Tom Moeller

It probably was the weather that helped depress home sales last month. The National Association of Realtors reported that sales of existing homes fell 0.6% from January as winter storms again blanketed the East and Midwest regions. [...]

U.S. Existing Home Sales RemainDepressed

Louise Curley

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<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100322e.jpg" align="left" border="0" height="265" width="353"></p>
<p>Canadian consumer prices, seasonally adjusted, increased 1.57%
in February from a year ago. The core index showed a larger increase,
2.04%. The core index has been rising faster than the total index since
November 2008, as can be seen in the first chart. The core index
usually rises more slowly than the total index since the idea behind
the core index is to exclude those items whose prices are particularly
volatile, like food and energy. However, when the prices of such items
decline faster that the general price level, the Core index will rise
faster than the Total index. The second chart shows the sharp decline
in the price of fuel oil and other fuels that took place from late 2008
until the summer of 2009. The rise since then suggests that sooner or
later, the Total Index will be rising faster than the Core.</p>
<p>Buried in the extensive detail of the index is a component
entitled Travel Accommodations that would not ordinarily cause comment,
however, the rise of this component in February was striking as can be
seen in the third chart. The rise was due apparently to increases in
the prices of hotel rooms and other travel accommodations during the
Olympics at Vancouver. The impact on the total index, was muted as the
weight of the Travel Accommodation component is only 1.15%.</p>
<p>The actual indexes and the weights are found in the Haver Data
Base, CANSIM.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100322f.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100322g.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col"><b>Feb 10&nbsp;</b></th>
<th scope="col"><b>Jan 09</b></th>
<th scope="col"><b>Feb 09</b></th>
<th scope="col"><b>M/M Chg</b></th>
<th scope="col"><b>Y/Y Chg</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Index (SA,
2002=100)&nbsp;</td>
<td>116.1</td>
<td>116.0</td>
<td>114.3</td>
<td>0.09</td>
<td>1.57</td>
<td>114.0</td>
<td>114.1</td>
<td>111.4</td>
</tr>
<tr>
<td class="firstcol">Core Index (SA,
2002=100)</td>
<td>115.3</td>
<td>114.9</td>
<td>113.0</td>
<td>0.35</td>
<td>2.04</td>
<td>113.6</td>
<td>111.7</td>
<td>109.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Index (NSA,
2002=100)</td>
<td>115.6</td>
<td>115.1</td>
<td>113.8</td>
<td>0.42</td>
<td>1.58</td>
<td>114.4</td>
<td>114.1</td>
<td>111.5</td>
</tr>
<tr>
<td class="firstcol">Fuel Oil and other
Fuels</td>
<td>176.0</td>
<td>181.6</td>
<td>157.6</td>
<td>-3.08</td>
<td>11.68</td>
<td>158.0</td>
<td>225.4</td>
<td>122.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Travel&nbsp;
Accommodations (NSA, 2002=100)</td>
<td>87.8</td>
<td>74.0</td>
<td>75.7</td>
<td>18.65</td>
<td>15.98</td>
<td>79.7</td>
<td>81.8</td>
<td>79.8</td>
</tr>
</tbody>
</table>
</body></html>

Canadian consumer prices, seasonally adjusted, increased 1.57% in February from a year ago. The core index showed a larger increase, 2.04%. The core index has been rising faster than the total index since November 2008, as can be seen [...]

Canadian Consumer Prices

Robert Brusca

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100322d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>Canadian Retail sales rose a sharp 0.7% in January. Deflated
by the CPI the retail sales rise comes back to a still respectable 0.4%
gain. The year-over-year plot in the chart shows the acceleration in
nominal retail sales is slowing. And that sort of thing is inevitable
as growth rates climb. But it is also inevitable as recovery progresses
and the recession gets pushed farther into history. In January the
Yr/Yr gain is marked from January a year ago when sales rose by 1.7%.
The December base for the year &#8211;over-year calculation is December 2009
when retail sales fell by 5% month-to-month. No wonder there is a
noticeable backtracking there in the Yr/Yr rate of growth!</p>
<p>But the shorter sequential growth rate progression ( 3-M, 6-M
12-M) demonstrates that nominal sales growth has actually cooled over
the past three-months compared to the 6-M and 12-M pace. On closer
inspection that seems to have more to do with inflation as CPI-deflated
retail sales accelerated to 3% over 6-months from 0.9% over 12 months
and then to 3.9% over three months compared to six months. In the new
quarter (2010-Q1) sales are rising at a 3.7% annual rate so the
stronger growth rate seems to be mostly holding up.</p>
<p>The nominal sales data also show much more momentum in sales
with motor vehicles excluded. The evidence there is of much stronger
consumer spending in train. Retail less MV sales have accelerated from
5.5% over 12-months to 7.9% over 6-months to 10.1% over three months.
In the current quarter the pace for sales is an even stronger 14%.</p>
<p>So there are various ways to assess the Canadian consumer. For
the most part the consumer seems to be back to the store had shopping
with gusto. Of course the Olympic Games came to Canada in February and
so there could be a further boost to these figures at that time with
the influx of tourists. For the moment, without the Olympic effect
Canada&#8217;s consumers appear to be back on a spending path. Only auto
purchases are lagging.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"><b>Canada
Retail Sales</b> </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;" colspan="3">Mo/Mo</td>
<td style="font-weight: bold;" colspan="4">Saar</td>
<td style="font-weight: bold;">New QTR</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">Nominal %</td>
<td style="font-weight: bold;">Jan-10</td>
<td style="font-weight: bold;">Dec-09</td>
<td style="font-weight: bold;">Nov-09</td>
<td style="font-weight: bold;">3-Mo</td>
<td style="font-weight: bold;">6-Mo</td>
<td style="font-weight: bold;">12-MO</td>
<td style="font-weight: bold;">Yr-Ago</td>
<td style="font-weight: bold;">Saar</td>
</tr>
<tr>
<td class="firstcol">Total RTL</td>
<td style="font-weight: bold;">0.7%</td>
<td style="font-weight: bold;">0.5%</td>
<td style="font-weight: bold;">-0.4%</td>
<td style="font-weight: bold;">3.5%</td>
<td style="font-weight: bold;">6.0%</td>
<td style="font-weight: bold;">6.0%</td>
<td style="font-weight: bold;">-6.3%</td>
<td style="font-weight: bold;">5.7%</td>
</tr>
<tr>
<td class="firstcol">New Car Dealers</td>
<td>-2.3%</td>
<td>-0.4%</td>
<td>-2.3%</td>
<td>-18.2%</td>
<td>-0.6%</td>
<td>10.6%</td>
<td>-19.5%</td>
<td>-18.3%</td>
</tr>
<tr>
<td class="firstcol">Supermarkets</td>
<td>2.0%</td>
<td>-0.7%</td>
<td>1.0%</td>
<td>9.6%</td>
<td>4.6%</td>
<td>0.7%</td>
<td>8.2%</td>
<td>11.7%</td>
</tr>
<tr>
<td class="firstcol">Clothing Stores</td>
<td>0.2%</td>
<td>1.5%</td>
<td>-2.5%</td>
<td>-3.5%</td>
<td>1.3%</td>
<td>-0.7%</td>
<td>-3.0%</td>
<td>1.9%</td>
</tr>
<tr>
<td style="font-weight: bold;" class="firstcol">Retail
less MVs</td>
<td style="font-weight: bold;">1.8%</td>
<td style="font-weight: bold;">0.7%</td>
<td style="font-weight: bold;">0.0%</td>
<td style="font-weight: bold;">10.1%</td>
<td style="font-weight: bold;">7.9%</td>
<td style="font-weight: bold;">5.5%</td>
<td style="font-weight: bold;">-3.0%</td>
<td style="font-weight: bold;">14.0%</td>
</tr>
<tr>
<td class="firstcol">CPI defalted Retail</td>
<td style="font-weight: bold;">0.4%</td>
<td style="font-weight: bold;">0.0%</td>
<td style="font-weight: bold;">0.5%</td>
<td style="font-weight: bold;">3.9%</td>
<td style="font-weight: bold;">3.0%</td>
<td style="font-weight: bold;">1.9%</td>
<td style="font-weight: bold;">1.1%</td>
<td style="font-weight: bold;">3.7%</td>
</tr>
</tbody>
</table>
</body></html>

Canadian Retail sales rose a sharp 0.7% in January. Deflated by the CPI the retail sales rise comes back to a still respectable 0.4% gain. The year-over-year plot in the chart shows the acceleration in nominal retail sales is slowing. [...]

Canadian Retail Sales Are On A Roll

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<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100322a.jpg" align="left" border="0" height="265" width="363"></p>
<p>Economic activity slowed last month according to the Chicago
Fed National Activity Index (CFNAI) from the Federal Reserve Bank of
Chicago. Was severe winter weather behind the slowdown or was there
more behind the index decline to -0.64 from a downwardly revised -0.04
in January? Regardless, positive economic growth still was indicated by
the increase from the series' low of -4.14 reached one year ago. During
the last ten years the has been a 76% correlation between the index
level and the q/q change in real GDP.</p>
<p><b>The three-month moving average of the index, which
smoothes out some of the series' volatility, also fell to -0.39 from
its highest level since 2007.</b></p>
<p>An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3.0%. The complete CFNAI report is available <a href="http://www.chicagofed.org/digital_assets/publications/cfnai/2010/cfnai_march2010.pdf">here</a>.</p>
<p>The Chicago Fed indicated that each of the series' components
except sales, inventories &amp; orders contributed negatively to
the overall decline. Overall, a reduced 34 of the 85 individual
indicators made positive contributions to the index while 51 made
negative contributions. The CFNAI is a weighted average of 85
indicators of economic activity. The indicators reflect activity in the
following categories: production &amp; income, the labor market,
personal consumption &amp; housing, manufacturing &amp; trade
sales, and inventories &amp; orders.</p>
<p>In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index improved during January to its highest
level since December 2008. Indicators for the auto, steel, machinery
and resource sectors each rose. The Chicago Federal Reserve figures are
available in Haver's <b>SURVEYS </b>database.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100322b.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100322c.jpg" style="width: 312px; height: 265px;">
<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/SURVEYS/@S5/@S503/@S503.HTM"><b>Chicago Fed</b></a></th>
<th scope="col"><b>February</b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>February '09</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">CFNAI</td>
<td>-0.64</td>
<td>-0.04</td>
<td>-0.50</td>
<td>-2.48</td>
<td>-1.62</td>
<td>-1.79</td>
<td>-0.35</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td>-0.39</td>
<td>-0.13</td>
<td>-0.42</td>
<td>-3.47</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Personal Consumption &amp; Housing&nbsp;</td>
<td>-0.45</td>
<td>-0.44</td>
<td>-0.48</td>
<td>-0.49</td>
<td>-0.49</td>
<td>-0.32</td>
<td>-0.09</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Employment, Unemployment &amp; Hours</td>
<td>-0.16</td>
<td>-0.02</td>
<td>-0.23</td>
<td>-1.34</td>
<td>-0.76</td>
<td>-0.67</td>
<td>-0.15</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Production &amp; Income</td>
<td>-0.08</td>
<td>0.41</td>
<td>0.05</td>
<td>-0.53</td>
<td>-0.24</td>
<td>-0.56</td>
<td>-0.05</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Sales, Inventories &amp; Orders</td>
<td>0.05</td>
<td>0.02</td>
<td>0.16</td>
<td>-0.13</td>
<td>-0.15</td>
<td>-0.25</td>
<td>-0.06</td>
</tr>
</tbody>
</table>
</body></html>

Economic activity slowed last month according to the Chicago Fed National Activity Index (CFNAI) from the Federal Reserve Bank of Chicago. Was severe winter weather behind the slowdown or was there more behind the index decline to [...]

Chicago Fed Index Indicates Slower Growth Last Month

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<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100322a.jpg" align="left" border="0" height="265" width="363"></p>
<p>Economic activity slowed last month according to the Chicago
Fed National Activity Index (CFNAI) from the Federal Reserve Bank of
Chicago. Was severe winter weather behind the slowdown or was there
more behind the index decline to -0.64 from a downwardly revised -0.04
in January? Regardless, positive economic growth still was indicated by
the increase from the series' low of -4.14 reached one year ago. During
the last ten years the has been a 76% correlation between the index
level and the q/q change in real GDP.</p>
<p><b>The three-month moving average of the index, which
smoothes out some of the series' volatility, also fell to -0.39 from
its highest level since 2007.</b></p>
<p>An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3.0%. The complete CFNAI report is available <a href="http://www.chicagofed.org/digital_assets/publications/cfnai/2010/cfnai_march2010.pdf">here</a>.</p>
<p>The Chicago Fed indicated that each of the series' components
except sales, inventories &amp; orders contributed negatively to
the overall decline. Overall, a reduced 34 of the 85 individual
indicators made positive contributions to the index while 51 made
negative contributions. The CFNAI is a weighted average of 85
indicators of economic activity. The indicators reflect activity in the
following categories: production &amp; income, the labor market,
personal consumption &amp; housing, manufacturing &amp; trade
sales, and inventories &amp; orders.</p>
<p>In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index improved during January to its highest
level since December 2008. Indicators for the auto, steel, machinery
and resource sectors each rose. The Chicago Federal Reserve figures are
available in Haver's <b>SURVEYS </b>database.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100322b.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100322c.jpg" style="width: 312px; height: 265px;">
<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/SURVEYS/@S5/@S503/@S503.HTM"><b>Chicago
Fed</b></a></th>
<th scope="col"><b>February</b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>February '09</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">CFNAI</td>
<td>-0.64</td>
<td>-0.04</td>
<td>-0.50</td>
<td>-2.48</td>
<td>-1.62</td>
<td>-1.79</td>
<td>-0.35</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td>-0.39</td>
<td>-0.13</td>
<td>-0.42</td>
<td>-3.47</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Personal Consumption &amp; Housing&nbsp;</td>
<td>-0.45</td>
<td>-0.44</td>
<td>-0.48</td>
<td>-0.49</td>
<td>-0.49</td>
<td>-0.32</td>
<td>-0.09</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Employment, Unemployment &amp; Hours</td>
<td>-0.16</td>
<td>-0.02</td>
<td>-0.23</td>
<td>-1.34</td>
<td>-0.76</td>
<td>-0.67</td>
<td>-0.15</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Production &amp; Income</td>
<td>-0.08</td>
<td>0.41</td>
<td>0.05</td>
<td>-0.53</td>
<td>-0.24</td>
<td>-0.56</td>
<td>-0.05</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Sales, Inventories &amp; Orders</td>
<td>0.05</td>
<td>0.02</td>
<td>0.16</td>
<td>-0.13</td>
<td>-0.15</td>
<td>-0.25</td>
<td>-0.06</td>
</tr>
</tbody>
</table>
<span id="articletitle">Canadian Retail Sales Are On A Roll</span><br>
<span id="byline">by <a href="/comment/Brusca.html">Robert
Brusca</a> March 22, 2010</span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100322d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>Canadian Retail sales rose a sharp 0.7% in January. Deflated
by the CPI the retail sales rise comes back to a still respectable 0.4%
gain. The year-over-year plot in the chart shows the acceleration in
nominal retail sales is slowing. And that sort of thing is inevitable
as growth rates climb. But it is also inevitable as recovery progresses
and the recession gets pushed farther into history. In January the
Yr/Yr gain is marked from January a year ago when sales rose by 1.7%.
The December base for the year &#8211;over-year calculation is December 2009
when retail sales fell by 5% month-to-month. No wonder there is a
noticeable backtracking there in the Yr/Yr rate of growth!</p>
<p>But the shorter sequential growth rate progression ( 3-M, 6-M
12-M) demonstrates that nominal sales growth has actually cooled over
the past three-months compared to the 6-M and 12-M pace. On closer
inspection that seems to have more to do with inflation as CPI-deflated
retail sales accelerated to 3% over 6-months from 0.9% over 12 months
and then to 3.9% over three months compared to six months. In the new
quarter (2010-Q1) sales are rising at a 3.7% annual rate so the
stronger growth rate seems to be mostly holding up.</p>
<p>The nominal sales data also show much more momentum in sales
with motor vehicles excluded. The evidence there is of much stronger
consumer spending in train. Retail less MV sales have accelerated from
5.5% over 12-months to 7.9% over 6-months to 10.1% over three months.
In the current quarter the pace for sales is an even stronger 14%.</p>
<p>So there are various ways to assess the Canadian consumer. For
the most part the consumer seems to be back to the store had shopping
with gusto. Of course the Olympic Games came to Canada in February and
so there could be a further boost to these figures at that time with
the influx of tourists. For the moment, without the Olympic effect
Canada&#8217;s consumers appear to be back on a spending path. Only auto
purchases are lagging.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"><b>Canada
Retail Sales</b> </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;" colspan="3">Mo/Mo</td>
<td style="font-weight: bold;" colspan="4">Saar</td>
<td style="font-weight: bold;">New QTR</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">Nominal
%</td>
<td style="font-weight: bold;">Jan-10</td>
<td style="font-weight: bold;">Dec-09</td>
<td style="font-weight: bold;">Nov-09</td>
<td style="font-weight: bold;">3-Mo</td>
<td style="font-weight: bold;">6-Mo</td>
<td style="font-weight: bold;">12-MO</td>
<td style="font-weight: bold;">Yr-Ago</td>
<td style="font-weight: bold;">Saar</td>
</tr>
<tr>
<td class="firstcol">Total RTL</td>
<td style="font-weight: bold;">0.7%</td>
<td style="font-weight: bold;">0.5%</td>
<td style="font-weight: bold;">-0.4%</td>
<td style="font-weight: bold;">3.5%</td>
<td style="font-weight: bold;">6.0%</td>
<td style="font-weight: bold;">6.0%</td>
<td style="font-weight: bold;">-6.3%</td>
<td style="font-weight: bold;">5.7%</td>
</tr>
<tr>
<td class="firstcol">New Car Dealers</td>
<td>-2.3%</td>
<td>-0.4%</td>
<td>-2.3%</td>
<td>-18.2%</td>
<td>-0.6%</td>
<td>10.6%</td>
<td>-19.5%</td>
<td>-18.3%</td>
</tr>
<tr>
<td class="firstcol">Supermarkets</td>
<td>2.0%</td>
<td>-0.7%</td>
<td>1.0%</td>
<td>9.6%</td>
<td>4.6%</td>
<td>0.7%</td>
<td>8.2%</td>
<td>11.7%</td>
</tr>
<tr>
<td class="firstcol">Clothing Stores</td>
<td>0.2%</td>
<td>1.5%</td>
<td>-2.5%</td>
<td>-3.5%</td>
<td>1.3%</td>
<td>-0.7%</td>
<td>-3.0%</td>
<td>1.9%</td>
</tr>
<tr>
<td style="font-weight: bold;" class="firstcol">Retail
less MVs</td>
<td style="font-weight: bold;">1.8%</td>
<td style="font-weight: bold;">0.7%</td>
<td style="font-weight: bold;">0.0%</td>
<td style="font-weight: bold;">10.1%</td>
<td style="font-weight: bold;">7.9%</td>
<td style="font-weight: bold;">5.5%</td>
<td style="font-weight: bold;">-3.0%</td>
<td style="font-weight: bold;">14.0%</td>
</tr>
<tr>
<td class="firstcol">CPI defalted Retail</td>
<td style="font-weight: bold;">0.4%</td>
<td style="font-weight: bold;">0.0%</td>
<td style="font-weight: bold;">0.5%</td>
<td style="font-weight: bold;">3.9%</td>
<td style="font-weight: bold;">3.0%</td>
<td style="font-weight: bold;">1.9%</td>
<td style="font-weight: bold;">1.1%</td>
<td style="font-weight: bold;">3.7%</td>
</tr>
</tbody>
</table>
<span id="articletitle">Canadian Consumer Prices</span><br>
<span id="byline">by <a href="/comment/Curley.html">Louise
Curley</a> March 22, 2010</span>
<span id="articletext">
<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100322e.jpg" align="left" border="0" height="265" width="353"></p>
<p>Canadian consumer prices, seasonally adjusted, increased 1.57%
in February from a year ago. The core index showed a larger increase,
2.04%. The core index has been rising faster than the total index since
November 2008, as can be seen in the first chart. The core index
usually rises more slowly than the total index since the idea behind
the core index is to exclude those items whose prices are particularly
volatile, like food and energy. However, when the prices of such items
decline faster that the general price level, the Core index will rise
faster than the Total index. The second chart shows the sharp decline
in the price of fuel oil and other fuels that took place from late 2008
until the summer of 2009. The rise since then suggests that sooner or
later, the Total Index will be rising faster than the Core.</p>
<p>Buried in the extensive detail of the index is a component
entitled Travel Accommodations that would not ordinarily cause comment,
however, the rise of this component in February was striking as can be
seen in the third chart. The rise was due apparently to increases in
the prices of hotel rooms and other travel accommodations during the
Olympics at Vancouver. The impact on the total index, was muted as the
weight of the Travel Accommodation component is only 1.15%.</p>
<p>The actual indexes and the weights are found in the Haver Data
Base, CANSIM.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100322f.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100322g.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col"><b>Feb 10&nbsp;</b></th>
<th scope="col"><b>Jan 09</b></th>
<th scope="col"><b>Feb 09</b></th>
<th scope="col"><b>M/M Chg</b></th>
<th scope="col"><b>Y/Y Chg</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Index (SA,
2002=100)&nbsp;</td>
<td>116.1</td>
<td>116.0</td>
<td>114.3</td>
<td>0.09</td>
<td>1.57</td>
<td>114.0</td>
<td>114.1</td>
<td>111.4</td>
</tr>
<tr>
<td class="firstcol">Core Index (SA,
2002=100)</td>
<td>115.3</td>
<td>114.9</td>
<td>113.0</td>
<td>0.35</td>
<td>2.04</td>
<td>113.6</td>
<td>111.7</td>
<td>109.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Index (NSA,
2002=100)</td>
<td>115.6</td>
<td>115.1</td>
<td>113.8</td>
<td>0.42</td>
<td>1.58</td>
<td>114.4</td>
<td>114.1</td>
<td>111.5</td>
</tr>
<tr>
<td class="firstcol">Fuel Oil and other
Fuels</td>
<td>176.0</td>
<td>181.6</td>
<td>157.6</td>
<td>-3.08</td>
<td>11.68</td>
<td>158.0</td>
<td>225.4</td>
<td>122.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Travel&nbsp;
Accommodations (NSA, 2002=100)</td>
<td>87.8</td>
<td>74.0</td>
<td>75.7</td>
<td>18.65</td>
<td>15.98</td>
<td>79.7</td>
<td>81.8</td>
<td>79.8</td>
</tr>
</tbody>
</table>
</body></html>

Chicago Fed Index Indicates SlowerGrowth Last Month

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<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100319d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>The year over year charts show that momentum is still in-place
for Italy and for France despite a set-back in January. Both Italy and
France have seen orders drop in January. For France the January drop
was severe but it still did not overwhelm the gain from December.
Italy&#8217;s order drop is across both domestic and foreign orders; it also
comes on the heels of strong gains in those same orders in December but
the drop does not exceed the past month&#8217;s gains, the same as the case
for France.</p>
<p>Despite accelerating sequential growth rates from Both Italy&#8217;s
and France&#8217;s orders, with 3-mo gains far in excess of six month gains,
and ahead of Yr/Yr, however, both Italian and French orders are losing
momentum.</p>
<p>If short term orders continue to rise, the Yr/Yr momentum drop
will fade away, but it&#8217;s all a question of strength and consistency
issues for orders growth that we cannot yet know with any degree of
certainty. For now the drop in orders in France and Italy raise some
questions about e-Zone growth. Germany has a contrary trend with orders
rising strongly by 4.7% in January after a smaller drop in December.
The e-zone remains a zone of intrigue when it comes to growth and
momentum.</p>
<p><br>
</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> <b>Italy
Orders</b></th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar exept m/m</td>
<td>Jan-10</td>
<td>Dec-09</td>
<td>Nov-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-2.8%</td>
<td>4.7%</td>
<td>2.8%</td>
<td>20.0%</td>
<td>3.7%</td>
<td>4.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Foreign</td>
<td>-2.3%</td>
<td>8.4%</td>
<td>3.1%</td>
<td>42.4%</td>
<td>3.6%</td>
<td>10.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Domestic</td>
<td>-3.1%</td>
<td>2.8%</td>
<td>2.6%</td>
<td>8.9%</td>
<td>3.6%</td>
<td>0.4%</td>
</tr>
<tr style="font-weight: bold;">
<td colspan="7" class="firstcol">Memo</td>
</tr>
<tr class="odd">
<td class="firstcol">Sales</td>
<td>2.7%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>30.4%</td>
<td>14.9%</td>
<td>4.8%</td>
</tr>
<tr style="font-weight: bold;">
<td colspan="7" class="firstcol">French Orders</td>
</tr>
<tr class="even">
<td class="firstcol">Saar exept m/m</td>
<td>Jan-10</td>
<td>Dec-09</td>
<td>Nov-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-10.8%</td>
<td>15.7%</td>
<td>0.5%</td>
<td>15.8%</td>
<td>5.1%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>-11.2%</td>
<td>19.9%</td>
<td>0.7%</td>
<td>32.2%</td>
<td>13.9%</td>
<td>11.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">IP xConstruct</td>
<td>0.8%</td>
<td>-0.9%</td>
<td>1.0%</td>
<td>3.7%</td>
<td>3.7%</td>
<td>4.4%</td>
</tr>
</tbody>
</table>
</body></html>

The year over year charts show that momentum is still in-place for Italy and for France despite a set-back in January. Both Italy and France have seen orders drop in January. For France the January drop was severe but it still did not [...]

Orders Drop In Italy And France Upward Trend Is Mixed

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<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100319a.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>You'd think the economy was on the cusp of overheating. But
seriously, the Philadelphia Federal Reserve Bank indicated yesterday
that its index of regional factory sector activity improved this month
to the second highest level since early-2005. At 18.9 the index
slightly exceeded Consensus expectations and has been positive since
the summer. The latest figure compared to those near -40.0 this past
fall and winter.</p>
<p>During the last ten years there has been a 75% 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 73% correlation with q/q growth in real GDP. The latest
survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2010/bos0310.pdf">here.</a></p>
<p>A slowing of vendor delivery speeds, a lengthened employee
workweek and higher prices provided the lift behind the general
activity index. These gains may, however, reflect harsh winter weather.
Amongst other components, new orders fell sharply and reversed much of
the February improvement. Inventories also ran off at a quickened rate
but the employment series improved to its highest since 2007. During
the last ten years, there has been a 90% correlation between the index
level and the three-month change in manufacturing sector payrolls.</p>
<p>The prices paid index rose to its highest since August 2008
and compares to negative readings one year ago. During the last ten
years there has been a 66% correlation between the prices paid index
and the three-month growth in the intermediate goods PPI. There has
been an 77% correlation with the change in core intermediate goods
prices.</p>
<p>Supporting the notion of a winter-weather effect was the
rebound in the separate index of expected business conditions in six
months to its highest in nine months. Many of the index subseries rose
including new orders and the number of employees. Expected prices paid
rose to nearly the highest level in two years and the average workweek
lengthened. Expected capital expenditures fell as did unfilled orders.</p>
<p>The figures from the Philadelphia Federal Reserve can be found
in Haver's <b>SURVEYS</b> database.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100319b.jpg" width="312">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100319c.jpg" width="312">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Philadelphia
Fed (%)</b></th>
<th scope="col"><b>March</b></th>
<th scope="col"><b>February</b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>March '09</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">General Activity Index</td>
<td>18.9</td>
<td>17.6</td>
<td>15.2</td>
<td>-31.4</td>
<td>-7.6</td>
<td>-21.4</td>
<td>5.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>9.3</td>
<td>22.7</td>
<td>3.2</td>
<td>-37.5</td>
<td>-9.7</td>
<td>-14.7</td>
<td>6.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Delivery Times</td>
<td>7.9</td>
<td>-2.1</td>
<td>6.6</td>
<td>-28.0</td>
<td>-15.3</td>
<td>-10.6</td>
<td>-6.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Number of Employees</td>
<td>8.4</td>
<td>7.4</td>
<td>6.1</td>
<td>-49.8</td>
<td>-23.8</td>
<td>-8.8</td>
<td>6.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventories</td>
<td>-11.0</td>
<td>3.2</td>
<td>-1.6</td>
<td>-52.4</td>
<td>-24.0</td>
<td>-16.7</td>
<td>-3.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index</td>
<td>38.6</td>
<td>32.4</td>
<td>33.2</td>
<td>-28.8</td>
<td>-3.9</td>
<td>36.3</td>
<td>26.3</td>
</tr>
</tbody>
</table>
</body></html>

You'd think the economy was on the cusp of overheating. But seriously, the Philadelphia Federal Reserve Bank indicated yesterday that its index of regional factory sector activity improved this month to the second highest level since [...]

Philadelphia Fed Index Increases With Shorter Delivery Speeds & Higher Prices

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100319a.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>You'd think the economy was on the cusp of overheating. But
seriously, the Philadelphia Federal Reserve Bank indicated yesterday
that its index of regional factory sector activity improved this month
to the second highest level since early-2005. At 18.9 the index
slightly exceeded Consensus expectations and has been positive since
the summer. The latest figure compared to those near -40.0 this past
fall and winter.</p>
<p>During the last ten years there has been a 75% 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 73% correlation with q/q growth in real GDP. The latest
survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2010/bos0310.pdf">here.</a></p>
<p>A slowing of vendor delivery speeds, a lengthened employee
workweek and higher prices provided the lift behind the general
activity index. These gains may, however, reflect harsh winter weather.
Amongst other components, new orders fell sharply and reversed much of
the February improvement. Inventories also ran off at a quickened rate
but the employment series improved to its highest since 2007. During
the last ten years, there has been a 90% correlation between the index
level and the three-month change in manufacturing sector payrolls.</p>
<p>The prices paid index rose to its highest since August 2008
and compares to negative readings one year ago. During the last ten
years there has been a 66% correlation between the prices paid index
and the three-month growth in the intermediate goods PPI. There has
been an 77% correlation with the change in core intermediate goods
prices.</p>
<p>Supporting the notion of a winter-weather effect was the
rebound in the separate index of expected business conditions in six
months to its highest in nine months. Many of the index subseries rose
including new orders and the number of employees. Expected prices paid
rose to nearly the highest level in two years and the average workweek
lengthened. Expected capital expenditures fell as did unfilled orders.</p>
<p>The figures from the Philadelphia Federal Reserve can be found
in Haver's <b>SURVEYS</b> database.</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100319b.jpg" width="312"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100319c.jpg" width="312">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Philadelphia
Fed (%)</b></th>
<th scope="col"><b>March</b></th>
<th scope="col"><b>February</b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>March '09</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">General Activity Index</td>
<td>18.9</td>
<td>17.6</td>
<td>15.2</td>
<td>-31.4</td>
<td>-7.6</td>
<td>-21.4</td>
<td>5.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>9.3</td>
<td>22.7</td>
<td>3.2</td>
<td>-37.5</td>
<td>-9.7</td>
<td>-14.7</td>
<td>6.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Delivery Times</td>
<td>7.9</td>
<td>-2.1</td>
<td>6.6</td>
<td>-28.0</td>
<td>-15.3</td>
<td>-10.6</td>
<td>-6.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Number of Employees</td>
<td>8.4</td>
<td>7.4</td>
<td>6.1</td>
<td>-49.8</td>
<td>-23.8</td>
<td>-8.8</td>
<td>6.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventories</td>
<td>-11.0</td>
<td>3.2</td>
<td>-1.6</td>
<td>-52.4</td>
<td>-24.0</td>
<td>-16.7</td>
<td>-3.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index</td>
<td>38.6</td>
<td>32.4</td>
<td>33.2</td>
<td>-28.8</td>
<td>-3.9</td>
<td>36.3</td>
<td>26.3</td>
</tr>
</tbody>
</table>
<span id="articletitle">Orders Drop In Italy And France
Upward Trend Is Mixed</span><br>
<span id="byline">by <a href="/comment/Brusca.html">Robert
Brusca</a> March 19, 2010</span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100319d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>The year over year charts show that momentum is still in-place
for Italy and for France despite a set-back in January. Both Italy and
France have seen orders drop in January. For France the January drop
was severe but it still did not overwhelm the gain from December.
Italy&#8217;s order drop is across both domestic and foreign orders; it also
comes on the heels of strong gains in those same orders in December but
the drop does not exceed the past month&#8217;s gains, the same as the case
for France.</p>
<p>Despite accelerating sequential growth rates from Both Italy&#8217;s
and France&#8217;s orders, with 3-mo gains far in excess of six month gains,
and ahead of Yr/Yr, however, both Italian and French orders are losing
momentum.</p>
<p>If short term orders continue to rise, the Yr/Yr momentum drop
will fade away, but it&#8217;s all a question of strength and consistency
issues for orders growth that we cannot yet know with any degree of
certainty. For now the drop in orders in France and Italy raise some
questions about e-Zone growth. Germany has a contrary trend with orders
rising strongly by 4.7% in January after a smaller drop in December.
The e-zone remains a zone of intrigue when it comes to growth and
momentum.</p>
<p><br>
</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> <b>Italy
Orders</b></th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar exept m/m</td>
<td>Jan-10</td>
<td>Dec-09</td>
<td>Nov-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-2.8%</td>
<td>4.7%</td>
<td>2.8%</td>
<td>20.0%</td>
<td>3.7%</td>
<td>4.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Foreign</td>
<td>-2.3%</td>
<td>8.4%</td>
<td>3.1%</td>
<td>42.4%</td>
<td>3.6%</td>
<td>10.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Domestic</td>
<td>-3.1%</td>
<td>2.8%</td>
<td>2.6%</td>
<td>8.9%</td>
<td>3.6%</td>
<td>0.4%</td>
</tr>
<tr style="font-weight: bold;">
<td colspan="7" class="firstcol">Memo</td>
</tr>
<tr class="odd">
<td class="firstcol">Sales</td>
<td>2.7%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>30.4%</td>
<td>14.9%</td>
<td>4.8%</td>
</tr>
<tr style="font-weight: bold;">
<td colspan="7" class="firstcol">French Orders</td>
</tr>
<tr class="even">
<td class="firstcol">Saar exept m/m</td>
<td>Jan-10</td>
<td>Dec-09</td>
<td>Nov-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-10.8%</td>
<td>15.7%</td>
<td>0.5%</td>
<td>15.8%</td>
<td>5.1%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>-11.2%</td>
<td>19.9%</td>
<td>0.7%</td>
<td>32.2%</td>
<td>13.9%</td>
<td>11.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">IP xConstruct</td>
<td>0.8%</td>
<td>-0.9%</td>
<td>1.0%</td>
<td>3.7%</td>
<td>3.7%</td>
<td>4.4%</td>
</tr>
</tbody>
</table>
</body></html>

Philadelphia Fed Index IncreasesWith Shorter Delivery Speeds & Higher Prices

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

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

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Andrew Cates

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

250501Z1.jpg

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

250501Z2.jpg

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

250501Z3.jpg

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

250501Z4.jpg

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

250501Z5.jpg

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

250501Z6.jpg

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

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

Charts of the Week: Tariff Truce, Tenuous Trust

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

250430A.jpg

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**.

250430C.jpg

250430D.jpg

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

Personal Income, Consumption, and Prices in March

250430F20.jpg

250430G20.jpg

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

250430F5.jpg

250430G5.jpg

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.

250430H5.jpg

250430I5.jpg

- 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 2010

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