Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120c.jpg" width="353">
The latest report from the Philadelphia Federal Reserve Bank continued to paint a bleak picture of the U.S. economy. The bank reported that its November Index of General Business conditions in the manufacturing sector was even more negative at -39.3 than it was last month at -37.5. The latest was lowest level since the recession of 1990. A reading of -35 had been expected for this month.
During the last ten years there has been a 61% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 43% correlation with q/q growth in real GDP.
The Philadelphia Fed constructs a diffusion index for total business activity and each of the sub-indexes. The business conditions index reflects a separate survey question.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120d.jpg" width="353">
Amongst the sub-indexes, the new orders index again led this month&#39;s weakness with a reading of -31.4, the lowest level since the recession of 1990. The shipments index was unchanged m/m following its 21.4 point October decline.
The employment index fell another 7.2 points to the lowest level since the recession year of 2001. Thirty eight percent of respondents expected to reduce employment levels, the highest since 1981, while only 12.6% expected to raise them. During the last ten years there has been a 79% correlation between the index level and the m/m change in manufacturing sector payrolls.
The prices paid index fell to a record low with a 37.9 point drop month-to-month to 30.7. During the last ten years there has been a 67% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 82% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months also fell further to near its lowest level since 2001. The expectations index for new orders fell further into negative territory. The expectations index for employment fell to near its record low while the expected prices paid figure fell to its record low.
The latest Business Outlook Survey from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2008/bos1108.cfm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Philadelphia Fed (%)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">November&nbsp; &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-39.3</td>
<td>-37.5</td>
<td>7.5</td>
<td>5.1</td>
<td>8.1</td>
<td>11.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>-30.7</td>
<td>&nbsp;7.2</td>
<td>&nbsp;34.4</td>
<td>26.4</td>
<td>36.6</td>
<td>40.1</td>
</tr>
</tbody>
</table>
</body>
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The latest report from the Philadelphia Federal Reserve Bank continued to paint a bleak picture of the U.S. economy. The bank reported that its November Index of General Business conditions in the manufacturing sector was even more [...]

Philadelphia Fed Index Lowest Since 1990

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120a.jpg" width="353">
Rising unemployment caused initial claims for jobless insurance to rise further above 500,000. At 542,000 claims reached their highest level since 1992. But even that comparison, as bad as it is, understates the current degree of labor market weakness. The 1992 level above 500,00 was reached for only one week during the short-lived, early-1990&#39;s recession. Quickly claims fell back below 400,000. The higher level of claims now is especially troubling since it likely will be sustained for a longer period.
The higher level of claims now is especially disturbing for two reasons. One is that it likely will be sustained for a longer period than one week. The second is that changes to the unemployment insurance program have made it more difficult to be eligible for a claim. Even a lower level of claims now is comparable to a weaker labor market.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120b.jpg" width="353">
Expectations had been for claims last week of 500,000. The four-week moving average of initial claims rose to this cycle&#39;s high of 506,500 (52.7% y/y).
The latest level of initial claims for unemployment insurance is for the week which covers the survey period for November nonfarm payrolls. Claims rose 63,000, or 13.2%, from the October period. During the last ten years there has been a 78% (inverse) correlation between the level of initial jobless insurance claims and the monthly change in nonfarm payrolls.
The largest increases in initial claims for the week ending Nov. 8 were in California (+15,532), North Carolina (+6,453), Tennessee (+5,067), New Jersey (+4,706), and New York (+3,680), while the largest decreases were in Kentucky (-1,562), Puerto Rico (-875), Delaware (-751), Maine (-349), and Rhode Island (-335).
Continuing claims for unemployment insurance during the week of November 8 rose by 109,000, about the same as during the prior week during which the level was upwardly revised. The four-week average of continuing claims rose to 3,867,000, this cycle&#39;s high and the highest since 1982. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment rose to a new cycle high of 3.0%. The Commerce Department indicated that the highest insured unemployment rates were in Puerto Rico (5.3 percent), Oregon (3.9), California (3.7), Nevada (3.7), Michigan (3.5), Alaska (3.4), Pennsylvania (3.4), South Carolina (3.4), New Jersey (3.3), Arkansas (3.2), and North Carolina (3.2).
The minutes to the latest FOMC meeting can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20081119a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">11/15/08</th>
<th scope="col">11/08/08</th>
<th scope="col">10/31/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>542</td>
<td>&nbsp;515</td>
<td>484</td>
<td>62.8%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,012</td>
<td>3,903</td>
<td>55.5%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
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Rising unemployment caused initial claims for jobless insurance to rise further above 500,000. At 542,000 claims reached their highest level since 1992. But even that comparison, as bad as it is, understates the current degree of [...]

U.S. Claims For Jobless Insurance Highest Since 1992

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120a.jpg" width="353">
Rising unemployment caused initial claims for jobless insurance to rise further above 500,000. At 542,000 claims reached their highest level since 1992. But even that comparison, as bad as it is, understates the current degree of labor market weakness. The 1992 level above 500,00 was reached for only one week during the short-lived, early-1990&#39;s recession. Quickly claims fell back below 400,000. The higher level of claims now is especially troubling since it likely will be sustained for a longer period.
The higher level of claims now is especially disturbing for two reasons. One is that it likely will be sustained for a longer period than one week. The second is that changes to the unemployment insurance program have made it more difficult to be eligible for a claim. Even a lower level of claims now is comparable to a weaker labor market.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120b.jpg" width="353">
Expectations had been for claims last week of 500,000. The four-week moving average of initial claims rose to this cycle&#39;s high of 506,500 (52.7% y/y).
The latest level of initial claims for unemployment insurance is for the week which covers the survey period for November nonfarm payrolls. Claims rose 63,000, or 13.2%, from the October period. During the last ten years there has been a 78% (inverse) correlation between the level of initial jobless insurance claims and the monthly change in nonfarm payrolls.
The largest increases in initial claims for the week ending Nov. 8 were in California (+15,532), North Carolina (+6,453), Tennessee (+5,067), New Jersey (+4,706), and New York (+3,680), while the largest decreases were in Kentucky (-1,562), Puerto Rico (-875), Delaware (-751), Maine (-349), and Rhode Island (-335).
Continuing claims for unemployment insurance during the week of November 8 rose by 109,000, about the same as during the prior week during which the level was upwardly revised. The four-week average of continuing claims rose to 3,867,000, this cycle&#39;s high and the highest since 1982. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment rose to a new cycle high of 3.0%. The Commerce Department indicated that the highest insured unemployment rates were in Puerto Rico (5.3 percent), Oregon (3.9), California (3.7), Nevada (3.7), Michigan (3.5), Alaska (3.4), Pennsylvania (3.4), South Carolina (3.4), New Jersey (3.3), Arkansas (3.2), and North Carolina (3.2).
The minutes to the latest FOMC meeting can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20081119a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">11/15/08</th>
<th scope="col">11/08/08</th>
<th scope="col">10/31/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>542</td>
<td>&nbsp;515</td>
<td>484</td>
<td>62.8%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,012</td>
<td>3,903</td>
<td>55.5%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Lowest Since 1990 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 20, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120c.jpg" width="353">
The latest report from the Philadelphia Federal Reserve Bank continued to paint a bleak picture of the U.S. economy. The bank reported that its November Index of General Business conditions in the manufacturing sector was even more negative at -39.3 than it was last month at -37.5. The latest was lowest level since the recession of 1990. A reading of -35 had been expected for this month.
During the last ten years there has been a 61% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 43% correlation with q/q growth in real GDP.
The Philadelphia Fed constructs a diffusion index for total business activity and each of the sub-indexes. The business conditions index reflects a separate survey question.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120d.jpg" width="353">
Amongst the sub-indexes, the new orders index again led this month&#39;s weakness with a reading of -31.4, the lowest level since the recession of 1990. The shipments index was unchanged m/m following its 21.4 point October decline.
The employment index fell another 7.2 points to the lowest level since the recession year of 2001. Thirty eight percent of respondents expected to reduce employment levels, the highest since 1981, while only 12.6% expected to raise them. During the last ten years there has been a 79% correlation between the index level and the m/m change in manufacturing sector payrolls.
The prices paid index fell to a record low with a 37.9 point drop month-to-month to 30.7. During the last ten years there has been a 67% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 82% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months also fell further to near its lowest level since 2001. The expectations index for new orders fell further into negative territory. The expectations index for employment fell to near its record low while the expected prices paid figure fell to its record low.
The latest Business Outlook Survey from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2008/bos1108.cfm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Philadelphia Fed (%)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">November&nbsp; &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-39.3</td>
<td>-37.5</td>
<td>7.5</td>
<td>5.1</td>
<td>8.1</td>
<td>11.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>-30.7</td>
<td>&nbsp;7.2</td>
<td>&nbsp;34.4</td>
<td>26.4</td>
<td>36.6</td>
<td>40.1</td>
</tr>
</tbody>
</table>
U.S. Leading Indicators Fell Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 20, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120e.jpg" width="353">
The Conference Board indicated that the October composite index of leading economic indicators fell by 0.8% after rising a downwardly revised 0.1% during September. The peak for the index was in July of last year and the six-month percent change fell to -4.7%, the largest rate of decline in nearly one year.
Six of the ten components of the leading index fell last month notably consumer expectations, vendor performance, stock prices and building permits.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120f.jpg" width="353">
The breadth of one-month increase amongst the leaders&#39; 10 components fell back to 35% and over a six-month period the breadth of gain amongst the components picked slightly to 30%.
The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.
The coincident indicators rose 0.2% following five consecutive months of decline. Three quarters of the index components rose m/m but over six months none rose. Over the last ten years there has been an 86% correlation between the y/y changes in the coincident indicators and real GDP.
The lagging index ticked up 0.1%, the smallest increase in four months. The ratio of coincident to lagging indicators (a measure of economic excess) also ticked up slightly but remained near its lowest level since 1982.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a> (%)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July, 6 Month % (AR)</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.8</td>
<td>0.1</td>
<td>-0.9</td>
<td>-4.7</td>
<td>-0.4%</td>
<td>1.3%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-2.4</td>
<td>1.7%</td>
<td>2.4%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.1</td>
<td>0.3</td>
<td>0.4</td>
<td>2.5</td>
<td>2.9%</td>
<td>3.1%</td>
<td>3.1%</td>
</tr>
</tbody>
</table>
New Orders for Italy and France Sink 
by <a href="/comment/Brusca.html">Robert Brusca</a> November 20, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120g.jpg" width="353">
For France and Italy new industrial orders continue to sink. France is right now seeing the greater weakness. Foreign orders show consistent weakness across time horizons for both Italy and for France. For France the recent deterioration in foreign orders is a bit worse than for Italy. But one remaining difference between these two countries is that in Italy domestic orders have shown some resiliency. Over three six and twelve months Italian orders have mostly showed increases. Meanwhile for France total and foreign order are down by almost the same percentage amounts over three months, hinting at weakening domestic orders. Italy may just be a step behind however. While Italy&#146;s domestic orders have been resilient, in September they have dropped by a sharp 2.6%. Also Italy&#146;s overall sales trends are deteriorating very rapidly. Both Italy and France seem to be well on their way to a deepening weakness in manufacturing. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Italy Orders
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar exept m/m</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-1.5%</td>
<td>-0.9%</td>
<td>2.2%</td>
<td>-1.0%</td>
<td>-5.1%</td>
<td>-3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>0.8%</td>
<td>-3.4%</td>
<td>-0.8%</td>
<td>-13.1%</td>
<td>-11.6%</td>
<td>-11.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic</td>
<td>-2.6%</td>
<td>0.3%</td>
<td>3.8%</td>
<td>5.7%</td>
<td>-1.4%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Sales</td>
<td>1.7%</td>
<td>-3.1%</td>
<td>-2.6%</td>
<td>-15.1%</td>
<td>-1.6%</td>
<td>-0.6%</td>
</tr>
<tr class="even">
<td colspan="7">French Orders</td>
</tr>
<tr>
<td class="firstcol">Saar exept m/m</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.7%</td>
<td>-7.6%</td>
<td>4.7%</td>
<td>-10.1%</td>
<td>-3.0%</td>
<td>-4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>2.2%</td>
<td>-8.3%</td>
<td>3.4%</td>
<td>-11.9%</td>
<td>-7.2%</td>
<td>-8.5%</td>
</tr>
</tbody>
</table>


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Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081119d.jpg" align="left" border="0" height="265" width="353">
UK orders rebounded ever so slightly from last month&#8217;s extreme
weakness and still reside in the bottom 2% of their range since about
2000. Export orders have had the same response, making a token bounce
in November. Stocks of finished goods are rated as at their highest
levels indicating a problem build up with orders falling so fast. 
 

Not surprisingly output volume for the next 3-months is rated
at a net of -42 the weakest reading on record. Prices are still posted
to make gains with a net +10 reading that is still in the top 21% of
its range. So inflation pressures are proving sticky in the face of
horrific weakness. The NTC (Markit) diffusion survey for Nov is not
quite ready but its low readings essentially confirms the deteriorating
picture from the CBI. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="11" scope="col">UK Industrial volume data CBI Survey </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Reported:</td>
<td>Nov 08</td>
<td>Oct 08</td>
<td>Sep 08</td>
<td>Aug 08</td>
<td>Jul 08</td>
<td>12MO Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr class="grey3">
<td class="firstcol">Total Orders</td>
<td>-38</td>
<td>-39</td>
<td>-26</td>
<td>-13</td>
<td>-8</td>
<td>-4</td>
<td>2%</td>
<td>9</td>
<td>-40</td>
<td>49</td>
</tr>
<tr class="grey3">
<td class="firstcol">Export Orders</td>
<td>-31</td>
<td>-32</td>
<td>-25</td>
<td>-9</td>
<td>-7</td>
<td>-7</td>
<td>17%</td>
<td>3</td>
<td>-39</td>
<td>42</td>
</tr>
<tr class="grey3">
<td class="firstcol">Stocks: FinGds</td>
<td>25</td>
<td>24</td>
<td>21</td>
<td>18</td>
<td>13</td>
<td>13</td>
<td>100%</td>
<td>24</td>
<td>-2</td>
<td>26</td>
</tr>
<tr class="grey2">
<td colspan="11" class="firstcol">Looking ahead</td>
</tr>
<tr class="grey3">
<td class="firstcol">Output Volume: Nxt 3M</td>
<td>-42</td>
<td>-31</td>
<td>-16</td>
<td>-13</td>
<td>-7</td>
<td>1</td>
<td>0%</td>
<td>28</td>
<td>-31</td>
<td>59</td>
</tr>
<tr class="grey3">
<td class="firstcol">Avg Prices 4Nxt 3m</td>
<td>10</td>
<td>23</td>
<td>31</td>
<td>34</td>
<td>28</td>
<td>25</td>
<td>79%</td>
<td>34</td>
<td>-19</td>
<td>53</td>
</tr>
<tr class="grey2">
<td colspan="11" class="firstcol">From end 2000</td>
</tr>
<tr class="grey1">
<td colspan="11" class="firstcol">Compare to CIPS MFG</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>Oct 08</td>
<td>Sep 08</td>
<td>Aug 08</td>
<td>Jul 08</td>
<td>12MO Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr class="grey3">
<td class="firstcol">UK MFG</td>
<td>&nbsp;</td>
<td>41.49</td>
<td>41.15</td>
<td>45.28</td>
<td>44.37</td>
<td>48.05</td>
<td>2%</td>
<td>56.3</td>
<td>41.15</td>
<td>15</td>
</tr>
</tbody>
</table>
</body></html>

UK orders rebounded ever so slightly from last month’s extreme weakness and still reside in the bottom 2% of their range since about 2000. Export orders have had the same response, making a token bounce in November. Stocks of finished [...]

UK's CBI Survey of Industry

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081119c.jpg" width="353">
Housing starts fell to a record low last month. At 791,000 units (SAAR), the level was the lowest in the series&#39; history which dates back to 1959. The 4.5% decline followed a revised 3.0% September drop that was slightly shallower than reported initially. Consensus expectations had been for 780,000 starts.
Starts of single-family homes fell another 3.3% to 531,000 units, their lowest level since late-1981. Since their peak in early 2006, single-family starts are down by roughly two-thirds. Permits to build single family homes also fell 14.5% (-43.3% y/y) to 460,000, their lowest since the 1981-82 recession.
Starts began 4Q down 11.9% from the 3Q average. During the last ten years there has been an 84% correlation between the q/q change in single-family starts and their contribution to quarterly GDP growth.
October multi-family starts fell 6.8% from September and they are down by one-third from last year.
By region, October starts of single-family units in the Northeast were unchanged m/m but down 40.6% y/y. In the Midwest starts rose 11.5% but they remained 42.9% lower than last October. In the South single-family starts fell a hard 10.5% (-40.6% y/y) to their lowest since 1990 while in the West starts ticked up 1.7% (-35.1% y/y) after a 13.9% September decline.
Today&#39;s speech Monetary Policy and Asset Prices Revisited by Fed Vice-Chairman Donald L. Kohn can be found <a href="http://www.federalreserve.gov/newsevents/speech/kohn20081119a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Housing Starts (000s, SAAR)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>791</td>
<td>828</td>
<td>854</td>
<td>-38.0%</td>
<td>1,341</td>
<td>1,812</td>
<td>2,073</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>531</td>
<td>549</td>
<td>615</td>
<td>-39.9</td>
<td>1,034</td>
<td>1,474</td>
<td>1,719</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>260</td>
<td>279</td>
<td>239</td>
<td>-33.5</td>
<td>307</td>
<td>338</td>
<td>354</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>708</td>
<td>805</td>
<td>857</td>
<td>-40.1</td>
<td>1,389</td>
<td>1,844</td>
<td>2,160</td>
</tr>
</tbody>
</table>
</body>
</html>

Housing starts fell to a record low last month. At 791,000 units (SAAR), the level was the lowest in the series' history which dates back to 1959. The 4.5% decline followed a revised 3.0% September drop that was slightly shallower [...]

U.S. Housing Starts At Record Low in October

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081119a.jpg" width="353">
The consumer price index (CPI-U) fell a record 1.0% last month versus September, according to the Bureau of Labor Statistics. The decline followed a roughly unchanged figure and it about matched Consensus expectations for a 0.8% decline. The latest reading lowered the three-month rate of change to 4.4% (AR).
Lower energy prices accounted for most of the decline in the total as they fell 8.6% from September. The drop was led by a record 14.2% drop in gasoline prices (+12.0% y/y) to an average of $3.05 per gallon. Prices have moved even lower this month to $2.07. Fuel oil prices fell a sharp 8.8% (+21.7% y/y), down for the third straight month. Prices for natural gas &amp; electricity fell just slightly m/m (+9.8% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081119b.jpg" width="353">
Food &amp; beverage prices increased 0.3%, half the September rise and the weakest gain since March. For the bulk of the year, however, food prices have been quite strong. They have posted a 6.1% y/y increase, the fastest since early 1990. September prices for cereals &amp; bakery products and meats, poultry &amp; fish remained firm, each up 0.6%. Year-to-year, they have increased 12.5% y/y and 6.2% y/y, respectively.
The CPI less food &amp; energy fell 0.1%, the first decline since late 1982. Consensus expectations were for a 0.2% increase. The three-month annual rate of increase fell to 1.1% from its July high of 3.5%.
Core goods prices fell by 0.2%, the second consecutive monthly drop. The three-month rate of decline amounted to 1.9%, the weakest since late 2006. The latest decline was led again by lower prices for new &amp; used motor vehicles which were down another 0.7% (-2.3% y/y). Apparel prices also fell by a sharp 1.0% (+0.3% y/y). Apparel prices fell 0.4% last year. Prices for household furnishings &amp; operations were unchanged (+2.0% y/y). Continued strength was seen in tobacco prices which rose 0.4% (7.0% y/y).
Core services prices were unchanged, their weakest performance since 1982. The three-month growth rate eased to 2.2%, the lowest since April. Medical care services prices rose just 0.2% (3.4% y/y) while education costs remained firm and gained another 0.4% (5.9% y/y). Shelter prices were unchanged (+2.2% y/y) as the housing market remained depressed, the weakest y/y gain since mid-2005. Owners equivalent rent of primary residence, a measure not equivalent to other house price measures, ticked up 0.1% (2.3% y/y). Rents remained firm and rose by 0.4% (3.7% y/y). Public transportation prices fell for the second consecutive month. The 3.3% decline nevertheless left them up 8.4% y/y. Recreation prices ticked 0.1% higher (2.2% y/y).
The chained CPI, which adjusts for shifts in consumption patterns, fell 0.8%. Less food and energy, chained prices ticked up just 0.1%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> (%)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total&nbsp;</td>
<td>-1.0</td>
<td>-0.1</td>
<td>3.7</td>
<td>2.9</td>
<td>3.2</td>
<td>3.4</td>
</tr>
<tr class="even">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>-0.1</td>
<td>0.1</td>
<td>2.2</td>
<td>2.3</td>
<td>2.5</td>
<td>2.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.4</td>
<td>-0.2</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.2</td>
<td>0.5</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Services less Energy</td>
<td>0.0</td>
<td>0.3</td>
<td>3.0</td>
<td>3.4</td>
<td>3.4</td>
<td>2.8</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Energy</td>
<td>-8.6</td>
<td>-1.9</td>
<td>11.6</td>
<td>5.6</td>
<td>11.0</td>
<td>17.0</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Food &amp; Beverages</td>
<td>0.3</td>
<td>0.6</td>
<td>6.1</td>
<td>3.9</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a>&nbsp;</td>
<td>-0.8</td>
<td>-0.1</td>
<td>3.3 </td>
<td>2.5</td>
<td>2.9 </td>
<td>2.9</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Total less Food &amp; Energy&nbsp;</td>
<td>0.1</td>
<td>0.2</td>
<td>1.9</td>
<td>2.0</td>
<td>2.2</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</body>
</html>

The consumer price index (CPI-U) fell a record 1.0% last month versus September, according to the Bureau of Labor Statistics. The decline followed a roughly unchanged figure and it about matched Consensus expectations for a 0.8% [...]

U.S. CPI Fell A Record 1.0% and Core Prices Declined As Well

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081119a.jpg" align="left" border="0" height="265" width="353">
The consumer price index (CPI-U) fell a
record 1.0% last month versus September, according to the Bureau of
Labor Statistics. The decline followed a roughly unchanged figure and
it about matched Consensus expectations for a 0.8% decline. The latest
reading lowered the three-month rate of change to 4.4% (AR).
Lower energy prices accounted for most of
the decline in the total as they fell 8.6% from September. The drop was
led by a record 14.2% drop in gasoline prices (+12.0% y/y) to an
average of $3.05 per gallon. Prices have moved even lower this month to
$2.07. Fuel oil prices fell a sharp 8.8% (+21.7% y/y), down for the
third straight month. Prices for natural gas &amp; electricity fell
just slightly m/m (+9.8% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081119b.jpg" align="right" border="0" height="265" width="353">
Food &amp; beverage prices increased
0.3%, half the September rise and the weakest gain since March. For the
bulk of the year, however, food prices have been quite strong. They
have posted a 6.1% y/y increase, the fastest since early 1990.
September prices for cereals &amp; bakery products and meats,
poultry &amp; fish remained firm, each up 0.6%. Year-to-year, they
have increased 12.5% y/y and 6.2% y/y, respectively.
The CPI less food &amp; energy fell
0.1%, the first decline since late 1982. Consensus expectations were
for a 0.2% increase. The three-month annual rate of increase fell to
1.1% from its July high of 3.5%.
Core goods prices fell by 0.2%, the second
consecutive monthly drop. The three-month rate of decline amounted to
1.9%, the weakest since late 2006. The latest decline was led again by
lower prices for new &amp; used motor vehicles which were down
another 0.7% (-2.3% y/y). Apparel prices also fell by a sharp 1.0%
(+0.3% y/y). Apparel prices fell 0.4% last year. Prices for household
furnishings &amp; operations were unchanged (+2.0% y/y). Continued
strength was seen in tobacco prices which rose 0.4% (7.0% y/y).
Core services prices were unchanged, their
weakest performance since 1982. The three-month growth rate eased to
2.2%, the lowest since April. Medical care services prices rose just
0.2% (3.4% y/y) while education costs remained firm and gained another
0.4% (5.9% y/y). Shelter prices were unchanged (+2.2% y/y) as the
housing market remained depressed, the weakest y/y gain since mid-2005.
Owners equivalent rent of primary residence, a measure not equivalent
to other house price measures, ticked up 0.1% (2.3% y/y). Rents
remained firm and rose by 0.4% (3.7% y/y). Public transportation prices
fell for the second consecutive month. The 3.3% decline nevertheless
left them up 8.4% y/y. Recreation prices ticked 0.1% higher (2.2% y/y).
The chained CPI, which adjusts for shifts in consumption
patterns, fell 0.8%. Less food and energy, chained prices ticked up
just 0.1%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer
Price Index</a> (%)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total&nbsp;</td>
<td>-1.0</td>
<td>-0.1</td>
<td>3.7</td>
<td>2.9</td>
<td>3.2</td>
<td>3.4</td>
</tr>
<tr class="even">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>-0.1</td>
<td>0.1</td>
<td>2.2</td>
<td>2.3</td>
<td>2.5</td>
<td>2.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>-0.4</td>
<td>-0.2</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.2</td>
<td>0.5</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Services less Energy</td>
<td>0.0</td>
<td>0.3</td>
<td>3.0</td>
<td>3.4</td>
<td>3.4</td>
<td>2.8</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Energy</td>
<td>-8.6</td>
<td>-1.9</td>
<td>11.6</td>
<td>5.6</td>
<td>11.0</td>
<td>17.0</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>0.3</td>
<td>0.6</td>
<td>6.1</td>
<td>3.9</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained
CPI: Total (NSA)</a>&nbsp;</td>
<td>-0.8</td>
<td>-0.1</td>
<td>3.3 </td>
<td>2.5</td>
<td>2.9 </td>
<td>2.9</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Total less Food
&amp; Energy&nbsp;</td>
<td>0.1</td>
<td>0.2</td>
<td>1.9</td>
<td>2.0</td>
<td>2.2</td>
<td>1.9</td>
</tr>
</tbody>
</table>
U.S. Housing Starts At Record Low
in October 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 19, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081119c.jpg" align="left" border="0" height="265" width="353">
Housing starts fell to a record low last month. At 791,000
units (SAAR), the level was the lowest in the series' history which
dates back to 1959. The 4.5% decline followed a revised 3.0% September
drop that was slightly shallower than reported initially.
Consensus expectations had been for 780,000 starts.
Starts of single-family homes fell another 3.3% to 531,000
units, their lowest level since late-1981. Since their peak in early
2006, single-family starts are down by roughly two-thirds. Permits to
build single family homes also fell 14.5% (-43.3% y/y) to 460,000,
their lowest since the 1981-82 recession.
Starts began 4Q down 11.9% from the 3Q average.
During the last ten years there has been an 84% correlation between the
q/q change in single-family starts and their contribution to quarterly
GDP growth.
October multi-family starts fell 6.8% from September and they
are down by one-third from last year.
By region, October starts of single-family units in the
Northeast were unchanged m/m but down 40.6% y/y. In the Midwest starts
rose 11.5% but they remained 42.9% lower than last October. In the
South single-family starts fell a hard 10.5% (-40.6% y/y) to their
lowest since 1990 while in the West starts ticked up 1.7% (-35.1% y/y)
after a 13.9% September decline.
Today's speech Monetary Policy and Asset Prices
Revisited by Fed Vice-Chairman Donald L. Kohn can be found <a href="http://www.federalreserve.gov/newsevents/speech/kohn20081119a.htm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Housing
Starts (000s, SAAR)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>791</td>
<td>828</td>
<td>854</td>
<td>-38.0%</td>
<td>1,341</td>
<td>1,812</td>
<td>2,073</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>531</td>
<td>549</td>
<td>615</td>
<td>-39.9</td>
<td>1,034</td>
<td>1,474</td>
<td>1,719</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>260</td>
<td>279</td>
<td>239</td>
<td>-33.5</td>
<td>307</td>
<td>338</td>
<td>354</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>708</td>
<td>805</td>
<td>857</td>
<td>-40.1</td>
<td>1,389</td>
<td>1,844</td>
<td>2,160</td>
</tr>
</tbody>
</table>
UK's CBI Survey of Industry 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 19, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081119d.jpg" align="left" border="0" height="265" width="353">
UK orders rebounded ever so slightly from last month&#8217;s extreme
weakness and still reside in the bottom 2% of their range since about
2000. Export orders have had the same response, making a token bounce
in November. Stocks of finished goods are rated as at their highest
levels indicating a problem build up with orders falling so fast. 
 

Not surprisingly output volume for the next 3-months is rated
at a net of -42 the weakest reading on record. Prices are still posted
to make gains with a net +10 reading that is still in the top 21% of
its range. So inflation pressures are proving sticky in the face of
horrific weakness. The NTC (Markit) diffusion survey for Nov is not
quite ready but its low readings essentially confirms the deteriorating
picture from the CBI. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr> <th colspan="11" scope="col">UK
Industrial volume data CBI Survey </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Reported:</td>
<td>Nov 08</td>
<td>Oct 08</td>
<td>Sep 08</td>
<td>Aug 08</td>
<td>Jul 08</td>
<td>12MO Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr class="grey3">
<td class="firstcol">Total Orders</td>
<td>-38</td>
<td>-39</td>
<td>-26</td>
<td>-13</td>
<td>-8</td>
<td>-4</td>
<td>2%</td>
<td>9</td>
<td>-40</td>
<td>49</td>
</tr>
<tr class="grey3">
<td class="firstcol">Export Orders</td>
<td>-31</td>
<td>-32</td>
<td>-25</td>
<td>-9</td>
<td>-7</td>
<td>-7</td>
<td>17%</td>
<td>3</td>
<td>-39</td>
<td>42</td>
</tr>
<tr class="grey3">
<td class="firstcol">Stocks: FinGds</td>
<td>25</td>
<td>24</td>
<td>21</td>
<td>18</td>
<td>13</td>
<td>13</td>
<td>100%</td>
<td>24</td>
<td>-2</td>
<td>26</td>
</tr>
<tr class="grey2">
<td colspan="11" class="firstcol">Looking ahead</td>
</tr>
<tr class="grey3">
<td class="firstcol">Output Volume: Nxt 3M</td>
<td>-42</td>
<td>-31</td>
<td>-16</td>
<td>-13</td>
<td>-7</td>
<td>1</td>
<td>0%</td>
<td>28</td>
<td>-31</td>
<td>59</td>
</tr>
<tr class="grey3">
<td class="firstcol">Avg Prices 4Nxt 3m</td>
<td>10</td>
<td>23</td>
<td>31</td>
<td>34</td>
<td>28</td>
<td>25</td>
<td>79%</td>
<td>34</td>
<td>-19</td>
<td>53</td>
</tr>
<tr class="grey2">
<td colspan="11" class="firstcol">From end 2000</td>
</tr>
<tr class="grey1">
<td colspan="11" class="firstcol">Compare to CIPS MFG</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>Oct 08</td>
<td>Sep 08</td>
<td>Aug 08</td>
<td>Jul 08</td>
<td>12MO Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr class="grey3">
<td class="firstcol">UK MFG</td>
<td>&nbsp;</td>
<td>41.49</td>
<td>41.15</td>
<td>45.28</td>
<td>44.37</td>
<td>48.05</td>
<td>2%</td>
<td>56.3</td>
<td>41.15</td>
<td>15</td>
</tr>
</tbody>
</table>
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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118j.jpg" align="left" border="0" height="265" width="353">
The November Housing Market Index (HMI) from the National
Association of Home Builders plumbed a new record low. At a single
level of 9 nearly halved the old record low of 14 reached just last
month. The index is compiled from survey questions asking builders to
rate market conditions as &#8220;good&#8221;, &#8220;fair&#8221;, &#8220;poor&#8221; or &#8220;very high&#8221; to
&#8220;very low&#8221;. Numerical equivalent results over 50 indicate a predominance of &#8220;good&#8221; readings.
Since 1990, the year-to-year change in this index has had a
correlation of 72% with the year-to-year percentage change in new
single-family home sales. As a result, the latest HMI index at best
indicates a bottoming of the housing market's troubles.
The Home Builders Association indicated that its sub-index of
present sales conditions also fell to a record low of 8. That was down
from last year's average level of 27 and 2006's average of 45.
Builders&#8217; expectations for sales six months was relatively strong an held steady at a level of 19. The &#8220;traffic of prospective buyers, however, fell to a new low index reading of 7.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118k.jpg" align="right" border="0" height="265" width="353">
Each of the country's regions showed deterioration in the index as conditions in each region fell to a new low.
Not only are builders disturbed by the market for new homes, but the
appraisal of conditions for remodeling a home also reached a record low
during the third quarter.
The current market condition for remodeling of a home also is deemed poor.
The NAHB has compiled the Housing Market Index since 1985. The
weights assigned to the individual index components are .5920 for
single family detached sales, present time; .1358 for single family
detached sales, next six months; and .2722 for traffic of prospective
buyers. The results, along with other housing and remodeling indexes
from NAHB Economics, are included in Haver&#8217;s SURVEYS database.
Mortgage Innovation, Mortgage Choice, and Housing Decisions from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/08/11/Chambers.pdf">here</a>.
Changing the Rule: State Mortgage Foreclosure Moratoria During the Great Depression is available <a href="http://research.stlouisfed.org/publications/review/08/11/Wheelock.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat'l Association of Home Builders</a></th>
<th scope="col">November</th>
<th scope="col">October &nbsp;</th>
<th scope="col">November '07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>9</td>
<td>14</td>
<td>19</td>
<td>27</td>
<td>42</td>
<td>67</td>
</tr>
</tbody>
</table>
</body></html>

The November Housing Market Index (HMI) from the National Association of Home Builders plumbed a new record low. At a single level of 9 nearly halved the old record low of 14 reached just last month. The index is compiled from survey [...]

U.S. Home Builders' Survey Lower Still

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.

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**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.

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Charts of the Week: Tariff Truce, Tenuous Trust

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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

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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

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- 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.

250430P1.jpg

250430Q1.jpg

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**.

250430R1.jpg

250430S1.jpg

- 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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250430B.jpg

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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250430D.jpg

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

Economy in Brief: November 2008

Jump to:

Philadelphia Fed Index Lowest Since 1990

U.S. Claims For Jobless Insurance Highest Since 1992

U.S. Claims For Jobless Insurance Highest Since 1992

UK's CBI Survey of Industry

U.S. Housing Starts At Record Low in October

U.S. CPI Fell A Record 1.0% and Core Prices Declined As Well

U.S. CPI Fell A Record 1.0% and Core Prices Declined As Well

U.S. Home Builders' Survey Lower Still