Tom Moeller

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The job market remains on a firm footing. Initial claims for unemployment 
insurance during the week ended October 18 rose to 283,000 (-18.4% y/y) from 266,000, 
revised from 264,000. The Action Economics Forecast Survey expected 280,000 claims in 
the latest week. The four-week moving average of initial claims declined to 281,000. 
It was the lowest level since May 2000.

The latest claims figure covers the survey period for October nonfarm
payrolls. There was a 2,000 increase (0.7%) in claims from the September period.
During the last ten years, there has been a 73% correlation between the level of
claims and the m/m change in nonfarm payroll employment.
Continuing claims for unemployment insurance in the week ended October 11
declined 38,000 (-18.4% y/y) to 2.351 million. The four-week moving average fell
to 2.381 million, the lowest level since May 2006. The insured rate of
unemployment held at 1.8% for the sixth straight week, the lowest level since
May 2007.

By state, in the week ended October 4, the insured rate of unemployment
continued to vary greatly with Wyoming (0.80%), Indiana (0.83%), New Hampshire
(0.86%), Virginia (0.89%), Ohio (1.03%) and Texas (1.13%) at the low end of the
range. At the high end were Massachusetts (2.06%), Pennsylvania (2.08%), Nevada
(2.24%), California (2.33%), New Jersey (2.70%) and Alaska (2.80%). These data
are not seasonally adjusted.

Data on weekly unemployment insurance 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 survey, carried in the AS1REPNA database.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" 0801 >Unemployment Insurance (000s)</th>
 <th 0801 >10/18/14</th>
 <th 0801 >10/11/14</th>
 <th 0801 >10/04/14</th>
 <th 0801 >Y/Y %</th>
 <th 0801 >2013</th>
 <th 0801 >2012</th>
 <th 0801 >2011</th>
 </tr>
 </thead>
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 <td class="firstcol" 0801 >Initial Claims</td>
 <td 0801 >283</td>
 <td 0801 >266</td>
 <td 0801 >287</td>
 <td 0801 >-18.4</td>
 <td 0801 >343</td>
 <td 0801 >375</td>
 <td 0801 >409</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" 0801 >Continuing Claims</td>
 <td 0801 >--</td>
 <td 0801 >2,351</td>
 <td 0801 >2,389</td>
 <td 0801 >-18.4</td>
 <td 0801 >2,977</td>
 <td 0801 >3,319</td>
 <td 0801 >3,742</td>
 </tr>
 <tr>
 <td class="firstcol" 0801 >Insured Unemployment Rate (%)</td>
 <td 0801 >--</td>
 <td 0801 >1.8</td>
 <td 0801 >1.8</td>
 <td 0801 >2.2 
 (10/13)</td>
 <td 0801 >2.3</td>
 <td 0801 >2.6</td>
 <td 0801 >3.0</td>
 </tr>
 </tbody>
 </table>
 
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The job market remains on a firm footing. Initial claims for unemployment insurance during the week ended October 18 rose to 283,000 (-18.4% y/y) from 266,000, revised from 264,000. The Action Economics Forecast Survey expected [...]

U.S. Initial Unemployment Insurance Declines to 2000 Low

Robert Brusca

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European markets reacted positively overnight to the release of the PMI data by Markit. The table below summarizes the recent PMI data. The table is a mixture of flash and historic (revised-flash or finalized) data. Actually, the flash reading for October is below the flash reading for September. But since the September flash reading was revised lower, the October flash is now higher than the finalized September reading. This is one of the reasons why we should be cautious about having too much optimism about the October numbers.

A second reason for caution is that the month-to-month increase is very small and that the current standing of the PMI values for October is still not very high. A third reason is that the momentum for the PMI gauges still has not been reversed to a positive gradient from a negative profile in any significant way.

Let's look first at the percentile standing. These are represented by the queue standings which place the current flash reading in its percentile queue among all previous flash readings. On this basis, the overall EMU (composite) standing is in the 53.7 percentile of its historic queue. That's barely above its historic median which lies at the 50th percentile. That's hardly very reassuring. The EMU manufacturing reading is in its 49.3 percentile, below its historic median. That, clearly, is a disappointment. The EMU services reading is in its 61.2 percentile. That is a more moderate reading, but it is still moderate and not strong or even firm.

It's true that the Markit indices did not continue to erode this month, but to take heart from that is to admit some grim expectations. 

To evaluate the significance of the month's gains, let's look at the three-month, six-month and 12-month averages. For the EMU overall, they continue to slide. The current level in October is still below its three-month average. The same is true of EMU manufacturing. For services, there is the smallest of uptrends but the October reading is still below the three-month average reading. None of this is good momentum nor is it in the right direction, generally.

Germany and France both overall and in their components fail the momentum tests as well. German and French services sectors - the same as for EMU- show some slow crawl higher, but in both cases the October reading for services is below its relevant three-month average.

European investors are scared. They rallied on news that October was not worse than expected, but it was not very good. That means the rally is on very thin ice.

Geopolitical tensions remain. Today a Russian jet was intercepted over the Baltic Sea. The Swedes are still looking for a mystery Submarine that invaded its waters. Ukraine is poised for elections and is worried that they will be interrupted or interfered with.

The economics for Europe is still on shaky ground. The geopolitics is in worse shape than that. There was not much in this report for markets to cheer about. Granted the Chinese manufacturing index `improved' but that was thin gruel for good news as well. Be careful what you choose to call good news. The news today was not worse, but it falls far short of being reassuring.


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European markets reacted positively overnight to the release of the PMI data by Markit. The table below summarizes the recent PMI data. The table is a mixture of flash and historic (revised-flash or finalized) data. Actually, the [...]

EMU Flash PMIs Show Life But Not Much Pulse

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The consumer price index gained 0.1% during September (1.7% y/y)
following an unrevised 0.2% August decline. The rise matched expectations in the
Action Economics Forecast Survey. Consumer prices excluding food and energy
also ticked 0.1% higher (1.7% y/y) following no change. Expectations had
been for a 0.2% increase.
Weakness in pricing power was paced by a 0.7% decline (-0.6% y/y) in energy
prices. Fuel oil prices led the way lower with a 2.1% drop (-3.2% y/y), down for
the seventh straight month. Gasoline prices fell 1.0% (-3.6% y/y) on the heels
of a 4.1% decline. Electricity prices were off 0.7% (+2.8% y/y) but natural gas
prices rebounded 1.6% (5.8% y/y) following four straight months of decline.
Continued strength in food prices offset some of this weakness with a
0.3% increase (3.0% y/y). Meat prices remained strong, posting a 1.2% rise
(13.0% y/y). Dairy product prices gained 0.5% (4.9% y/y) but egg prices declined
2.8% (+8.5% y/y). Offsetting this strength was a 0.4% decline (-0.1% y/y) in
cereal &amp; bakery product prices. Fruit &amp; vegetable costs ticked 0.1%
higher (0.9% y/y) and nonalcoholic beverage costs gained 0.2% (0.2%
y/y).&nbsp;&nbsp;&nbsp;&nbsp;
Continuing weak were prices for goods less food and energy, unchanged
for the month and down 0.2% y/y. Furniture &amp; bedding prices were off another
0.7% (-3.5% y/y) but appliance costs gained 0.5% (-4.5% y/y). New vehicle prices
were unchanged&nbsp; (0.3% y/y) but used vehicle prices slipped 0.1% (-0.4% y/y).
Recreation product prices improved 0.2% (-2.2% y/y) and apparel prices were
unchanged (0.5% y/y). Continuing to show strength were educational books &amp;
supplies prices which rose 0.3% (4.6% y/y).&nbsp;&nbsp;&nbsp;&nbsp;
Core service prices improved 0.2% (2.4% y/y). Shelter costs (32% of
the CPI) rose 0.3% (3.0% y/y) as owners equivalent rent of primary residences increased
0.2% (2.7% y/y). Tuition &amp; other educational costs edged 0.1% higher (3.2%
y/y) while medical care services prices also gained 0.1% (1.7% y/y). Public
transportation prices slipped 0.1% (-2.2% y/y) while recreation services prices
were roughly stable (+1.3% y/y).&nbsp;&nbsp;&nbsp;
The consumer price data is available in Haver's USECON database while
detailed figures can be found in CPIDATA. The expectations figure is from
Action Economics and is found in the AS1REPNA database.
<table class="centered" border="0" width="1871" cellspacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="785">Consumer Price Index (%)</th>
 <th scope="col" width="154">Sep</th>
 <th scope="col" width="154">Aug</th>
 <th scope="col" width="154">Jul</th>
 <th scope="col" width="155">Sep Y/Y</th>
 <th scope="col" width="155">2013</th>
 <th scope="col" width="155">2012</th>
 <th scope="col" width="155">2011</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="785">Total</td>
 <td align="center" width="154">0.1</td>
 <td align="center" width="154">-0.2</td>
 <td align="center" width="154">0.1</td>
 <td align="center" width="155">1.7</td>
 <td align="center" width="155">1.5</td>
 <td align="center" width="155">2.1</td>
 <td align="center" width="155">3.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="785">Total less Food &amp; Energy</td>
 <td align="center" width="154">0.1</td>
 <td align="center" width="154">0.0</td>
 <td align="center" width="154">0.1</td>
 <td align="center" width="155">1.7</td>
 <td align="center" width="155">1.8</td>
 <td align="center" width="155">2.1</td>
 <td align="center" width="155">1.7</td>
 </tr>
 <tr>
 <td class="firstcol" width="785">&nbsp;&nbsp;Goods less Food &amp; Energy</td>
 <td align="center" width="154">0.0</td>
 <td align="center" width="154">-0.1</td>
 <td align="center" width="154">-0.0</td>
 <td align="center" width="155">-0.2</td>
 <td align="center" width="155">-0.0</td>
 <td align="center" width="155">1.3</td>
 <td align="center" width="155">1.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="785">&nbsp;&nbsp;Services less Energy</td>
 <td align="center" width="154">0.2</td>
 <td align="center" width="154">0.0</td>
 <td align="center" width="154">0.1</td>
 <td align="center" width="155">2.4</td>
 <td align="center" width="155">2.4</td>
 <td align="center" width="155">2.4</td>
 <td align="center" width="155">1.8</td>
 </tr>
 <tr>
 <td class="firstcol" width="785">&nbsp;Food</td>
 <td align="center" width="154">0.3</td>
 <td align="center" width="154">0.2</td>
 <td align="center" width="154">0.4</td>
 <td align="center" width="155">3.0</td>
 <td align="center" width="155">1.4</td>
 <td align="center" width="155">2.6</td>
 <td align="center" width="155">3.7</td>
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 <td class="firstcol" width="785">&nbsp;Energy</td>
 <td align="center" width="154">-0.7</td>
 <td align="center" width="154">-2.6</td>
 <td align="center" width="154">-0.3</td>
 <td align="center" width="155">-0.6</td>
 <td align="center" width="155">-0.7</td>
 <td align="center" width="155">0.9</td>
 <td align="center" width="155">15.2</td>
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&nbsp;
&nbsp;
U.S. Mortgage Loan Applications Improve With Lower
Interest Rates 
by <a href="http://haver.com/comment/Moeller.html">Tom Moeller</a>&nbsp;&nbsp;October
8, 2014
The Mortgage Bankers Association reported that their total Mortgage Market
Volume Index increased 3.8% last week (-23.1% y/y) following two week's of
decline. Applications remained near the lowest level of the economic recovery.
Applications to refinance an existing loan jumped 5.0% (-31.9% y/y)
following two weeks of decline. Home purchase applications gained 2.4%
(-8.1% y/y) after two of being roughly unchanged.
Mortgage financing costs remained under control. The effective interest rate
on a 15-year mortgage edged lower to 3.56%. The effective rate on a 30-year
fixed rate loan fell to 4.35%. The rate on a Jumbo 30-year loan slipped to
4.29%. For adjustable 5-year mortgages, the effective interest rate fell sharply
to 3.33% and remained down versus last year's 3.74% peak.
The average mortgage loan size jumped w/w to $246,300 but remained below the
$253,800 May peak. For home purchases, the average loan size rose to $275,000,
down versus the $280,500 high. For refinancings, it increased w/w to $224,000,
off from the $232,200 high.
Applications for fixed interest rate loans declined 24.2% y/y while
adjustable rate loan applications were off 6.2% y/y.
The survey covers over 75 percent of all U.S. retail residential mortgage
applications, and has been conducted weekly since 1990. Respondents include
mortgage bankers, commercial banks and thrifts. The base period and value for
all indexes is March 16, 1990=100. The figures for weekly mortgage applications
and interest rates are available in Haver's SURVEYW database.
<table class="centered" border="0" width="1871" cellspacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" 0925 0918 width="845">MBA Mortgage
 Applications (SA, 3/16/90=100)</th>
 <th scope="col" 0925 0918 width="146">10/17/14</th>
 <th scope="col" 0925 0918 width="146">10/10/14</th>
 <th scope="col" 0925 0918 width="146">10/03/14</th>
 <th scope="col" 0925 0918 width="146">Y/Y%</th>
 <th scope="col" 0925 0918 width="146">2013</th>
 <th scope="col" 0925 0918 width="146">2012</th>
 <th scope="col" 0925 0918 width="146">2011</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" 0925 0918 width="845">Total Market Index</td>
 <td 0925 0918 align="center" width="146"></td>
 <td 0925 0918 align="center" width="146">370.4</td>
 <td 0925 0918 align="center" width="146">350.7</td>
 <td 0925 0918 align="center" width="146">-23.1</td>
 <td 0925 0918 align="center" width="146">616.6</td>
 <td 0925 0918 align="center" width="146">813.8</td>
 <td 0925 0918 align="center" width="146">572.3</td>
 </tr>
 <tr>
 <td class="firstcol" 0925 0918 width="845">&nbsp;Purchase</td>
 <td 0925 0918 align="center" width="146"></td>
 <td 0925 0918 align="center" width="146">171.7</td>
 <td 0925 0918 align="center" width="146">172.9</td>
 <td 0925 0918 align="center" width="146">-8.1</td>
 <td 0925 0918 align="center" width="146">197.5</td>
 <td 0925 0918 align="center" width="146">187.8</td>
 <td 0925 0918 align="center" width="146">182.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" 0925 0918 width="845">&nbsp;Refinancing</td>
 <td 0925 0918 align="center" width="146"></td>
 <td 0925 0918 align="center" width="146">1,502.4</td>
 <td 0925 0918 align="center" width="146">1,358.0</td>
 <td 0925 0918 align="center" width="146">-31.9</td>
 <td 0925 0918 align="center" width="146">3,070.0</td>
 <td 0925 0918 align="center" width="146">4,505.0</td>
 <td 0925 0918 align="center" width="146">2,858.4</td>
 </tr>
 <tr>
 <td class="firstcol" 0925 0918 width="845">15-Year Mortgage Effective
 Interest Rate (%)</td>
 <td 0925 0918 align="center" width="146"></td>
 <td 0925 0918 align="center" width="146">3.48</td>
 <td 0925 0918 align="center" width="146">3.56</td>
 <td 0925 0918 align="center" width="146">3.57 
 (10/13)</td>
 <td 0925 0918 align="center" width="146">3.42</td>
 <td 0925 0918 align="center" width="146">3.25</td>
 <td 0925 0918 align="center" width="146">3.97</td>
 </tr>
 </tbody>
</table>





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The consumer price index gained 0.1% during September (1.7% y/y) following an unrevised 0.2% August decline. The rise matched expectations in the Action Economics Forecast Survey. Consumer prices excluding food and energy also ticked [...]

U.S. Consumer Price Inflation Is Minimal

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Japan's trade position remained in substantial deficit in September, as exports and imports both showed some life in September. Goods-exports increased by 3.1% and were surpassed by the 5% growth rate for goods-imports. Over three months both exports and imports have highly elevated growth rates. Exports are up at a 33.4% annual rate with imports up at a 44.7% annual rate. Over six months the growth rate settles down with exports up at a 12.8% pace and imports falling at a 4.3% pace. Over 12 months. Exports rise by 5.6% while imports rise by 4.1%.

Over three months imports are stronger, but over the longer trends, six months and 12 months, exports are relatively stronger.

Over this entire period, the yen has been falling and Japan has been gaining competitiveness. Over three months, the yen is down at a 24% annual rate, over six months it's down at a 10.2% annual rate and over 12 months, it's down at an 8.3% annual rate. The yen's decline has been picking up speed. A weaker yen increases Japan's competitiveness and should push exports to stronger growth. The weaker yen reduces the wealth of Japan, compared other countries and increases the relative price of imports; those effects will cause imports to slow.

For the time being, there is only mild evidence that exports are beginning to benefit from their improved competitiveness and at the same time, there's scant or contradictory- evidence that imports are slowing down.

Japan now has a long string of the trade deficits that extends back to the year 2011. Japan's lost decade then its hammering by the Tsunami that created a nuclear crisis and led to a shuttering of most of Japans nuclear capability have ravaged Japan's economy. Japan's economy continues to struggle and now political problems for the administration have emerged as two ministers have just quit their posts. This could impede economic decision-making. The BOJ is still resolute in its course, and the weakening yen may be the most effective macroeconomic tool that Japan has. However, since Japanese firms have already outsourced so much activity many are now complaining that the too-weak yen is hurting them. However, Japan wants polices that stimulated its domestic economy not policies that create profits for its multinational corporations- especially not at the cost of growth at home.

Japan continues to reel from the costs of its past successes as well as from its ticking demographic time bomb. Japan's past successes caused the yen to become overly strong and that in turn hollowed-out Japan's manufacturing as its multinationals moved operations to other Asian countries and established a production foothold in the U.S.A. At the same time the cost of living in Japan became so high that many Japanese families decided to stay small and many Japanese couples decided not to have families at all to preserve their living standard. Remember... at one point Japanese real estate was so expensive Japan innovated the multigenerational home mortgage,

Japan is not going to conquer its current economic problems using traditional macroeconomic policies. It needs to solve the problem of its ticking demographic time bomb. Japanese couples need to decide to have families again. Japan, as trends stand, is going to be too be overwhelmed by its aging. That is going to be such an enormous burden that the economy will not be able to cope with it. Japan's problems are greater than anything that can be solved by a program of quantitative easing, however large the Bank of Japan's program may be. 

Japan as a society has to decide what it wants to be when it grows up and by this I mean what it wants to be as it ages. Japan is facing an aging and a ratio of the old to the young ratio that dwarfs the problems being faced by China which themselves are enormous. Something must be done because the problem will not solve itself. Conditions in Japan only going to get worse unless its demographic trends are altered by a specific, targeted response.

	 




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Japan's trade position remained in substantial deficit in September, as exports and imports both showed some life in September. Goods-exports increased by 3.1% and were surpassed by the 5% growth rate for goods-imports. Over three [...]

Japanese Trade Trends Still Feature Deficits

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The Mortgage Bankers Association reported that their total Mortgage Market
Volume Index surged 11.6% last week (-9.1% y/y) following two week's of moderate
increase. Applications to refinance an existing loan jumped by roughly
one-quarter w/w (-9.0% y/y) following two weeks of firm improvement. Home purchase
applications declined 4.8% (-9.4% y/y) after a moderate slip during the prior
week.
Mortgage financing costs declined sharply. The effective interest rate on a
15-year mortgage fell to 3.34%, down from 3.63% four weeks earlier and was the
lowest level since May 2013. The effective rate on a 30-year fixed rate loan
declined to 4.16%, down from 4.49% four weeks ago. The rate on a Jumbo 30-year
loan declined to 4.09%, the lowest level in roughly a year and a half. For
adjustable 5-year mortgages, the effective interest rate fell sharply to 3.08%,
down versus last year's 3.74% peak and the lowest level since June 2013.
The average mortgage loan size surged w/w to $298,900 as refinancings spiked
to $306,400. The average loan size for home purchases also rose sharply to a new
high of $285,000.
Applications for fixed interest rate loans rose to the highest level since
January but declined 11.9% y/y. Adjustable rate loan applications rose by nearly
one-third both w/w and y/y.
The survey covers over 75 percent of all U.S. retail residential mortgage
applications, and has been conducted weekly since 1990. Respondents include
mortgage bankers, commercial banks and thrifts. The base period and value for
all indexes is March 16, 1990=100. The figures for weekly mortgage applications
and interest rates are available in Haver's SURVEYW database.

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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" 0925 0918 >MBA Mortgage
 Applications (SA, 3/16/90=100)</th>
 <th scope="col" 0925 0918 >10/17/14</th>
 <th scope="col" 0925 0918 >10/10/14</th>
 <th scope="col" 0925 0918 >10/03/14</th>
 <th scope="col" 0925 0918 >Y/Y%</th>
 <th scope="col" 0925 0918 >2013</th>
 <th scope="col" 0925 0918 >2012</th>
 <th scope="col" 0925 0918 >2011</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" 0925 0918 >Total Market Index</td>
 <td 0925 0918 >413.2</td>
 <td 0925 0918 >370.4</td>
 <td 0925 0918 >350.7</td>
 <td 0925 0918 >-9.1</td>
 <td 0925 0918 >616.6</td>
 <td 0925 0918 >813.8</td>
 <td 0925 0918 >572.3</td>
 </tr>
 <tr>
 <td class="firstcol" 0925 0918 >&nbsp;Purchase</td>
 <td 0925 0918 >163.4</td>
 <td 0925 0918 >171.7</td>
 <td 0925 0918 >172.9</td>
 <td 0925 0918 >-9.4</td>
 <td 0925 0918 >197.5</td>
 <td 0925 0918 >187.8</td>
 <td 0925 0918 >182.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" 0925 0918 >&nbsp;Refinancing</td>
 <td 0925 0918 >1,852.3</td>
 <td 0925 0918 >1,502.4</td>
 <td 0925 0918 >1,358.0</td>
 <td 0925 0918 >-9.0</td>
 <td 0925 0918 >3,070.0</td>
 <td 0925 0918 >4,505.0</td>
 <td 0925 0918 >2,858.4</td>
 </tr>
 <tr>
 <td class="firstcol" 0925 0918 >15-Year Mortgage Effective
 Interest Rate (%)</td>
 <td 0925 0918 >3.34</td>
 <td 0925 0918 >3.48</td>
 <td 0925 0918 >3.56</td>
 <td 0925 0918 >3.57 
 (10/13)</td>
 <td 0925 0918 >3.42</td>
 <td 0925 0918 >3.25</td>
 <td 0925 0918 >3.97</td>
 </tr>
 </tbody>
</table>

 
</body>

</html>

The Mortgage Bankers Association reported that their total Mortgage Market Volume Index surged 11.6% last week (-9.1% y/y) following two week's of moderate increase. Applications to refinance an existing loan jumped by roughly one- [...]

U.S. Mortgage Loan Applications To Refinance Jump With Lower Interest Rates

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The consumer price index gained 0.1% during September (1.7% y/y)
following an unrevised 0.2% August decline. The rise matched expectations in the
Action Economics Forecast Survey. Consumer prices excluding food and energy
also ticked 0.1% higher (1.7% y/y) following no change. Expectations had
been for a 0.2% increase.
Weakness in pricing power was paced by a 0.7% decline (-0.6% y/y) in energy
prices. Fuel oil prices led the way lower with a 2.1% drop (-3.2% y/y), down for
the seventh straight month. Gasoline prices fell 1.0% (-3.6% y/y) on the heels
of a 4.1% decline. Electricity prices were off 0.7% (+2.8% y/y) but natural gas
prices rebounded 1.6% (5.8% y/y) following four straight months of decline.
Continued strength in food prices offset some of this weakness with a
0.3% increase (3.0% y/y). Meat prices remained strong, posting a 1.2% rise
(13.0% y/y). Dairy product prices gained 0.5% (4.9% y/y) but egg prices declined
2.8% (+8.5% y/y). Offsetting this strength was a 0.4% decline (-0.1% y/y) in
cereal &amp; bakery product prices. Fruit &amp; vegetable costs ticked 0.1%
higher (0.9% y/y) and nonalcoholic beverage costs gained 0.2% (0.2%
y/y).
Continuing weak were prices for goods less food and energy, unchanged
for the month and down 0.2% y/y. Furniture &amp; bedding prices were off another
0.7% (-3.5% y/y) but appliance costs gained 0.5% (-4.5% y/y). New vehicle prices
were unchanged&nbsp; (0.3% y/y) but used vehicle prices slipped 0.1% (-0.4% y/y).
Recreation product prices improved 0.2% (-2.2% y/y) and apparel prices were
unchanged (0.5% y/y). Continuing to show strength were educational books &amp;
supplies prices which rose 0.3% (4.6% y/y).
Core service prices improved 0.2% (2.4% y/y). Shelter costs (32% of
the CPI) rose 0.3% (3.0% y/y) as owners equivalent rent of primary residences increased
0.2% (2.7% y/y). Tuition &amp; other educational costs edged 0.1% higher (3.2%
y/y) while medical care services prices also gained 0.1% (1.7% y/y). Public
transportation prices slipped 0.1% (-2.2% y/y) while recreation services prices
were roughly stable (+1.3% y/y).
The consumer price data is available in Haver's USECON database while
detailed figures can be found in CPIDATA. The expectations figure is from
Action Economics and is found in the AS1REPNA database.

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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" >Consumer Price Index (%)</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Jul</th>
 <th scope="col" >Sep Y/Y</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >0.1</td>
 <td >-0.2</td>
 <td >0.1</td>
 <td >1.7</td>
 <td >1.5</td>
 <td >2.1</td>
 <td >3.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Total less Food &amp; Energy</td>
 <td >0.1</td>
 <td >0.0</td>
 <td >0.1</td>
 <td >1.7</td>
 <td >1.8</td>
 <td >2.1</td>
 <td >1.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Goods less Food &amp; Energy</td>
 <td >0.0</td>
 <td >-0.1</td>
 <td >-0.0</td>
 <td >-0.2</td>
 <td >-0.0</td>
 <td >1.3</td>
 <td >1.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Services less Energy</td>
 <td >0.2</td>
 <td >0.0</td>
 <td >0.1</td>
 <td >2.4</td>
 <td >2.4</td>
 <td >2.4</td>
 <td >1.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Food</td>
 <td >0.3</td>
 <td >0.2</td>
 <td >0.4</td>
 <td >3.0</td>
 <td >1.4</td>
 <td >2.6</td>
 <td >3.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Energy</td>
 <td >-0.7</td>
 <td >-2.6</td>
 <td >-0.3</td>
 <td >-0.6</td>
 <td >-0.7</td>
 <td >0.9</td>
 <td >15.2</td>
 </tr>
 </tbody>
</table> 
 
 
 
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Sales of existing single-family homes rose 2.4% to 5.170 million (AR, -1.7%)
during September from an unrevised 5.050 million in August. Sales were 3.9%
below the peak reached last July. The latest level beat expectations for 5.10
million sales in the Action Economics Forecast Survey. Sales of single-family
homes improved 2.0% (-1.9% y/y) to 4.560 million. Sales of condos and co-ops
increased 5.2% (0.0% y/y) to 0.610 million.
The median sales price of an existing single-family home declined 4.0% to $209,700
last month (+5.6% y/y). It was the lowest price since April. Prices were 9.0%
below the all-time peak in July 2006.
Sales in the West rebounded 7.1% (-4.0% y/y) to the highest level in twelve
months. In the South, sales recovered 5.0% (1.4% y/y) and matched the high for
the economic expansion. Sales in the Northeast improved 1.5% (-1.4% y/y) to the
highest level since last October. Countering these gains was a 5.6% sales
decline (-4.9% y/y) in the Midwest. It was the lowest level since May.
During August, home affordability improved 1.2% (-1.4% y/y) as monthly
mortgage payments slipped to 15.9% of median family income, down from its recent
high of 16.1%. Mortgage rates averaged 4.24%, down from the January high of
4.54%. 
The inventory of unsold homes rose 6.0% y/y to 2.300 million but remained 43%
below the 2007 peak. The supply of unsold homes slipped to 5.3 months. That
compares to an 11.9 month peak supply in July of 2010.
The data on existing home sales, prices and affordability can be found in
Haver's USECON database. The regional price, affordability and inventory
data are available in the REALTOR database. The expectations figure is
from the Action Economics survey, reported in the AS1REPNA database.

<a href="/comment/141021c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/141021c.png"></a>
 <a href="/comment/141021d_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/141021d.png"></a>
 
 <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" >Existing Home Sales (SAAR,
 000s)</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Jul</th>
 <th scope="col" >Y/Y %</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >5,170</td>
 <td >5,050</td>
 <td >5,140</td>
 <td >-1.7</td>
 <td >5,073</td>
 <td >4,659</td>
 <td >4,277</td>
 </tr>
 <tr class="even">
 <td class="firstcol" >Northeast</td>
 <td >680</td>
 <td >670</td>
 <td >640</td>
 <td >-1.4</td>
 <td >659</td>
 <td >597</td>
 <td >543</td>
 </tr>
 <tr>
 <td class="firstcol" >Midwest</td>
 <td >1,170</td>
 <td >1,240</td>
 <td >1,210</td>
 <td >-4.9</td>
 <td >1,193</td>
 <td >1,064</td>
 <td >917</td>
 </tr>
 <tr class="even">
 <td class="firstcol" >South</td>
 <td >2,120</td>
 <td >2,020</td>
 <td >2,120</td>
 <td >1.4</td>
 <td >2,032</td>
 <td >1,834</td>
 <td >1,683</td>
 </tr>
 <tr>
 <td class="firstcol" >West</td>
 <td >1,200</td>
 <td >1,120</td>
 <td >1,170</td>
 <td >-4.0</td>
 <td >1,190</td>
 <td >1,164</td>
 <td >1,133</td>
 </tr>
 <tr class="even">
 <td class="firstcol" >Single-Family Sales</td>
 <td >4,560</td>
 <td >4,470</td>
 <td >4,540</td>
 <td >-1.9</td>
 <td >4,471</td>
 <td >4,128</td>
 <td >3,792</td>
 </tr>
 <tr>
 <td class="firstcol" >Median Price Total ($, NSA)</td>
 <td >209,700</td>
 <td >218,400</td>
 <td >221,600</td>
 <td >5.6</td>
 <td >195,667</td>
 <td >175,442</td>
 <td >164,542</td>
 </tr>
 </tbody>
</table>
 
 
 
</body></html>

Sales of existing single-family homes rose 2.4% to 5.170 million (AR, -1.7%) during September from an unrevised 5.050 million in August. Sales were 3.9% below the peak reached last July. The latest level beat expectations for 5.10 [...]

U.S. Existing Home Sales Improve As Prices Fall Sharply

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

250501Z1.jpg

**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

250501Z2.jpg

**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

250501Z3.jpg

**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

250501Z4.jpg

**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

250501Z5.jpg

**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

250501Z6.jpg

Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

<iframe style="border-radius:12px" src="https://open.spotify.com/embed/episode/3PzXXKrkHcwtOLipohEdnB?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Tariff Truce, Tenuous Trust

250501J5.jpg

250501K5.jpg

The ISM Purchasing Managers Index of activity in the manufacturing sector slipped to 48.7 in April from 49.0 during March and 50.3 in February. It remained up from a low of 46.9 in October of last year. A level of 50 is the break-even point between a rising and falling level of activity. The Action Economics Forecast Survey expected a reading of 47.8 for April. The series reached a monthly high of 63.8 in March 2021.

Two of the five component indexes weakened last month. The April production index fell to 44.0 after declining to 48.3 in March. It was the lowest level since May 2020. A lessened 19.8% (NSA) of respondents reported higher production while an increased 24.2% reported lower output. The inventories index declined to 50.8 last month from 53.4 in March. The index remained up from a low of 43.2 in October of last year.

Moving higher, the new orders index rose to 47.2 last month from 45.2 in March. The index remained below a January high of 55.1. Twenty-eight percent (NSA) of respondents reported higher new orders while 26.7% reported a decline. The employment index rose to 46.5 from 44.7 in March. It was below a high of 50.3 in January. A greater 13.1% (NSA) of respondents reported more hiring while a fewer 16.2% indicated less. The supplier delivery index rose to 55.2 from 53.5 in March. A higher 16.6% (NSA) of respondents reported slower delivery speeds while a fairly steady 6.2% reported a quickening.

The prices index, which is not part of the composite series, edged up to 69.8 (NSA) in April after increasing to 69.4 in March. It was the highest level since June 2022, up from a December 2022 low of 39.4. An increased 49.2% of respondents reported higher prices last month, up from 12.2% in November, while a higher 9.7% reported lower prices.

In other series, the export orders index plummeted to 43.1 in April from 49.6 during March. It was down from the high of 52.4 in January. The imports index fell sharply to 47.1 from 50.1 in March. It was the lowest reading since December 2023. The order backlog index dropped to 43.7 (NSA) last month from 44.5 in March. It was the lowest level in five months.

The ISM figures are based on responses from over 400 purchasing executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These indexes are diffusion indexes where a reading above 50 indicates expansion and a reading below 50 points to contraction. 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.

250501L5.jpg

250501M5.jpg

- Declines in last three months follow earlier improvement.
- Production & inventories account for m/m shortfall.
- Prices index edges up to another three-year high.

U.S. ISM Manufacturing Index Indicates Contraction in April

Carol Stone, CBE

250501A8.jpg

250501B8.jpg

Initial claims for unemployment insurance rose 18,000 in the week ended April 26 to 241,000, seasonally adjusted.  This is higher by 16,000 than the Action Economics Forecast Survey amount of 225,000 and is the largest amount since the week of February 22. The previous week’s actual count was revised up by 1,000, from 223,000 reported initially.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” – in the week ended April 19 was 1.916 million, up 83,000 from the prior week’s 1.833 million; that earlier amount was revised down by 8,000.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, was 1.3% in the April 19 week, following 1.2% continuously since the week of January 6, 2024.

Economic conditions vary widely across states and territories.  In the week ended April 12, the highest unemployment rates were in New Jersey (2.39%), California (2.24%), Washington (2.19%), Rhode Island (2.17%) and Massachusetts (1.93%).  The lowest rates were in Florida (0.35%), South Dakota (0.40%), Alabama (0.41%), Virginia (0.45%) and Tennessee (0.48%).  Rates in other notable states include the Illinois (1.85%), New York (1.71%), Pennsylvania (1.54%) and Texas (1.09%). 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 U**SECON**. 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.

250501C8.jpg

250501D8.jpg

- Actual initial claims amount is 16,000 more than forecast.
- Total beneficiaries rose by 83,000.
- Insured unemployment rate ticked up to 1.3% after 15 months at 1.2%.

U.S. Initial Jobless Claims Rise Notably in April 28 Week

250430N1.jpg

250430O1.jpg

Real GDP eased 0.3% SAAR (+2.1% y/y) during the first quarter of 2025 after increasing 2.4% in Q4’24 and 3.1% in Q3’24. A 0.4% increase had been expected in the Action Economics Forecast Survey. It was the first decline since Q1 2022.

Foreign trade subtracted 4.83 percentage points from growth last quarter as imports surged 41.3% (13.4% y/y) ahead of tariffs, which began to come into effect in the first quarter. The rise followed a 1.9% decline in Q4’24. Exports rose 1.8% (3.0% y/y) after easing 0.2% in Q4. Inventories added 2.25 percentage points to growth after subtracting 0.84 percentage point from Q4 growth.

Real final sales to domestic purchasers grew 2.3% (2.9% y/y) in Q1 after rising 3.0% in Q4. Personal consumption expenditures rose 1.8% (3.1% y/y) following a 4.0% gain. Durable goods spending fell 3.4% (+5.3% y/y) after surging 12.4% in Q4. Motor vehicle purchases declined 11.1% (+5.5% y/y) after strengthening 19.7% in Q4. Spending on home furnishings & appliances gained 1.5% (6.1% y/y) following a 5.4% rise. Recreational goods & vehicle outlays rose 2.5% (7.0% y/y) last quarter after a 13.9% Q4 increase.

Nondurable goods outlays rose 2.7% (3.0% y/y) following 3.1% growth in Q4. Apparel spending increased 6.7% (2.5% y/y) following a 5.0% rise. Food & beverage buying gained 2.5% (2.3% y/y) after a 1.8% increase. Gasoline & fuel oil purchases increased 4.6% (3.4% y/y) after falling 2.0% in Q4.

Spending on services increased 2.4% last quarter (2.7% y/y) after a 3.0% gain. Outlays on housing & utilities increased 3.4% (1.8% y/y) after rising 1.1% in Q4. Health care expenditures rose 4.0% (4.8% y/y) following a 4.7% strengthening. Transportation outlays increased 5.3% (4.6% y/y) after a 3.7% rise while recreation spending rose 4.7% (2.8% y/y) following a 4.5% rise. Restaurant & hotel expenditures declined 2.1% (+0.5% y/y) following a 2.8% rise. Financial services expenditures rose 1.9% (2.0% y/y) after a 3.1% Q4 increase.

Business fixed investment increased 9.8% (3.6% y/y) following a 3.0% decline in Q4. Expenditures on structures rose 0.4% (-0.4% y/y) after a 2.9% increase. Expenditures on producers’ durable equipment jumped 22.5% (8.0% y/y) after falling 8.7%.  Outlays on information processing equipment soared 69.3% (18.9% y/y) following a 7.3% decline. Industrial equipment investment fell 1.4% (-0.3% y/y) after easing 0.9%. Intellectual property product spending rose 4.1% (1.8% y/y) following a 0.5% decline. 

Residential structures investment increased 1.3% (-0.1% y/y) in Q1 after a 5.5% Q4 rise.

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Government spending fell 1.5% (+2.4% y/y) after a 3.1% Q4 rise. Federal government expenditures declined 5.1% (+2.9% y/y) after rising 4.0% in Q4. National defense expenditures declined 8.0% (+4.0% y/y) after increasing 4.8% in Q4. State & local government spending rose 0.8% (2.1% y/y) following a 2.5% rise.

The GDP price index rose 3.7% (2.6% y/y) after increasing 2.3% in Q4. It was the largest increase since Q4’22. A 2.4% increase had been expected. The PCE chain price index increased 3.6% (2.5% y/y) following a 2.4% rise. The PCE price index excluding food and energy rose 3.5% (2.8% y/y) after increasing 2.6% in Q4. The business fixed investment price index rose 0.4% (1.8% y/y) after 1.5% rise. The residential price index strengthened 3.9% (3.2% y/y) after a 1.9% rise while the government price index increased 4.7% (2.8% y/y) following a 2.1% rise.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Decline in GDP is first in three years.
- Foreign trade subtracts substantially ahead of tariffs.
- Domestic final demand growth weakens.
- Price index strengthens with higher core PCE prices.

U.S. GDP Unexpectedly Declines in Q1’25; Prices Strengthen

Michael J. Moran

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High-side readings on the price indexes for personal consumption expenditures in January and February caused some concern about emerging price pressure, especially with some policies of the Trump administration possibly adding to the upward force. However, March brought notable relief, with the headline price index falling slightly (-0.04%). A marked decline in energy prices was helpful (-2.7%), but core prices also were subdued, increasing less than 0.1%.  Year-over-year changes were still above the Fed’s target of 2%, but only barely so for the headline measure (2.3%). The core index backed away from the reading of 3.0% in February, but the latest reading of 2.7% was in line with observations in the past year, and still uncomfortably above target.

Consumers roused from a winter slumber in March, with nominal outlays increasing 0.7%. With inflation restrained, real outlays also posted a gain of 0.7%. Spending on durable gods stood out, with real outlays advancing 3.2%. Real outlays for both nondurable goods and services rose 0.4%, a solid pace. Signs of life were certainly welcome after an average decline of 0.1% in January and February. The March rebound left growth of 1.8% (annual rate) in the first quarter.

The brisk increase in spending in March was supported by a solid gain in personal income (0.5% in both nominal and real terms). Growth in wage income was firm at 0.5%, while proprietors’ income was robust with a gain of 1.8% (not annualized!). The farm sector led the advance in proprietors’ income, but the nonfarm sector also was strong (0.6%).

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- Price pressure eases.
- Spending rebounds after two soft months.

Economy in Brief: October 2014

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