Kathleen Stephansen, CBE

819a3bea-2448-4f16-afa9-ad7c7b4426a5_1210104F.jpg

cb3ac93f-99d8-4e0b-8d7f-63365beda457_1210104G.jpg

The Institute for Supply Management (ISM) reported that its Composite Index of Manufacturing Sector Activity declined to 58.7 in December from 61.1 during November. The high of 64.7 for the year was reached in March. A level of 60.3 had been expected in the Action Economics Forecast Survey. During the last 15 years, there has been a 41% correlation between the composite index and the quarterly change in real GDP.

The ISM indicated, "The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment, with indications of improvements in labor resources and supplier delivery performance. Shortages of critical lowest-tier materials, high commodity prices and difficulties in transporting products continue to plague reliable consumption."

The production index dropped to 59.2 in December from 61.5 in November. A lessened 25.6% (NSA) of respondents reported higher production, while 17.4% reported lower production, up from 12.4% in November. The new orders index edged down to 60.4 in December from 61.5 in November. The supplier delivery series dropped to 64.9, its lowest level for the year and from 72.2 in November, indicating quicker product delivery speeds. The inventories index eased to 54.7 from 56.8 in November.

The employment index rose to 54.2 in December from 53.3 during November. A lessened 15.5% (NSA) of respondents reported more hiring and a lessened 12.3% reported a decline in jobs.

The prices paid index declined sharply to 68.2 in December from 82.4 in November and remained well below the June high of 92.1. A lessened 47.4% (NSA) of respondents reported higher prices while an increased 11.0% reported price declines.

In other ISM series not included in the composite, the order backlog figure rose to 62.8 in December from 61.9 (NSA) in November and remained well below the high of 70.6 in May. The new export measure edged lower to 53.6 from 54.0 in November and remained down from a November 2020 high of 57.8. The imports index rose to 53.8 in December from 52.6 in November.

The ISM figures are based on responses from over 400 manufacturing purchasing executives from 20 industries, which correspond to their contribution to GDP in 50 states. These data are diffusion indexes where a reading above 50 indicates expansion. The figures from the Institute for Supply Management can be found in Haver's **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver's **AS1REPNA** database.

38a0435d-c728-4d0c-b780-ae9a4fcb6874_1210104H.jpg

3ebe0db2-b74c-4ed2-a7db-a5cff3c7f1de_1210104I.jpg

- Manufacturing activity grew at a softer pace in December than in November.
- A drop in supplier delivery performance indicates a quicker pace of product delivery.
- Sharply lower prices paid point to declining pricing power.

ISM Manufacturing Index Declined in December

Tom Moeller

590f4406-ccfe-4c1a-861c-f5802b27d3ee_1210104A.jpg

ade6c6e6-a48e-4f63-ab4e-870507afaa3d_1210104B.jpg

**Retail gasoline prices** held at $3.28 per gallon (+45.9% y/y) in the week ended January 3 after falling to that level in the previous week. Haver Analytics adjusts the gasoline price series for normal seasonal variation. The seasonally adjusted price edged higher to $3.41 per gallon from $3.40 per gallon in the previous week.

The price of **West Texas Intermediate crude oil** rose 6.2% last week (58.2% y/y) to $76.05 per barrel in the week ended December 31. It was the highest price in five weeks after falling to $66.90 in the first week of December. Yesterday, the price was $76.08 per barrel. The average price of **Brent crude oil** rose 5.3% (53.4% y/y) to $78.73 per barrel from $74.80 per barrel in the prior week. The price was $78.97 per barrel yesterday.

The price of **natural gas** fell 11.9% to $3.39/mmbtu (+42.4% y/y) in the week ended December 31 from $3.85/mmbtu in the previous week. The price remained down from its recent high of $5.87/mmbtu reached in the second week of October. Yesterday, the price increased to $3.74/mmbtu.

In the four weeks ended December 24, **gasoline demand** increased 17.1% y/y. Demand for **all petroleum products** grew 12.4% y/y. **Crude oil input to refineries** rose 10.6% y/y. **Gasoline inventories** fell 5.9% y/y, while **crude oil inventories** declined 10.3% y/y.

The **supply of gasoline** inventories in the week ending December 24 fell to 24.0 days from 24.8 days in the previous week and remained well below the recent high of 32.9 days in the third week of February. The supply of crude oil fell to 26.7 days, the lowest level since late August.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price data can be found in Haver's **WEEKLY** and **DAILY** databases. Greater detail on prices, as well as the demand, production and inventory data are in **USENERGY**.

c133dca2-ee1c-4cac-8124-c766405938a7_1210104C.jpg

fddee934-79cd-44a2-af97-447158393efc_1210104D.jpg

- Gasoline prices hold steady.
- Crude oil prices continue to strengthen.
- Natural gas prices reverse two weekly increases.

U.S. Energy Prices Are Mixed

7f52d2d6-eda2-4bac-9efa-2af12785b380_1210103N.jpg

dd3c4262-1595-4f3e-b874-dbc539018b6e_1210103O.jpg

The Census Bureau reported that the value of construction put-in-place rose 0.4% (9.3% y/y) during November following a 0.4% October increase, revised from 0.2%. A 0.7% November gain had been expected in the Action Economics Forecast Survey. September's change was revised to +1.0% from -0.1%.

Private construction rose 0.6% (12.5% y/y) in November after a 0.1% uptick. Residential private construction improved 0.9% (+16.3% y/y) after slipping 0.2% in October. Single-family building rose 1.2% (19.4% y/y) after easing in two of the prior three months. Multi-family building slipped 0.3% (+9.6% y/y) after holding steady in October. Home improvement expenditures rose 0.9% (14.4% y/y) in November after little change in the prior month.

Nonresidential private construction improved 0.1% (6.7% y/y) in November after firm gains in each of the prior four months. Transportation spending surged 4.4% (0.3% y/y), the strongest increase in six months. Office building was little-changed (2.9% y/y) after a 0.4% rise and communication construction grew 0.3% (1.5% y/y) after strengthening 1.1% in October. To the downside, heath care construction fell 1.2% (+5.2% y/y) after two consecutive 0.7% increases. Educational construction fell 0.6% (-5.2% y/y) and fully reversed the prior month's gain. Manufacturing construction grew 0.9% (22.4% y/y) following even stronger increases in each of the prior three months. Power building improved 0.1% (7.5% y/y) after rising 0.4% in October.

The value of public construction weakened 0.2% (-0.9% y/y) in November after surging 1.5% in the prior month. Power construction rose 1.3% (50.1% y/y) following a 5.6% surge. Spending on highways and streets weakened 0.8% (+0.2% y/y) after strengthening 1.7% in October. Residential construction declined 2.8% (-3.0% y/y) and reversed the prior month's increase. Health care building fell 1.2% (+13.8% y/y) following a 2.9% surge. Spending on educational buildings improved 0.3% (-6.3% y/y) following no change in October. Transportation building fell 0.5% (+0.7% y/y) after strengthening 2.8% in October.

The construction spending figures, some of which date back to 1946, can be found in Haver's **USECON** database. The expectations reading is in the **AS1REPNA** database.

**What's Holding Back Employment in the Recovery from the COVID-19 Pandemic?** from the Federal Reserve Bank of Cleveland can be found [here](https://www.clevelandfed.org/en/newsroom-and-events/publications/economic-commentary/2021-economic-commentaries/ec-202123-whats-holding-back-employment-in-the-recovery-from-the-covid19-pandemic.aspx).

c1762ff5-2d9f-48dc-961c-e65c272f5a8d_1210103P.jpg

849b2b1e-0c96-48e3-8339-fcef150a5f68_1210103Q.jpg

- Gain is slightly less-than-expected.
- Residential building strengthens but business outlays ease.
- Public sector construction slips following earlier strength.

U.S. Construction Spending Remains Solid in November

719d94e5-5c08-41fb-91fb-4bfd767451ae_1211230T.jpg

0ee390c2-d8d5-4fc5-a866-91c93042f2ba_1211230U.jpg

The ISM-Chicago Purchasing Managers Business Barometer rose to 63.1 in December from 61.8 in November. The Action Economics Forecast had expected a drop to 62.0 from a projection of 67.7 in November. An index above 50 suggests growing business activity in the Chicago area. Haver Analytics constructs an ISM-Adjusted Chicago Business Barometer with methodology similar to the ISM Composite Index. This measure rose to 63.2 from 62.8 in November.

Production rose modestly to 61.9 in December from 61.5 in November. Thirty-eight percent (NSA) of respondents reported a higher level of output and 15% reported a decline. New orders rose to 66.5 in December from 58.2 in November, while order backlogs dropped 5.2 points, to 55.6 from 60.8 in November, reaching the lowest reading this year.

Supplier delivery speeds edged down to 80.5 in December from 83.2 in November. Sixty percent (NSA) of respondents reported slower delivery speeds while none reported quicker speeds. Inventories rose to 62.7 in December from 59.6 in November and hitting a four-year high as firms create buffers for longer lead times.

The employment index declined again to 44.6 in December from 51.6 in November and 56.6 in October, still indicating that firms have a hard time finding qualified workers for available jobs. A reduced 11% (NSA) reported more hiring while an increased 25% reported less.

Prices paid eased to 89.6 in December from 93.8 in November and a multi-decade high of 94.3 in October. Eighty-one percent (NSA) of respondents raised prices while 2% lowered them.

This month's special question asked what firms anticipated was "the biggest challenge to executing plans for the holiday season?" The largest share (36.4%) said global shortages, followed by logistics (25.0%) and staff shortages (22.7%).

The MNI Chicago Report is produced by MNI in partnership with ISM-Chicago. The survey is collected online each month from manufacturing and nonmanufacturing firms in the Chicago area. Summary data are contained in Haver's **USECON** database with detail including the ISM-style index in the **SURVEYS** database.

7b759bd6-c844-4078-973a-2c04e92d3fd1_1211230V.jpg

64cee540-1307-4ae3-ac8c-7909e1490d5c_1211230W.jpg

- The Chicago Business Barometer rose in December, picking up again after November's decline.
- Inventories hit a 4-year high as firms are stockpiling to get ahead of supply-chain disruptions.
- The employment index dipped again in December.

U.S. Chicago Business Barometer Rose to 63.1 in December

Carol Stone, CBE

b0bfcd2c-500c-47a7-813c-a7bd0c8eb7d9_1211230A.jpg

c472ac26-9159-4813-9f8d-f85d22cdde47_1211230B.jpg

Initial claims for unemployment insurance fell 8,000 in the week ended December 25 to a seasonally adjusted 198,000 (-74.0% y/y); the prior week was marginally revised from 205,000 to 206,000 reported initially. The Action Economics Forecast Survey expected 203,000 claims for the latest week. The 4-week moving average was 199,259, down from 206,500; the latest count was not just a new post-pandemic low, but is the lowest since October 25, 1969, when it was also 199,250.

Initial claims for the federal Pandemic Unemployment Assistance (PUA) program in the December 25 week were 897, down from 1,554 the week before and -99.7% y/y. This program expired on September 4. These claims averaged 107,756 per week during August, the last full month of the program. The PUA program provided benefits to individuals who are not eligible for regular state unemployment insurance benefits, such as the self-employed. Given the brief history of this program, these and other COVID-related series are not seasonally adjusted.

In the December 18 week, continued weeks claimed for regular state unemployment insurance were 1.716 million (-67.7% y/y) down from 1.856 million the week before; that earlier week was revised from 1.859 million. The insured unemployment rate decreased to 1.3% in the December 18 week from 1.4% the week before and was the lowest since 1.2% during the week of March 14, 2020.

In the week ended December 11, continued weeks claimed in the Pandemic Assistance Program (PUA) rose slightly to 137,421 from 133,763 the week before but down 98.5% from a year ago. This number of continued weeks claimed compares to 4.896 million in the last week of the program, September 4. Continued weeks claimed for Pandemic Emergency Unemployment Compensation (PEUC) also increased, rising to 117,721 in the December 11 week from 116,434 the prior week and well below the 3,644,555 claims during the last week of the program on September 4. This program covered people who had exhausted their state unemployment insurance benefits.

In the week ended December 11 the total number of all state, federal, PUA and PEUC continued claims was 2.177 million, up from 2.138 million the week before. These figures are not seasonally adjusted.

The state insured rates of unemployment in regular programs vary widely. In the week ending December 11, the highest insured unemployment rates were in Alaska (3.13%), California (2.67%), New Jersey (2.44%), Illinois (2.29%) and Minnesota (2.26%). The lowest rates were in Alabama (0.32), South Dakota (0.39%), Nebraska (0.40%), Kansas (0.42%) and New Hampshire (0.45%) Other state insured rates of unemployment in regular programs included Pennsylvania (1.53%), New York (1.75%), Texas (0.99%), and Florida (0.56%). These state rates 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 and is in the **AS1REPNA** database.

77f08a6b-1e49-475d-aa94-8bff484e30e1_1211230C.jpg

2a3fd001-527d-4b2d-823b-b1f8ab7119ba_1211230D.jpg

- Initial claims 4-week average lowest since 1969.
- Continued claims in regular programs down almost 66% from a year ago.
- Insured jobless rate 1.3%, lowest since 1.2% in March 2020.

U.S. Initial Unemployment Insurance Claims Decrease

9247cc3b-5328-4b16-ad40-7847b7440c14_1211229T.jpg

62c7cd6a-c8cd-45ec-ba2b-74a84b3fcd0a_1211229U.jpg

Pending home sales decreased 2.2% in November (-2.7% y/y) after rising 7.5% in October. Apart from October's surge, sales were the highest since last January. These sales are measured at contract signing, as described below.

By region in November, sales fell in all four areas. They declined the most in the Midwest, 6.3% (+0.2% y/y), but they had been the strongest there in October, gaining 11.9%. The next largest November decline was in the West, 2.2% (-4.6% y/y) after a 2.5% increase in October. Sales fell 0.7% (-1.3% y/y) in the South after October's sizable 7.7% gain. Contract signings were little changed in the Northeast, -0.1%, but that was still 8.5% lower than November 2020; they had advanced 6.9% in October.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **SURVEYW** database.

- Decrease reverses some of prior month's advance.
- Sales weakest in Midwest, which had been strongest in October

U.S. Pending Home Sales Ease in November

Sandy Batten

d8e36721-7acb-406d-9393-fba3af2df0cf_1211229X1.jpg

ecc68221-3db0-4d67-b5c6-45af921d4981_1211229X2.jpg

The advance estimate of the U.S. international trade deficit in goods widened to $97.78 billion in November, a new monthly record, from $83.20 billion in October. The Action Economics Forecast Survey expected a much smaller widening of the deficit to $86.3 billion. Exports fell 2.1% m/m (+22.2% y/y) in November following their 11.0% m/m jump in October. Imports increased 4.7% m/m (+19.1% y/y), making up for meager 0.8% and 0.9% monthly gains in October and September, respectively. The sharp widening of the deficit in November essentially offset the marked narrowing of the deficit in October. So, for the first two months of the fourth quarter, the goods trade deficit is on course to be a neutral factor in fourth quarter's GDP.

By end-use category, the decline in exports in November was widely spread with only exports of foods, feeds and beverages posting a monthly increase (+4.3% m/m). Exports of industrial supplies fell 2.3% m/m; capital goods exports were down 3.0% m/m; exports of automotive vehicles and parts declined 2.3% m/m; nonauto consumer goods exports dropped 2.1% m/m; and other exports slumped 7.2% m/m. Each of these categories had posted meaningful monthly increases in October.

The November increase in imports was also widely spread across end-use categories and was led by a 10.0% m/m jump in imports of industrial supplies and materials (which include petroleum products) following a 0.9% m/m decline in October. Imports of foods, feeds and beverages rose 3.4% m/m (+1.9% m/m in October); capital goods exports edged up 0.3% m/m after a 0.7% m/m drop in October; imports of automotive vehicles and parts increased 4.5% m/m on top of a 5.7% monthly gain in October; nonauto consumer goods imports rose 4.5% m/m following a 1.5% increase in October; and other imports jumped up 6.5% m/m versus 1.5% m/m in October.

The advance international trade data can be found in Haver's **USECON** database. The expectation figure is from the Action Economics Forecast Survey, which is in **AS1REPNA**.

6a0fca13-8022-484a-bf3d-1c24ac861c7a_1211229X3.jpg

72c525c2-7065-4b14-8422-93c7e8d9ad3e_1211229X4.jpg

- Widely spread decline in exports.
- Widely spread increase in imports, led by industrial supplies.

U.S. Goods Trade Deficit Widens to New Record in November

3df898e7-2cb4-4684-b473-98e1ca397a42_1211228BJ.jpg

dedb238e-fbd5-4ecc-a0b5-b94203b0b330_1211228BK.jpg

The Federal Housing Finance Agency (FHFA) House Price Index increased 1.1% (17.4% y/y) in October following a 0.9% (17.8% y/y) in September. House prices continue to rise but at a slower pace than seen in the spring. The home price series dates back to January 1991.

Monthly house prices ranged from -0.3% in the New England region to +1.7% in the East South Central and Pacific regions. Year-on-year price changes ranged from 13.2% in the West North Central region to 23.2% in in the Mountain region.

Regional details show house prices were strongest in the East South Central where they rose 1.7% (18.9% y/y) and in the Pacific states where they rose 1.7% (19.9% y/y). Prices rose 1.4% (19.4% y/y) in the South Atlantic region, 1.3% (14.5% y/y) in the Middle Atlantic region and 1.1% (23.2% y/y) in the Mountain region. Softer monthly gains took place in the West South Central region, where prices rose 0.9% (17.2% y/y), in the East North Central region where prices rose 0.7% (13.9% y/y) and in the West North Central where prices rose 0.6% (13.2% y/y). The only monthly drop took place in the New England region, -0.3% (15.4% y/y), though it follows a sharp 1.7% rise in September.

The FHFA house price index is a weighted purchase-only index that measures average price changes in repeat sales of the same property. An associated quarterly index includes refinancings on the same kinds of properties. The indexes are based on transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included.

The FHFA data are available in Haver's **USECON** database.

8f5ba6e3-8239-451e-9f58-27f32610d6d3_1211228BL.jpg

7389e025-de93-4ff8-8bd2-38d1bc94ff41_1211228BM.jpg

- Gains are smaller than in the spring.
- Monthly house prices range is wide.
- In East South Central and Pacific regions, prices accelerated noticeably.

U.S. FHFA House Price Increase Strengthened in October

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Winnie Tapasanun

260406N15.jpg

260406O15.jpg

The U.S. ISM Services PMI decreased to 54.0 in March following a 2.3-point rise to 56.1 in February (the highest reading since July 2022), according to today’s report by the Institute for Supply Management, indicating expansion in the services sector for the 21st consecutive month but at a slower pace. The March index, while above 50.8 in March 2025 and a low of 49.4 in June 2024, remained below a high of 55.5 in October 2024 and a record-high 67.5 in November 2021. The 12-month average was 52.3, pointing to continued growth in the U.S. services sector. The Action Economics Forecast Survey had expected 54.9 for March.

Haver Analytics constructs a composite index combining the services index and the manufacturing reading. This index fell to 53.8 in March after a 2.0-point increase to 55.7 in February, signaling expansion for the 10th straight month, albeit at a slower rate. The latest reading was above 50.6 in March 2025 and a low of 49.3 in June 2024, while remaining below a record-high 66.7 in November 2021. These series date back to July 1997.

In the latest services survey, the business activity index declined to 53.9 in March after rising to 59.9 in February, indicating continued expansion in business activity for 21 consecutive months, though at the slowest pace since September. The index was above a low of 50.0 in June 2024 but below a record-high 70.9 in November 2021. In March, 22.8% of respondents (NSA) reported higher activity while 14.6% reported an activity decline. The new orders index rose to 60.6 in March after increasing to 58.6 in February, reflecting expansion in new orders for the 10th straight month and the highest level since February 2023. The index was above its recent low of 47.2 in May 2025 but below a high of 61.0 in February 2023 and a record-high 69.2 in October 2021. In March, 32.0% of respondents (NSA) reported higher new orders while a lessened 12.6% reported declines. Meanwhile, the supplier deliveries index (NSA) increased to 56.2 in March from 53.9 in February, indicating slower supplier delivery performance for the 16th straight month after one month in faster territory in November 2024.

On the labor front, the employment index fell to 45.2 in March after rising to 51.8 in February, showing employment activity in the services sector contracted for the first time since November and at the lowest level since December 2023. The latest reading was above a low of 43.5 in December 2023 but below a high of 54.1 in June 2023 and a high of 58.9 in April 2021. A reduced 10.7% of respondents (NSA) indicated higher employment in March while an increased 18.4% reported declines.

On the inflation front, the prices index jumped to 70.7 in March from 63.0 in February, indicating prices paid by services organizations for materials and services had risen (i.e., above 50) since June 2017 and at the fastest pace since October 2022. The index was above a low of 53.9 in March 2024 and a low of 55.1 in June 2023 but significantly below a peak of 83.7 in March 2022. An increased 45.7% of respondents (NSA) reported higher prices in March while only 1.2% reported price declines.

Additionally, the new export orders index dropped to 50.7 in March from 57.2 in February, showing new export orders expanded for the third time in four months but at a slower rate. The imports index rose to 55.2 in March from 51.8 in February, registering the third expansion in four months and the highest level since January 2024. The inventories index declined to 54.8 in March from 56.4 in February, indicating inventories expanded for the fourth time in five months but at a slower pace. The inventory sentiment index slipped to 54.3 in March from 55.3 in February, showing continued expansion since May 2023. The backlog of orders index fell to 53.6 in March from 55.9 in February, marking the second successive month of expansion following 11 straight months of contraction. These series are not seasonally adjusted and not included in the ISM Services PMI total.

The ISM Services PMI is a composite index consisting of four equally weighted diffusion indexes: Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector; below 50 suggests contraction. Supplier Deliveries is the only ISM index that is inversed; a reading above 50 indicates slower deliveries. The ISM figures are available in Haver's **USECON** database, with additional detail in the **SURVEYS** database. The expectations figure from Action Economics is in the **AS1REPNA** database.

260406P15.jpg

260406Q15.jpg

- ISM Services PMI at 54.0 in Mar., down 2.1 pts. from Feb.; below forecasts but above the 12-month avg. of 52.3.
- Business Activity (53.9, 21st straight month of expansion); New Orders (60.6, 10th consecutive month of expansion and fastest since Feb. ’23); Employment (45.2, first contraction since Nov.); Supplier Deliveries (56.2 vs. 53.9).
- Prices Index (70.7) indicates prices rising since June ’17, the fastest pace since Oct. ’22.

U.S. ISM Services PMI Slips in March, Still Indicating Expansion for the 21st Straight Month

Tian Yong Woon

In this week’s Letter, we examine the first-round price impacts of the surge in oil prices stemming from the ongoing Middle East conflict in Asia. Despite recent rhetoric and reports suggesting a potentially swift resolution, the conflict continues to unfold, with a ceasefire hanging in the balance, and with some measures of shipping volumes through the Strait of Hormuz still reduced to a trickle. At the same time, crude oil prices have been whipsawing amid shifting market perceptions about the persistence of the current supply shock (chart 1). The initial effects of higher oil prices are already showing up in hard data, particularly in energy- and fuel-related inflation across Indonesia, South Korea, and Vietnam (chart 2). In response, several governments have rolled out sizeable subsidy programmes to cushion rising energy costs, though these measures come with significant fiscal strain.

We also assess recent consumer inflation expectations in South Korea and Taiwan, which show early signs of edging higher (chart 3), although there is as yet no clear evidence of a meaningful unanchoring. To add further nuance, our latest Blue Chip survey suggests that most panellists expect only a limited and temporary pass-through from higher energy prices to core inflation, though a non-trivial minority anticipate a more persistent effect (chart 4). On the policy front, respondents broadly expect central banks to delay easing while avoiding outright tightening, with outcomes likely to diverge across regions (chart 5). In the near term, upcoming policy decisions in India, New Zealand, and South Korea—alongside other key data releases—will provide a useful test of these expectations (chart 6).

**The Middle East conflict**
The Middle East conflict continues to rage, with IMF-tracked shipping volumes through the Strait of Hormuz still reduced to a trickle. Meanwhile, crude oil prices remain volatile, gyrating alongside shifting perceptions over how soon normal oil flows might resume. In reality, there is still little sign of a substantive resolution, and no agreement to fully reopen the strait appears imminent, suggesting that oil flows are likely to remain constrained at low levels in the near term. That said, some investors are closely monitoring developments following reports of discussions around a potential 45-day ceasefire, which could pave the way toward a more lasting resolution. Until then, and absent any meaningful supply relief, crude oil prices—and by extension, energy-related inflation—are likely to face continued upward pressure, particularly for oil-dependent, importing economies.

260406T1.jpg

**Initial price impacts**
The initial inflation concerns among policymakers and investors stemming from the surge in oil prices are now beginning to show up in the data, as illustrated in chart 2. The latest March readings—capturing the period after the onset of the Middle East conflict—already point to a sharp acceleration in energy-related prices on a year-ago basis. Indonesia’s energy CPI basket has risen by around 9%, while diesel prices in South Korea have jumped 17%. Vietnam’s retail gasoline prices have seen an even more pronounced increase, at roughly 25.6%. Given the scale of these price surges, and their direct impact on everyday essentials—particularly fuel for daily commutes and broader economic activity—governments across Asia have begun rolling out sizeable subsidy programmes. These measures, often implemented at significant fiscal cost, aim to cushion the burden on households and firms. For instance, South Korea’s finance ministry proposed a supplementary budget of around $17.3 billion in late March to support low-income households, youth, and businesses amid higher oil prices, with approval expected by April 10. Meanwhile, Indonesia has allocated approximately $22.4 billion toward energy subsidies and support for selected energy and utilities firms to help keep prices affordable.

260406T2.jpg

**Consumer inflation expectations**
What policymakers are likely to focus on—beyond the immediate price impacts—is how the recent surge in oil prices feeds into inflation expectations. If left unanchored, these expectations could pose a far greater challenge than the supply-driven price shock itself, including reduced monetary policy effectiveness in reining in inflation and the risk of a self-fulfilling inflation cycle—though it is worth noting that such dynamics are not yet close to materialising. So far, there are some early, albeit inconclusive, signs that near-term consumer inflation expectations are beginning to drift higher in certain economies. As shown in chart 3, one-year-ahead inflation expectations edged up to 2.7% in March, while in Taiwan, consumer sentiment regarding domestic price trends over the next six months has turned notably more pessimistic relative to overall confidence.

260406T3.jpg

**The latest Blue Chip survey**
Turning to investor perspectives on how higher energy prices may feed into inflation, our special questions in the latest Blue Chip Financial Forecasts (BCFF) survey offer some useful nuance. As shown in chart 4, around two-thirds of panellists expect only a limited and temporary pass-through from higher oil prices to core inflation. That said, a non-trivial minority (31%) anticipate a more moderate and persistent pass-through. This is notable given the focus on core inflation, and underscores how energy prices can generate second-round effects even in typically non-energy components, reflecting the pervasive role of energy in everyday economic activity—from manufacturing to the upkeep of a wide range of goods and services.

260406T4.jpg

Delving deeper, we also asked panellists about their views on the prospective path of central bank policy should energy-driven inflation prove persistent. As shown in chart 5, responses broadly coalesce around two themes: central banks are likely to delay easing rather than tighten, and policy responses will vary meaningfully across regions. The former is already playing out to some extent in recent central bank decisions across Asia, with several explicitly citing the ongoing Middle East conflict as a reason to remain vigilant on inflation and refrain from easing policy prematurely. As for the latter, there are already signs of divergence in how different central banks are approaching the situation.

260406T5.jpg

**The week ahead**
Looking to the week ahead, there will be ample opportunities to assess whether investor expectations for central bank policy moves play out across Asia, with several rate decisions due—most notably in India, New Zealand, and South Korea. Also on the docket are China’s March CPI print and a range of Japan-related releases. Policymakers are likely to remain focused on balancing inflation control with supporting growth and maintaining currency stability. For now, and absent offsetting domestic factors, expectations for further near-term easing have been tempered by rising inflation risks. In China, recent CPI readings point to a modest pickup, while producer price deflation has begun to ease after a prolonged period of weak or negative inflation.

260406T6.jpg

Asia

Economic Letter from Asia: First-Round Effects

Michael J. Moran

260403A.jpg

260403B.jpg

The report on payroll employment for March was impressive when viewed in isolation. Job growth was strong at 178,000, and the advance was broadly based. The construction and manufacturing sectors both posted solid gains, and the service-producing sector registered its firmest performance in more than a year. However, the gain might be viewed as a continuation of an unusual bout of random volatility. The March advance followed a notable drop in February (-133,000, revised down from -92,000), which followed an upside surprise in January (160,000, revised up from 126,000).

To be sure, statistical noise has been a factor in the past three months, but the results also represent an encouraging shift in job growth from that in the second half of last year, when employment rose only marginally in the third quarter and fell in the fourth. The net change in the past three months seems to signal that job growth is not drying up. The net advance so far this year is far from brisk, but it is clearly in the plus column and noticeably better than results in late 2025.

The unemployment rate also might be viewed as favorable, as it dipped 0.1 percentage point to 4.3%, although it was a “soft” decline. That is, employment as measured by the household survey declined 64,000, but the size of the labor force fell by a larger amount (off 396,000). Still, the jobless rate has climbed only modestly higher since the labor market started to ease in 2023, and it has inched lower in the past few months.

Unemployment has been contained despite modest hiring because layoffs also have been light. Initial claims for unemployment benefits have moved sideways in the past few years, indicating no change in the pace of layoffs. This pattern is confirmed by terminations data in the report on job openings and labor turnover (JOLTs) from the Bureau of Labor Statistics.

A supply-side shift in the labor market also has helped to contain the unemployment rate. Growth in the size of the labor force has slowed, and with fewer individuals seeking employment, those searching are more easily absorbed. Measures of the size of the labor force can be difficult to assess because there are breaks in the series every year. The Bureau of Labor Statistics adjusts the population controls used in its estimating procedure every January without revising past data to align with the new estimates. Thus, every January involves a discontinuity in the series, which will distort year-over-year changes.

However, Haver Analytics maintains a smoothed series originally developed by BLS to eliminate the breaks in the labor force data. As shown in the chart below, the smoothed series on the size of the labor force had been growing at a pace centered on 1.2% through 2022, but it has slowed irregularly since then (an observation for October is not available because of limited data collection during the government shutdown). The overall labor force is still growing, but the slower pace means fewer individuals looking for work, which most likely results in fewer being counted as unemployed.

The BLS collects data every month on both native-born and foreign-born individuals in the labor force. The breaks in these series are an issue, and Haver does not maintain smoothed series. However, the use of moving averages achieves enough smoothing to provide a sense of underlying changes. The native-born labor force has moved erratically in the past couple of years, but it has continued to advance. The foreign-born labor force, in contrast, seems to have peaked in mid-2025 and has generally declined since then.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

260403C.jpg

260403D.jpg

- The jump of 178,000 in payroll employment in March easily exceeded the expected gain of 51,000.
- Following a net gain in January and February, the employment setting seems to have brightened slightly.
- A dip in the unemployment rate continued the recent pattern of marginal changes.

Payroll Employment: Another Surprise in March, The Third Consecutive

Robert Brusca

260403E.jpg

French manufacturing industrial production was flat in February after a January rebound; output rose by 0.2% following a 0.8% decline in December.

The components of industrial production in February showed 2.6% increase in consumer durables, a 0.4% increase in consumer nondurables, flat output from capital goods, and a 0.7% month to month decline in intermediate output.

Sequentially, French output had been growing at a slow, steady pace of 0.8% at an annual rate over both 12 months and six months, but then slipped to a 6.1% contraction at an annual rate over three months. Consumer durable goods output on this span shows consistent increases, but there are no trends to clear acceleration or deceleration. Consumer nondurables trace an accelerating path of moderate means from -1.8% over 12 months, to -0.4% over six months, and then rising at a 5.5% annual rate over three months. Capital goods output is moving in the opposite direction, growing by 3.4% over 12 months, slowing to a 0.7% annual pace over six months, and then contracting at a 9.5% annual rate over three months. Intermediate goods output is falling at 0.8% pace over 12 months, but then it switches to an expansion rate of 0.8% over six months and 0.6% and over three months. There's nothing remarkable about these patterns, except there's some acceleration, some deceleration, and a lot of mulling about at low growth rates.

As a separate item, French auto production is slipping and decelerating, falling by 7.1% at an annual rate over 12 months, falling at a 7.9% pace over six months, and then plunging at a 19.3% annual rate over three months. On these same horizons, motor vehicle registrations fall by 14.7% over 12 months; the weakness pares back to an 11.2% annual rate decline over six months, and then it steps up to a 22.1% decline at an annual rate over three months. French demand for autos is not in good shape.

In the quarter to date—now two months into the first quarter—manufacturing industrial production is falling at a 0.8% annual rate. That pace is boosted by 9.4% annual rate gain in consumer durables output but restrained by just a 0.2% annual rate increase in consumer nondurable goods. Capital goods output is falling at a 1.9% annual rate, while intermediate goods output is falling at a 1% annual rate. Also in the quarter to date, automobile production is plunging at a 24.3% annual rate, while on the demand side, motor vehicle registrations are falling at a 15% annual rate.

French manufacturing data are somewhat confusing. The chart shows that the industrial production trend has been showing consistent increases over 12 months, but it has recently been pulling back relatively sharply. On the other hand, the manufacturing PMI for France has been consistently negative going back to mid-2022 and only in early 2026 has the manufacturing PMI been posting some values above the 50% mark, indicating that output was starting to actually expand. In March, the PMI reading for manufacturing has slipped back by the thinnest margin below the 50% mark.

260403.jpg

Of course, events in the Middle East make everything more speculative, with the war effectively closing the Strait of Hormuz and no certainty about how or when that is going to be sorted out. In the meantime, the potential threat of ongoing oil price pressures has put both the ECB and the Bank of England in a position to be more wary with policy, and they warned markets about the potential for rate hikes as soon as their next meetings are engaged. That also raises questions about the outlook for growth. But we continue to track and chronicle trends in the data. It's also quite clear that we could have events that will play out that could completely undermine these trends before they get a chance to run to conclusion. It's an important time to be wary and watch all developments—a lot is in play.

France

French IP Waffles

260402A5.jpg

260402B5.jpg

Initial claims for unemployment insurance declined by 9,000 to 202,000 in the week ending March 28, from 211,000 in the week ending March 21, revised from 210,000. The four-week average declined 3,000 to 207,750 in the week ending March 28, from 210,750 the March 21 week, revised from 210,500. The Forecast Survey looked for 212,000 claims to have been filed.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—rose by 25,000 to 1.841 million in the week ending March 21, from 1.816 million in the week ending March 14. The four-week moving average declined to 1.839 million in the latest week from 1.846 million in the March 14 week. This is the lowest level for this average since September 28, 2024 when it was 1.834 million. The insured unemployment rate remained at 1.2% in the week of March 21. It has remained at that level since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending March 14, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.73%), Massachusetts (2.66%), Washington (2.39%), Minnesota (2.31%), California (2.17%), and New York (2.01%). The lowest rates were in Florida (0.31%), Louisiana (0.32%), Arkansas (0.36%), Alabama (0.38%), and North Carolina (0.40%). Rates in other notable states include Illinois (1.99%), Connecticut (1.82%), Pennsylvania (1.72%), and Texas (1.07%). 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.

260402C5.jpg

260402D5.jpg

- New claims declined by 9,000 to 202,000.
- Continuing claims rose by 25,000 to 1.841 million.
- The insured unemployment rate remained at 1.2%.

U.S. Initial Unemployment Claims Edged Down in the Week of March 28