underpin much of the value created by intangibles. If geopolitical uncertainty undermines the perceived reliability of US intellectual property protections or weakens global collaboration, it could pose a deeper structural challenge to future growth than any immediate cyclical downturn.

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**Investment in Artificial Intelligence**
The centrality of intangibles to the US growth model is nowhere more evident than in the explosion of private investment in artificial intelligence. As this chart illustrates, global AI investment has surged over the past decade—reaching new highs in 2024—and the United States has consistently accounted for the lion’s share of that spending. This reflects not only America’s previous leadership in frontier technologies but also its dependence on intangible capital, from algorithms and data infrastructure to human expertise and institutional trust. However, this dominance also underscores the strategic stakes of current policy choices. In an environment of rising trade tensions and potential fragmentation, the foundations of US leadership in AI—cross-border collaboration, data openness, and global market access—could be at risk.

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Financial market sentiment has rebounded in recent weeks, buoyed by signs of de-escalation in the US-led trade war and growing confidence that central banks—particularly the Federal Reserve—will step in with more rate cuts to cushion any fallout. Yet beneath the surface, a more sobering picture of the global economy persists. For example, latest PMI surveys reveal that global business expectations have slumped to their lowest levels since the pandemic, reflecting widespread unease about the growth outlook (chart 1). While supply chain pressures have so far remained contained, suggesting no repeat of the logistical chaos seen during the pandemic (chart 2), the latest Blue Chip Financial Forecasts survey reveals that forecasters are now pencilling in deeper and more widespread monetary easing than previously anticipated—an acknowledgment that demand is faltering (chart 3). Falling oil prices further reinforce this view: they are both a symptom of weakening global demand and a potential source of disinflation, reducing the urgency for central banks to maintain tight policy (chart 4). At the structural level, the US economy's increasing reliance on intangible assets—ranging from intellectual property to reputation—has made it more vulnerable to geopolitical frictions and the erosion of global trust (chart 5). This risk is compounded by America's dominant role in AI investment, a sector symbolic of both its economic strengths and its exposure to international perceptions (chart 6). The longer-term challenge, then, is not just navigating the current downturn, but ensuring that the institutional goodwill and cross-border openness that support the modern US economy are not sacrificed in a more fragmented and uncertain global order.

Charts of the Week: Relief Rally Meets Recession Risk

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At today’s meeting of the Federal Open Market Committee, the target range for the Fed funds rate was left unchanged at 4.25% to 4.50%. This followed reductions at three consecutive meetings in the fall of 2024. Rates remain below the high of 5.25% to 5.50% in place in mid-September. Today’s target range matched expectations in the Action Economics Forecast Survey.

The statement following the meeting indicated that, “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook has increased further. The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”

“The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.”

The Fed continued, “The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage backed securities.”

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- FOMC holds funds rate target at late-December level.
- Risk assessments include higher unemployment & inflation.

Economy in Brief: 2018

Jump to:

U.S. GDP Growth Revised Down 0.1%; Profits Growth Modestly Higher

GfK Consumer Climate Is Unchanged Month-to-Month

U.S. Durable Goods Orders Improvement Paced by Aircraft

U.S. Initial Claims for Unemployment Insurance Rise

U.S. Leading Economic Indicators Increase

U.K. Retail Sales Advance on Strong 'Black Friday' Sales, But Weakness Has Not Been Reversed

Philadelphia Fed Manufacturing Index Declines; Pricing Pressure Holds Steady

U.S. Initial Claims for Unemployment Insurance Rise