Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060323c.jpg" width="353">
 The National Association of Realtors reported that total existing home sales rose 5.2% m/m to 6.910M last month following a 2.7% January decline that was about half the drop initially estimated. Consensus expectations had been for sales last month of 6.50M. 
Sales of single-family homes rose 4.7% after a 1.2% January decline that was revised from -6.8% reported initially. The data cover sales closed in the latest and previous months, and contrast to the new home sales data which count sales at the signing of a contract. 
February single family home sales rose sharply in the Northeast (+2.4% y/y). Sales in the Midwest also were strong (+2.1% y/y) and sales in the West rose for the first month in six (-10.9% y/y). Sales in the South fell m/m but rose y/y by 4.2%.
The median price of an existing single-family home fell 0.5%. At $208,500 the median price is 5.1% below the August peak. Prices are not seasonally adjusted.
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/research.nsf/pages/EHSPage?OpenDocument">here</a>.
The Road to Price Stability from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/pubs/feds/2006/200605/200605pap.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/USECON/@E9/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Home Sales</td>
<td>&nbsp;6,910</td>
<td>6,570</td>
<td>-0.3%</td>
<td>7,064</td>
<td>6,722</td>
<td>6,176</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family Home Sales</td>
<td>6,060</td>
<td>5,790</td>
<td>-0.2%</td>
<td>6,170</td>
<td>5,912</td>
<td>5,443</td>
</tr>
<tr class="odd">
<td class="firstcol">Single Family Median Home Price ($,000) </td>
<td>$208.5 </td>
<td>$209.6 </td>
<td>11.6% </td>
<td>$206.3</td>
<td>$182.8 </td>
<td>$169.1 </td>
</tr>
</tbody>
</table>


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The National Association of Realtors reported that total existing home sales rose 5.2% m/m to 6.910M last month following a 2.7% January decline that was about half the drop initially estimated. Consensus expectations had been for [...]

U.S. Existing Home Sales Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060323a.jpg" width="353">
Last week, initial claims for unemployment insurance reversed all of the upwardly revised increase the prior period. The 11,000 person decline to 302,000 compared with Consensus expectations for 305,000 claims.
The latest figure covers the survey period for March nonfarm payrolls and claims rose 24,000 (8.6%) from the February period.
During the last ten years there has been a (negative) 75% correlation between the level of initial jobless insurance claims and the m/m change in payroll employment.
The four-week moving average of initial claims rose to 303,500 (-7.3% y/y), its highest level since early January.
Continuing unemployment insurance claims reversed most of the prior week&#39;s sharp drop, which was revised deeper, and rose 38,000 to 2.472M.
The insured rate of unemployment was stable at 1.9% for the sixth week.
Using Cyclical Regimes of Output Growth to Predict Jobless Recoveries from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/06/03/Dueker.pdf"> here</a>.
Also from the St. Louis Fed is Entrepreneurship and the Policy Environment and the article can be found <a href="http://research.stlouisfed.org/publications/review/06/03/GeorgellisWall.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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">03/18/06</th>
<th scope="col">03/11/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>302</td>
<td>313</td>
<td>-8.5%</td>
<td>332</td>
<td>343</td>
<td>402</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,472</td>
<td>-7.6%</td>
<td>2,663</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
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Last week, initial claims for unemployment insurance reversed all of the upwardly revised increase the prior period. The 11,000 person decline to 302,000 compared with Consensus expectations for 305,000 claims. The latest figure [...]

Initial Jobless Insurance Claims Drop

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060323c.jpg" width="353">
 The National Association of Realtors reported that total existing home sales rose 5.2% m/m to 6.910M last month following a 2.7% January decline that was about half the drop initially estimated. Consensus expectations had been for sales last month of 6.50M. 
Sales of single-family homes rose 4.7% after a 1.2% January decline that was revised from -6.8% reported initially. The data cover sales closed in the latest and previous months, and contrast to the new home sales data which count sales at the signing of a contract. 
February single family home sales rose sharply in the Northeast (+2.4% y/y). Sales in the Midwest also were strong (+2.1% y/y) and sales in the West rose for the first month in six (-10.9% y/y). Sales in the South fell m/m but rose y/y by 4.2%.
The median price of an existing single-family home fell 0.5%. At $208,500 the median price is 5.1% below the August peak. Prices are not seasonally adjusted.
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/research.nsf/pages/EHSPage?OpenDocument">here</a>.
The Road to Price Stability from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/pubs/feds/2006/200605/200605pap.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/USECON/@E9/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Home Sales</td>
<td>&nbsp;6,910</td>
<td>6,570</td>
<td>-0.3%</td>
<td>7,064</td>
<td>6,722</td>
<td>6,176</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family Home Sales</td>
<td>6,060</td>
<td>5,790</td>
<td>-0.2%</td>
<td>6,170</td>
<td>5,912</td>
<td>5,443</td>
</tr>
<tr class="odd">
<td class="firstcol">Single Family Median Home Price ($,000) </td>
<td>$208.5 </td>
<td>$209.6 </td>
<td>11.6% </td>
<td>$206.3</td>
<td>$182.8 </td>
<td>$169.1 </td>
</tr>
</tbody>
</table>
Initial Jobless Insurance Claims Drop 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 23, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060323a.jpg" width="353">
Last week, initial claims for unemployment insurance reversed all of the upwardly revised increase the prior period. The 11,000 person decline to 302,000 compared with Consensus expectations for 305,000 claims.
The latest figure covers the survey period for March nonfarm payrolls and claims rose 24,000 (8.6%) from the February period.
During the last ten years there has been a (negative) 75% correlation between the level of initial jobless insurance claims and the m/m change in payroll employment.
The four-week moving average of initial claims rose to 303,500 (-7.3% y/y), its highest level since early January.
Continuing unemployment insurance claims reversed most of the prior week&#39;s sharp drop, which was revised deeper, and rose 38,000 to 2.472M.
The insured rate of unemployment was stable at 1.9% for the sixth week.
Using Cyclical Regimes of Output Growth to Predict Jobless Recoveries from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/06/03/Dueker.pdf"> here</a>.
Also from the St. Louis Fed is Entrepreneurship and the Policy Environment and the article can be found <a href="http://research.stlouisfed.org/publications/review/06/03/GeorgellisWall.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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">03/18/06</th>
<th scope="col">03/11/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>302</td>
<td>313</td>
<td>-8.5%</td>
<td>332</td>
<td>343</td>
<td>402</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,472</td>
<td>-7.6%</td>
<td>2,663</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
February U.S. Budget Deficit Deeper, Fiscal YTD Narrower 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 23, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060323b.jpg" width="353">
The U.S. federal government posted a deeper budget deficit during February of $119.2B versus last February&#39;s deficit of $113.9B. Nevertheless, the fiscal year to date budget deficit narrowed to $217.5B versus 223.4B during the first five months of FY05.
Net revenues collapsed 50.9% m/m as is often the case during February but rose 10.5% during the first five months versus FY04. Individual income tax receipts (44% of total receipts) rose 10.8% y/y and corporate income taxes (10% of total receipts) rose 29.6% y/y during fiscal year 2005&#39;s first five months.
The improved job market raised employment taxes (36% of total receipts) 6.0% y/y though estate &amp; gift taxes fell 0.4% y/y. 
U.S. net outlays continued strong and rose 7.6% y/y fiscal year to date. Defense (19% of total outlays) for the first five months of FY06 rose 7.6% from the year prior. The growth in Medicare spending (12% of total outlays) accelerated to 8.5% y/y and spending on social security (21% of total outlays) grew 5.6%. s
Agriculture spending grew 10.6%. Also strong was spending on community &amp; regional development which nearly tripled this fiscal year to date versus last. Spending on health programs (10% of the total) rose 2.1% while spending on education &amp; training (4% of the total) fell 1.9% y/y. Interest expense (8% of the total) grew 24.3% with higher interest rates.
The Current Budget Projections from the US Congressional Budget Office released March 3rd are available <a href="http://www.cbo.gov/budget/budproj.shtml"> 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/USECON/@E1/@E106/@E10602/@E10602.HTM">US Government Finance</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">FY 2005</th>
<th scope="col">FY 2004</th>
<th scope="col">FY 2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$-119.2B</td>
<td>$21.0B</td>
<td>$-113.9B (2/05)</td>
<td>$-318.3B</td>
<td>$-412.7B</td>
<td>$-377.6B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Net Revenues</td>
<td>$112.9B</td>
<td>$230.0B</td>
<td>11.9%</td>
<td>14.5%</td>
<td>5.5%</td>
<td>-3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Outlays</td>
<td>$232.1B</td>
<td>$209.0B</td>
<td>8.0%</td>
<td>7.8%</td>
<td>6.2%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
Chemical Prices Surge with Petroleum, But Some Stabilize or Even Decline Recently 
by <a href="/comment/Stone.html">Carol Stone</a> March 23, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060323d.jpg" width="353">
Besides its wide array of macroeconomic databases, Haver Analytics also features a number of industry offerings. Just this morning, for example, Chemical Week magazine released its weekly report on chemical prices. These are maintained in Haver&#39;s CHEMWEEK database. Far from being esoteric trivia, the chemicals in this collection are main building blocks of products and fuels consumers use every day. If not ingredients in the items themselves, several of these chemicals are important in the manufacturing process.
The database consists of 29 major chemicals. We list just four in the table below as a sampling. The prices we show here averages; &quot;highs&quot; and &quot;lows&quot; are also available. These are US spot prices; spot prices are also given for European markets and contract prices for several specific delivery months are available for most items for both US and European markets.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060323e.jpg" width="353">
The particular items we show here are multipurpose chemicals. Many plastics are made from polyvinyl chloride and combinations of propylene with various other substances. Both have experienced a near doubling over the past couple of years, but have shown some signs of stabilizing so far this year. PVC is a hard plastic, frequently used now in pipes, as in household plumbing, and other building products, such as vinyl siding. Its price has been steady now since last April at $930 per metric ton. However, the price rose in steep steps from just $370/MT in early 2002.
Propylene is an ingredient in other products, such as aerosol sprays, other plastics and fibers and synthetic rubber. Its price has more than tripled since early 2002, when it traded at just $0.13/pound, compared with as much as $0.52 briefly in late November and $0.41 most currently.
Methanol, or wood alcohol, was once thought to be a potential substitute or complement to gasoline in motor vehicle fuels. Racecars and some specialty vehicles do run on it. However, it is also highly toxic, causing safety concerns. So other items, such as ethanol, are developing more as alternative fuels. This shift in potential usage may be reflected in the price trend for methanol. It has risen markedly, from $0.57/gallon in late 2003 to $0.94 recently, but on a relative basis, it has moved much less than other chemicals, as is evident in the second graph.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060323f.jpg" width="353">
Finally, the price of caustic soda is also up dramatically. Caustic soda is more familiarly known as lye and its more formal chemical name is sodium hydroxide. It is a very widely used in the manufacture of such diverse items as aluminum, textiles, soap and paper and in petroleum refining. As recently as the spring of 2004, this key substance was selling for as little as $65 a ton. But in November, it reached $587.50 before falling back to &quot;just&quot; $335 in the last couple of weeks.
The mere wide ranges covered by these price movements highlight the value of the CHEMWEEK database. Unlike many commodities that have tighter markets, these chemical prices often seem to move in fits and spurts, sometimes doubling virtually &quot;overnight&quot;. So monitoring them would seem vital for industry analysts and even macroeconomists.
Further, several are closely tied to petroleum prices. In the third graph, for instance, we show the simple spot price for crude oil, West Texas Intermediate, from the WEEKLY and OILWKLY databases. It has a high 86% correlation with PVC prices since 1999 and as high or for even longer periods with numerous other chemicals. So the role of oil is closely intertwined not only with heating and driving costs, but also with the raw material and processing costs for many other products.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">US Spot Prices</th>
<th scope="col">Mar 22, 2006</th>
<th scope="col">Feb 22, 2006</th>
<th scope="col">End-Dec 2005*</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">PVC General Purpose, $/metric ton</td>
<td>930</td>
<td>930</td>
<td>930</td>
<td>914</td>
<td>810</td>
<td>585</td>
</tr>
<tr>
<td class="firstcol">Propylene, Chemical Grade, $/lb</td>
<td>0.41</td>
<td>0.41</td>
<td>0.42</td>
<td>0.41</td>
<td>0.31</td>
<td>0.20</td>
</tr>
<tr class="odd">
<td class="firstcol">Methanol, $/gal</td>
<td>0.94</td>
<td>0.94</td>
<td>0.91</td>
<td>0.86</td>
<td>0.82</td>
<td>0.73</td>
</tr>
<tr>
<td class="firstcol">Caustic Soda, $/short ton</td>
<td>335</td>
<td>345</td>
<td>415</td>
<td>369</td>
<td>176</td>
<td>139</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo: Crude Oil, $/bbl**</td>
<td>62.69</td>
<td>60.00</td>
<td>59.49</td>
<td>56.29</td>
<td>41.31</td>
<td>31.14</td>
</tr>
</tbody>
</table>


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Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060322f.jpg" width="353">
New orders for manufactured goods in Euro-Zone countries fell 5.9% in January, according to a report published today by Eurostat. This drop followed sizable increases of 4.9% and 5.3% in November and December, respectively, however, and the year-on-year gain is a hefty 9.7%.
Much of the month-to-month movement is due to transport equipment, particularly ships and aircraft. As seen in the table below, this category, comprising NACE industry groups 34 and 35, surged 10%+ in each November and December, so a 14.4% drop in January is hardly surprising. In fact, a new subtotal devised by Eurostat excludes NACE 35: ships, railroad equipment and aircraft. This segment&#39;s orders rose a mere 0.2% in January, although prior strength means those orders were up a substantial 10.7% from January 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060322g.jpg" width="353">
These gains in orders have to be encouraging for European business leaders and policymakers. As we have reported here recently, industrial production itself is mixed at best, with stagnation characterizing many of the nations in that region. Employment has continued a downward trend in several majors countries, even while uptrends are starting to develop in others. These basic indicators, though, show that steps toward growth are tenuous.
So orders have begun to look better. Further, a diversity of industries is participating. As seen below, chemicals and machinery both have increasing order books, and textiles and wood products do as well.Notably, then, it is beneficial to look beyond headline series to details of these indicator reports to assess the current position of an industry or even of an entire regional economy.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">SA, Indexes, 2000=100, % chg</th>
<th scope="col">Jan 2006</th>
<th scope="col">Dec 2005</th>
<th scope="col">Nov 2005</th>
<th scope="col">Year/Year*</th>
<th scope="col">2005*</th>
<th scope="col">2004*</th>
<th scope="col">2003*</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-5.9</td>
<td>5.3</td>
<td>4.9</td>
<td>9.7</td>
<td>4.6</td>
<td>7.3</td>
<td>0.2</td>
</tr>
<tr>
<td class="firstcol">Total ex NACE 35**</td>
<td>0.2</td>
<td>1.5</td>
<td>2.7</td>
<td>10.7</td>
<td>3.7</td>
<td>6.5</td>
<td>0.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Selected Industries:</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Transport Equip.</td>
<td>-14.4</td>
<td>10.6</td>
<td>10.4</td>
<td>11.2</td>
<td>6.0</td>
<td>10.5</td>
<td>0.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Chemicals &amp; Products</td>
<td>-0.3</td>
<td>1.0</td>
<td>2.3</td>
<td>7.1</td>
<td>4.9</td>
<td>5.5</td>
<td>0.5</td>
</tr>
<tr>
<td class="firstcol">Machinery &amp; Equipment</td>
<td>1.9</td>
<td>-0.8</td>
<td>0.2</td>
<td>10.8</td>
<td>5.6</td>
<td>6.8</td>
<td>-1.4</td>
</tr>
</tbody>
</table>
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New orders for manufactured goods in Euro-Zone countries fell 5.9% in January, according to a report published today by Eurostat. This drop followed sizable increases of 4.9% and 5.3% in November and December, respectively, however, [...]

Total European Factory Orders Down in January, But Most Industries Have Gains

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060322c.jpg" width="353">
Last week&#39;s jump in the U.S. average price for gasoline to $2.50 per gallon lifted prices 13.6% above the yearend 2005 level. This strength certainly reflects some pass through of this year&#39;s rise in crude oil prices.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060322d.jpg" width="353">
Crude costs are up 4.2% year to date and 8.1% y/y though the spot price for WTI crude at $60.58 is off its high reached earlier in the year of $67.83 per barrel.
Supplies of gasoline, however, are plentiful. Strong imports of motor gasoline (+31.5% y/y) have offset weakness in gasoline production (+1.0% y/y). That has lifted gasoline inventories 17.8% (1.1% y/y) from the low early last September. (These figures are available in the Haver OILWKLY database.)
Drivers seem to be growing accustomed to higher gasoline prices. Since last year the four week average level of gasoline consumption, through early March, rose 0.6%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060322e.jpg" width="353">
The just-released figures from the <a href="http://ops.fhwa.dot.gov/wz/resources/facts_stats.htm"> Federal Highway Administration</a> (MVMPM@USECON in the Haver database) indicate that passenger car miles driven during 2004 rose 2.0% from the year prior and rose 20.4% during the last ten years.
<a href="http://www.cbo.gov/showdoc.cfm?index=3991&amp;sequence=0">Reducing Gasoline Consumption: Three Policy Options</a> is a 2002 study from the Congressional Budget Office.
The Annual Energy Outlook 2006 with Projections to 2030 from the U.S. Energy Information Administration is available <a href="http://www.eia.doe.gov/oiaf/aeo/index.html"> 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/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">03/20/06</th>
<th scope="col">12/27/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">US Retail Gasoline Price per Gallon</td>
<td>$2.50</td>
<td>$2.20</td>
<td>18.7%</td>
<td>$2.27</td>
<td>$1.85</td>
<td>$1.56</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; (per bbl.)</td>
<td>$60.58</td>
<td>$58.16</td>
<td>8.1%</td>
<td>$58.16</td>
<td>$41.78</td>
<td>$32.78</td>
</tr>
</tbody>
</table>
</body>
</html>

Last week's jump in the U.S. average price for gasoline to $2.50 per gallon lifted prices 13.6% above the yearend 2005 level. This strength certainly reflects some pass through of this year's rise in crude oil prices. Crude costs are [...]

Gasoline Prices Up On Stronger Demand

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060322b.jpg" width="353">
The total number of mortgage applications slumped 1.6% last week and continued the downtrend which began the middle of last year. Since the weekly peak last June, applications are down 36.3%. In March, applications are 2.4% below the February average which fell 6.3% m/m.
Purchase applications reversed the prior week&#39;s gain and fell 2.3%. Versus the weekly peak last May purchase applications are down 25.2% and the March level is down 2.0% from the February average.
During the last ten years there has been a 50% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance were off another 0.6% on top of the prior week&#39;s 1.9% drop. Since the peak last June refis are down 46.9% and the March level is 2.6% below the February average which fell 2.0% from January.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060322a.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage jumped for the second week. The nine basis point rise in the effective rate on a 15-year mortgage to 6.36% was to the highest level since mid-2002. The ten basis point rise in the effective rate on a 30 year mortgage pulled it to 6.65%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective rate on a 30-Year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
The Yield Curve and Predicting Recessions from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/pubs/feds/2006/200607/200607pap.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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">03/17/06</th>
<th scope="col">03/10/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>565.0</td>
<td>5574.4</td>
<td>-14.2%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>393.6</td>
<td>403.0</td>
<td>-11.8%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,574.5</td>
<td>1,583.6</td>
<td>-30.2%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications slumped 1.6% last week and continued the downtrend which began the middle of last year. Since the weekly peak last June, applications are down 36.3%. In March, applications are 2.4% below the [...]

Mortgage Applications Down Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060322b.jpg" width="353">
The total number of mortgage applications slumped 1.6% last week and continued the downtrend which began the middle of last year. Since the weekly peak last June, applications are down 36.3%. In March, applications are 2.4% below the February average which fell 6.3% m/m.
Purchase applications reversed the prior week&#39;s gain and fell 2.3%. Versus the weekly peak last May purchase applications are down 25.2% and the March level is down 2.0% from the February average.
During the last ten years there has been a 50% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance were off another 0.6% on top of the prior week&#39;s 1.9% drop. Since the peak last June refis are down 46.9% and the March level is 2.6% below the February average which fell 2.0% from January.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060322a.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage jumped for the second week. The nine basis point rise in the effective rate on a 15-year mortgage to 6.36% was to the highest level since mid-2002. The ten basis point rise in the effective rate on a 30 year mortgage pulled it to 6.65%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective rate on a 30-Year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
The Yield Curve and Predicting Recessions from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/pubs/feds/2006/200607/200607pap.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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">03/17/06</th>
<th scope="col">03/10/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>565.0</td>
<td>5574.4</td>
<td>-14.2%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>393.6</td>
<td>403.0</td>
<td>-11.8%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,574.5</td>
<td>1,583.6</td>
<td>-30.2%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
Gasoline Prices Up On Stronger Demand 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 22, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060322c.jpg" width="353">
Last week&#39;s jump in the U.S. average price for gasoline to $2.50 per gallon lifted prices 13.6% above the yearend 2005 level. This strength certainly reflects some pass through of this year&#39;s rise in crude oil prices.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060322d.jpg" width="353">
Crude costs are up 4.2% year to date and 8.1% y/y though the spot price for WTI crude at $60.58 is off its high reached earlier in the year of $67.83 per barrel.
Supplies of gasoline, however, are plentiful. Strong imports of motor gasoline (+31.5% y/y) have offset weakness in gasoline production (+1.0% y/y). That has lifted gasoline inventories 17.8% (1.1% y/y) from the low early last September. (These figures are available in the Haver OILWKLY database.)
Drivers seem to be growing accustomed to higher gasoline prices. Since last year the four week average level of gasoline consumption, through early March, rose 0.6%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060322e.jpg" width="353">
The just-released figures from the <a href="http://ops.fhwa.dot.gov/wz/resources/facts_stats.htm"> Federal Highway Administration</a> (MVMPM@USECON in the Haver database) indicate that passenger car miles driven during 2004 rose 2.0% from the year prior and rose 20.4% during the last ten years.
<a href="http://www.cbo.gov/showdoc.cfm?index=3991&amp;sequence=0">Reducing Gasoline Consumption: Three Policy Options</a> is a 2002 study from the Congressional Budget Office.
The Annual Energy Outlook 2006 with Projections to 2030 from the U.S. Energy Information Administration is available <a href="http://www.eia.doe.gov/oiaf/aeo/index.html"> 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/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">03/20/06</th>
<th scope="col">12/27/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">US Retail Gasoline Price per Gallon</td>
<td>$2.50</td>
<td>$2.20</td>
<td>18.7%</td>
<td>$2.27</td>
<td>$1.85</td>
<td>$1.56</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; (per bbl.)</td>
<td>$60.58</td>
<td>$58.16</td>
<td>8.1%</td>
<td>$58.16</td>
<td>$41.78</td>
<td>$32.78</td>
</tr>
</tbody>
</table>
Total European Factory Orders Down in January, But Most Industries Have Gains 
by <a href="/comment/Stone.html">Carol Stone</a> March 22, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060322f.jpg" width="353">
New orders for manufactured goods in Euro-Zone countries fell 5.9% in January, according to a report published today by Eurostat. This drop followed sizable increases of 4.9% and 5.3% in November and December, respectively, however, and the year-on-year gain is a hefty 9.7%.
Much of the month-to-month movement is due to transport equipment, particularly ships and aircraft. As seen in the table below, this category, comprising NACE industry groups 34 and 35, surged 10%+ in each November and December, so a 14.4% drop in January is hardly surprising. In fact, a new subtotal devised by Eurostat excludes NACE 35: ships, railroad equipment and aircraft. This segment&#39;s orders rose a mere 0.2% in January, although prior strength means those orders were up a substantial 10.7% from January 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060322g.jpg" width="353">
These gains in orders have to be encouraging for European business leaders and policymakers. As we have reported here recently, industrial production itself is mixed at best, with stagnation characterizing many of the nations in that region. Employment has continued a downward trend in several majors countries, even while uptrends are starting to develop in others. These basic indicators, though, show that steps toward growth are tenuous.
So orders have begun to look better. Further, a diversity of industries is participating. As seen below, chemicals and machinery both have increasing order books, and textiles and wood products do as well.Notably, then, it is beneficial to look beyond headline series to details of these indicator reports to assess the current position of an industry or even of an entire regional economy.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">SA, Indexes, 2000=100, % chg</th>
<th scope="col">Jan 2006</th>
<th scope="col">Dec 2005</th>
<th scope="col">Nov 2005</th>
<th scope="col">Year/Year*</th>
<th scope="col">2005*</th>
<th scope="col">2004*</th>
<th scope="col">2003*</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-5.9</td>
<td>5.3</td>
<td>4.9</td>
<td>9.7</td>
<td>4.6</td>
<td>7.3</td>
<td>0.2</td>
</tr>
<tr>
<td class="firstcol">Total ex NACE 35**</td>
<td>0.2</td>
<td>1.5</td>
<td>2.7</td>
<td>10.7</td>
<td>3.7</td>
<td>6.5</td>
<td>0.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Selected Industries:</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Transport Equip.</td>
<td>-14.4</td>
<td>10.6</td>
<td>10.4</td>
<td>11.2</td>
<td>6.0</td>
<td>10.5</td>
<td>0.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Chemicals &amp; Products</td>
<td>-0.3</td>
<td>1.0</td>
<td>2.3</td>
<td>7.1</td>
<td>4.9</td>
<td>5.5</td>
<td>0.5</td>
</tr>
<tr>
<td class="firstcol">Machinery &amp; Equipment</td>
<td>1.9</td>
<td>-0.8</td>
<td>0.2</td>
<td>10.8</td>
<td>5.6</td>
<td>6.8</td>
<td>-1.4</td>
</tr>
</tbody>
</table>
</body>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321d.jpg" width="353">
Indicators released today are pointing to an increase in the rate of growth of Finland&#39;s GDP in the first quarter from the 0.91% rate of the fourth quarter of 2005. The trend of the monthly total production series, which is a good indicator of Finland&#39;s Gross Domestic Product increased 0.18% in January from December and 2.61% from January, 2005. The first chart plots the monthly index of total production with the quarterly values of real GDP to show the leading characteristic of the monthly series. To show that the total production index is a good indicator of GDP, we have aggregated the monthly series quarterly and compared it with the quarterly GDP data as shown in the second chart. The correlation between the two series is .99.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321e.jpg" width="353">
Another sign of increased activity in the first quarter is the rising trend of employment. In Finland, many series, the total production series noted above and some of the labor force data, are reported on seasonally adjusted basis. Instead of computing seasonally adjusted data, Finland computes trends of the unadjusted data. The third chart shows the trend and seasonally unadjusted data for employment. The trend continues to rise in January and February.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321f.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/NORDIC/@NF/@NF.HTM">Finland</a></th>
<th scope="col">Jan 06</th>
<th scope="col">Dec 05</th>
<th scope="col">Jan 05</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2005&nbsp; </th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">TOTAL PRODUCTION (2000=100)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Seasonally Unadjusted</td>
<td>108.6</td>
<td>115.7</td>
<td>105.1</td>
<td>-6.14</td>
<td>3.33</td>
<td>111.9</td>
<td>109.6</td>
<td>105.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Trend</td>
<td>113.8</td>
<td>113.6</td>
<td>110.9</td>
<td>0.18</td>
<td>2.61</td>
<td>112.1</td>
<td>109.2</td>
<td>105.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;</td>
<td>Feb 06</td>
<td>Jan 06</td>
<td>Feb 05</td>
<td>M/M %</td>
<td>Y/Y %</td>
<td>2005&nbsp; </td>
<td>2004&nbsp;</td>
<td>2003&nbsp;&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">EMPLOYMENT (000)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Seasonally Unadjusted</td>
<td>&nbsp;2395</td>
<td>2353&nbsp;</td>
<td>2348&nbsp;</td>
<td>1.78&nbsp;</td>
<td>2.00&nbsp;</td>
<td>2401&nbsp;</td>
<td>2365&nbsp;</td>
<td>2365&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Trend</td>
<td>2436</td>
<td>2433</td>
<td>2385</td>
<td>0.12</td>
<td>2.14</td>
<td>2401</td>
<td>2364</td>
<td>2366</td>
</tr>
</tbody>
</table>
</body>
</html>

Indicators released today are pointing to an increase in the rate of growth of Finland's GDP in the first quarter from the 0.91% rate of the fourth quarter of 2005. The trend of the monthly total production series, which is a good [...]

Early Indicators Pointing to Good First Quarter for Finland

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Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

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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.

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**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.

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**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.

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**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.

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**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.

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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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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.

Personal Income, Consumption, and Prices in March

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The Pending Home Sales Index, a forward-looking home sales measure based on contract signings, from the National Association of Realtors rose 6.1% to 76.5 (-0.6% y/y) during March after rising a little-revised 2.1% in February. These changes followed a 4.6% January decline.

The rise in March sales occurred as the rate on a 30-year mortgage eased to an average 6.65% from 6.84% in February. This rate was well above a low of 2.68% averaged in December 2020.

Pending home sales were up in most regions of the country. Sales in the Midwest rose 4.9% (1.4% y/y) last month after rising 1.8% in February. Sales in the South increased 9.8% (-0.4% y/y) following a 5.8% February rise. Sales in the West improved 4.8% (-2.0% y/y) after falling 3.0% in February. Sales in the Northeast were off 0.5% (-3.0% y/y) in March after falling 0.9% in February.

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

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

- Sales rise to highest level in four months.
- Strength is evident throughout most of country.

U.S. Pending Home Sales Surge in March

Sandy Batten

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The employment cost index (ECI) for civilian workers, arguably the most accurate measure of labor compensation in the United States, rose 0.9% q/q (3.6% y/y) in Q1, the same quarterly increase as in last year’s Q4, according to the Bureau of Labor Statistics. The quarterly gains have fluctuated between 0.8% and 1.0% for the past six quarters. The Action Economics Forecast Survey had expected a 0.9% q/q increase and a 3.5% y/y gain.

Wages and salaries for civilian workers rose 0.8% q/q (3.5% y/y) in Q1, down from 1.0% q/q in Q4. This tied the Q3 2024 quarterly rise as the smallest increase since Q2 2021. It was also the smallest y/y increase since Q2 2021. Benefits increased by an outsized 1.2% q/q (3.9% y/y) in Q1 versus 0.8% q/q in Q4. This is the largest quarterly gain since Q2 2022. In general, employment cost gains remain above the pace observed prior to the pandemic but are slowing gradually.

Private industry workers’ compensation rose 0.8% q/q (3.4% y/y) in Q1, down from 0.9% q/q (3.6% y/y) in Q4. Wages and salaries for private industry workers increased 0.8% q/q (3.4% y/y) in Q1 versus 0.8% q/q (3.7% y/y) in Q4. The quarterly gain in Q1 tied that in Q3 2024 as the smallest increase since Q4 2020. Benefits for private industry workers jumped 1.2% q/q (3.6% y/y). the largest quarterly gain since Q2 2022. The acceleration in benefits in Q1 was primarily in service-producing industries.

Compensation in private goods-producing industries increased 1.0% q/q (3.2% y/y) in Q1, the largest quarterly gain in five quarters, versus a 0.7% q/q increase in Q4. Compensation in construction jumped 1.3% q/q, its largest quarterly increase since Q2 2022, up from a 0.6% q/q gain in Q4. Manufacturing compensation growth slowed to 0.7% q/q, its slowest quarterly advance since Q4 2020, from 0.8% q/q in Q4. Compensation in private service-producing industries increased 0.8% q/q (3.5% y/y), down slightly from a 0.9% q/q gain in Q4. Compensation in education and health services jumped 1.3% q/q, its largest quarterly gain since Q3 2023. In contrast, compensation in other services edged up 0.1% q/q in Q1, its smallest quarterly advance since before the pandemic.

The employment cost index measures the change in the cost of labor, free from the influence of employment shifts across occupations and industries. It is provided by the Bureau of Labor Statistics and is available in Haver’s **USECON** database. Consensus estimates from the Action Economics Forecast Survey are in Haver’s **AS1REPNA** database.

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- Compensation grew 0.9 q/q in Q1, the same pace as in Q4.
- Wage growth slowed to 0.8% q/q while benefits surged 1.2% q/q, their largest quarterly increase since Q2 2022.

Economy in Brief: March 2006

Jump to:

U.S. Existing Home Sales Up

Initial Jobless Insurance Claims Drop

U.S. Existing Home Sales Up

Total European Factory Orders Down in January, But Most Industries Have Gains

Gasoline Prices Up On Stronger Demand

Mortgage Applications Down Further

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