Robert Brusca

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100421a.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
The UK claimant count continues to make its slow turn to lower
levels. The unemployment rate calculated from claimant data also is
trending lower. However, a broader ILO survey has shown the opposite to
be true. On the ILO measure the number of unemployed is up to its
highest tally since 1994. As in the US, the ranks of the long-term
unemployed are growing in the UK. The ILO rate of unemployment, also a
separate calculation, went up to 8% from 7.8%.
These metrics take on added importance in the middle of UK
elections. The claimant figures tend to grab the headlines in the UK
but the ILO numbers are usually mentioned too. While the economy does
seem to be turning the corner, the speed of the turn is slow and the
political fighting over what it means is intense.
In a release of the minutes of the BOE&#8217;s last meeting there is
mention of a growing risk of inflation. Up to now&#8217; the BOE has been
talking of an inflation overshoot of its target that was not a matter
of concern. In these minutes for the first time there is talk of
&#8216;upside risks&#8217; to inflation laid at the feet of rising oil and
commodity prices. Still, the bottom line is that the committee did not
see these risks as substantial enough to call for any change in the
current policy path.
The UK seems to be in the same boat as every other major
economy in so far as its economic data blow hot then cold sometimes on
the same day! This obviously this makes it hard to get a fix on what
the economy is really doing. On top that, electioneering just muddies
the waters even more as politicians try to take each number to make
some political gain from it. Now the BOE is seeing shifting risks for
inflation. With all of this in process the UK remains one of the most
enigmatic economies in Europe.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col">UK Claimant Count </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>Jan-10</td>
<td>3mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td colspan="3">Level in Month</td>
<td colspan="3">Avg in Period</td>
</tr>
<tr class="odd">
<td class="firstcol">U-Rate:Claimants</td>
<td>4.8</td>
<td>4.9</td>
<td>5.0</td>
<td>4.9</td>
<td>4.9</td>
<td>4.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td colspan="3">Change in MO</td>
<td colspan="3">Change over period</td>
</tr>
<tr class="odd">
<td class="firstcol">Change on 000s</td>
<td>-32.9</td>
<td>-40.1</td>
<td>16.2</td>
<td>-56.8</td>
<td>-73.4</td>
<td>90.1</td>
</tr>
</tbody>
</table>
</body></html>

The UK claimant count continues to make its slow turn to lower levels. The unemployment rate calculated from claimant data also is trending lower. However, a broader ILO survey has shown the opposite to be true. On the ILO measure the [...]

UK Claimant Count Turns Lower Amid Reports With Conflicting Signals

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100421a.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
The UK claimant count continues to make its slow turn to lower
levels. The unemployment rate calculated from claimant data also is
trending lower. However, a broader ILO survey has shown the opposite to
be true. On the ILO measure the number of unemployed is up to its
highest tally since 1994. As in the US, the ranks of the long-term
unemployed are growing in the UK. The ILO rate of unemployment, also a
separate calculation, went up to 8% from 7.8%.
These metrics take on added importance in the middle of UK
elections. The claimant figures tend to grab the headlines in the UK
but the ILO numbers are usually mentioned too. While the economy does
seem to be turning the corner, the speed of the turn is slow and the
political fighting over what it means is intense.
In a release of the minutes of the BOE&#8217;s last meeting there is
mention of a growing risk of inflation. Up to now&#8217; the BOE has been
talking of an inflation overshoot of its target that was not a matter
of concern. In these minutes for the first time there is talk of
&#8216;upside risks&#8217; to inflation laid at the feet of rising oil and
commodity prices. Still, the bottom line is that the committee did not
see these risks as substantial enough to call for any change in the
current policy path.
The UK seems to be in the same boat as every other major
economy in so far as its economic data blow hot then cold sometimes on
the same day! This obviously this makes it hard to get a fix on what
the economy is really doing. On top that, electioneering just muddies
the waters even more as politicians try to take each number to make
some political gain from it. Now the BOE is seeing shifting risks for
inflation. With all of this in process the UK remains one of the most
enigmatic economies in Europe.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">UK
Claimant Count </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>Jan-10</td>
<td>3mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td colspan="3">Level in Month</td>
<td colspan="3">Avg in Period</td>
</tr>
<tr class="odd">
<td class="firstcol">U-Rate:Claimants</td>
<td>4.8</td>
<td>4.9</td>
<td>5.0</td>
<td>4.9</td>
<td>4.9</td>
<td>4.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td colspan="3">Change in MO</td>
<td colspan="3">Change over period</td>
</tr>
<tr class="odd">
<td class="firstcol">Change on 000s</td>
<td>-32.9</td>
<td>-40.1</td>
<td>16.2</td>
<td>-56.8</td>
<td>-73.4</td>
<td>90.1</td>
</tr>
</tbody>
</table>
</body></html>

UK Claimant Count Turns Lower AmidReports With Conflicting Signals

Louise Curley

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100420e.jpg" style="width: 353px; height: 265px;" align="right">The
German
financial community is upbeat on Germany's economic prospects over the
next six months despite the disruptions caused by the eruption of the
Icelandic volcano.&nbsp; The ZEW Survey of institutional investors
and analysts took place over the period, March 29 to April 19, that
latter part of which was affected by the eruption of the
volcano.&nbsp; The survey revealed that those expecting
macroeconomic conditions to improve over the next six months exceeded
those expecting conditions to worsen by 53% up from 44.5% in
March.&nbsp; This was the first increase since September of last
year and its magnitude exceeded consensus estimates of a
rise.&nbsp;&nbsp;
 The
change in the appraisal of current conditions was even
greater.&nbsp;&nbsp; The financial community has
had a dim view of current conditions since August, 2008 when the
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100420f.jpg" style="width: 353px; height: 265px;" align="right">pessimists
regarding current conditions began to exceed the
optimists.&nbsp; By May 2009 the excess of pessimists reached
92.8%.&nbsp;&nbsp; Since then, there has been a steady decline
in the percentage of pessimists.&nbsp; In April, the excess of
pessimists was 39.2% an 11.7 point decline from the 51.9% of March. The
percent balances between optimist and pessimists regarding current
conditions and expectations for the next six months are shown in the
first chart.
 The
improved appraisal of current conditions and expectations has led
to some changes in profit expectations.&nbsp; The second chart
shows those industries where profit expectations have increased the
most in the last month.&nbsp; Although expectations for profits in
the Vehicles/Automotive and Consumption/Trade are small and even
negative in the case of the latter, expectations for profits in both
these industries have increased the most in the last month.&nbsp;
Profit expectations for these industries and two other industries where
profit expectations have had big increases--Machinery and
Electronics--are shown in the second chart.&nbsp;&nbsp;
 Over the
past few months
the economic news in Germany had been encouraging.&nbsp; The euro
has declined almost 11% since early December.&nbsp; Unemployment
continues to fall and&nbsp; new orders, particularly foreign, have
been strong. may have contributed to the good feeling in the financial
community
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Percent</th>
<th scope="col">Apr 10</th>
<th scope="col">Mar 10&nbsp;</th>
<th scope="col">Feb 10&nbsp;</th>
<th scope="col">Jan 10</th>
<th scope="col">Dec 09</th>
<th scope="col">Nov 09</th>
<th scope="col">Oct 09</th>
<th scope="col">Sep 09</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Expectation 6 mo
Ahead</td>
<td>53.0</td>
<td>44.5</td>
<td>15.1</td>
<td>47.2</td>
<td>50.4</td>
<td>56.1</td>
<td>56.0</td>
<td>57.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Conditions</td>
<td>-39.2</td>
<td>-51.9</td>
<td>-54.8</td>
<td>-56.6</td>
<td>-60.6</td>
<td>-65.6</td>
<td>-72.2</td>
<td>-74.0</td>
</tr>
<tr>
<td colspan="9" class="firstcol" style="font-weight: bold;">Profit
Expectations</td>
</tr>
<tr class="odd">
<td class="firstcol">Vehicles/Automotive</td>
<td>3.1</td>
<td>-25.4</td>
<td>-29.7</td>
<td>-23.2</td>
<td>-26.5</td>
<td>-33.9</td>
<td>-40.9</td>
<td>-43.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumption/Trade</td>
<td>-2.3</td>
<td>-15.6</td>
<td>-18.9</td>
<td>-12.1</td>
<td>-10.4</td>
<td>-18.4</td>
<td>-16.7</td>
<td>-20.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Machinery</td>
<td>52.1</td>
<td>36.7</td>
<td>29.6</td>
<td>33.8</td>
<td>26.9</td>
<td>16.8</td>
<td>14.4</td>
<td>12.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Electronics</td>
<td>41.2</td>
<td>29.8</td>
<td>22.0</td>
<td>27.0</td>
<td>22.8</td>
<td>18.1</td>
<td>17.4</td>
<td>9.1</td>
</tr>
</tbody>
</table>

</body></html>

The German financial community is upbeat on Germany's economic prospects over the next six months despite the disruptions caused by the eruption of the Icelandic volcano. The ZEW Survey of institutional investors and analysts took [...]

German Investors Upbeat On Economic Prospects 6 Months Ahead

Tom Moeller

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<img alt solid src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100420d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
Consumers still seem interested in spending money after being
cooped up indoors this winter. As a result, chain store sales last week
held onto the sharp gain early in the month and the y/y change remained
at 4.6%, its strongest gain since early-2007.
During the last ten
years there has been a 68% correlation between the y/y change in chain
store sales and the change in retail sales at general merchandise
stores.
 That correlation recently has increased.

The ICSC-Goldman
Sachs retail chain-store sales index is constructed using the
same-store sales (stores open for one year) reported by 78 stores of
seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney,
Sears and Wal-Mart.
 During the last ten years there has been a 69%
correlation between the year-to-year growth in chain store sales and
the growth in general merchandise retail sales. The weekly
figures are available in Haver's SURVEYW database.

Contrary to the trend in purchases, the leading indicator of
chain store sales slipped last week and was down slightly versus one
year ago. The composite leading economic indicator is compiled from
four series: (1) the MBA's volume index of mortgage applications for
home purchase (2) the ABC News/Money magazine's survey of consumer
buying conditions (3) new filings for jobless benefits and (4) the
30-year government bond yield.
Issues in Economic Development is
yesterday's speech by Fed Governor Elizabeth A. Duke and it can be
found <a href="http://www.federalreserve.gov/newsevents/speech/duke20100419a.htm">here</a>.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">04/17/10</th>
<th scope="col">04/10/10</th>
<th scope="col">04/03/10</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>513.8</td>
<td>513.0</td>
<td>512.7</td>
<td>4.6%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
</body></html>

Consumers still seem interested in spending money after being cooped up indoors this winter. As a result, chain store sales last week held onto the sharp gain early in the month and the y/y change remained at 4.6%, its strongest gain [...]

U.S. Weekly Chain Store Sales Hold On To Early-April Gain

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100420a.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
The trend has been upward for the cost of regular
gasoline. Last week the price for a gallon remained at the
prior week's high of $2.86 which was up by 78% since the December, 2008
low. At the margin, however, there's been some shakiness. Yesterday,
the spot market price for a gallon of regular gasoline fell back by ten
cents from the early-April high. The figures are reported by the U.S.
Department of Energy and can be found in Haver's WEEKLY
&amp; DAILY databases.
Crude oil costs have been behind the gasoline price
volatility. The price for a barrel of light sweet crude (WTI) fell a
modest 1.6% last week to $84.60 from $85.97 but then fell twice that
percent yesterday to $81.45. Regardless, prices remain up by
two-and-one half times the 2008 low
The easing of gasoline prices has had nothing to due with the
trend in demand. Weekly gasoline usage has been trending higher with
more temperate weather and the improved economy. It was up 1.0% last
week versus one year ago and that compares with a 3.0% decline in
early-February. The demand for residual fuel oil fell 1.6% and
distillate demand fell 4.8% y/y. Inventories of crude oil and petroleum
products were stable through much of last month and were down slightly
from one year ago.
U.S. natural gas prices were up slightly last week at $4.09
per mmbtu (+15.3% y/y). Prices reached a high of $6.50 early in
January. Nevertheless, prices remained nearly double the September low.
The energy price data can be found in Haver's WEEKLY
database while the daily figures are in DAILY.
The gasoline demand figures are in OILWKLY.
Lessons from the failure of Lehman Brothers is
this morning's House testimony by Fed Chairman Ben S. Bernanke and it
can be found <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20100420a.htm">here</a>.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100420b.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100420c.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/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">04/17/10</th>
<th scope="col">04/12/10</th>
<th scope="col">04/05/10</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.86</td>
<td>2.86</td>
<td>2.83</td>
<td>38.9%</td>
<td>2.35</td>
<td>3.25</td>
<td>2.80</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>84.60</td>
<td>85.97</td>
<td>83.29</td>
<td>69.9%</td>
<td>61.39</td>
<td>100.16</td>
<td>72.25</td>
</tr>
</tbody>
</table>
</body></html>

The trend has been upward for the cost of regular gasoline. Last week the price for a gallon remained at the prior week's high of $2.86 which was up by 78% since the December, 2008 low. At the margin, however, there's been some [...]

U.S. Petroleum Prices Remain Near High But Spot Prices Fall

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100420a.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
The trend has been upward for the cost of regular
gasoline. Last week the price for a gallon remained at the
prior week's high of $2.86 which was up by 78% since the December, 2008
low. At the margin, however, there's been some shakiness. Yesterday,
the spot market price for a gallon of regular gasoline fell back by ten
cents from the early-April high. The figures are reported by the U.S.
Department of Energy and can be found in Haver's WEEKLY
&amp; DAILY databases.
Crude oil costs have been behind the gasoline price
volatility. The price for a barrel of light sweet crude (WTI) fell a
modest 1.6% last week to $84.60 from $85.97 but then fell twice that
percent yesterday to $81.45. Regardless, prices remain up by
two-and-one half times the 2008 low
The easing of gasoline prices has had nothing to due with the
trend in demand. Weekly gasoline usage has been trending higher with
more temperate weather and the improved economy. It was up 1.0% last
week versus one year ago and that compares with a 3.0% decline in
early-February. The demand for residual fuel oil fell 1.6% and
distillate demand fell 4.8% y/y. Inventories of crude oil and petroleum
products were stable through much of last month and were down slightly
from one year ago.
U.S. natural gas prices were up slightly last week at $4.09
per mmbtu (+15.3% y/y). Prices reached a high of $6.50 early in
January. Nevertheless, prices remained nearly double the September low.
The energy price data can be found in Haver's WEEKLY
database while the daily figures are in DAILY.
The gasoline demand figures are in OILWKLY.
Lessons from the failure of Lehman Brothers is
this morning's House testimony by Fed Chairman Ben S. Bernanke and it
can be found <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20100420a.htm">here</a>.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100420b.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100420c.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/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">04/17/10</th>
<th scope="col">04/12/10</th>
<th scope="col">04/05/10</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.86</td>
<td>2.86</td>
<td>2.83</td>
<td>38.9%</td>
<td>2.35</td>
<td>3.25</td>
<td>2.80</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>84.60</td>
<td>85.97</td>
<td>83.29</td>
<td>69.9%</td>
<td>61.39</td>
<td>100.16</td>
<td>72.25</td>
</tr>
</tbody>
</table>
U.S. Weekly Chain Store Sales Hold
On To Early-April Gain 
by <a href="/comment/Moeller.html">Tom
Moeller</a> April 20, 2010



<img alt solid src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100420d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
Consumers still seem interested in spending money after being
cooped up indoors this winter. As a result, chain store sales last week
held onto the sharp gain early in the month and the y/y change remained
at 4.6%, its strongest gain since early-2007.
During the last ten
years there has been a 68% correlation between the y/y change in chain
store sales and the change in retail sales at general merchandise
stores.
 That correlation recently has increased.

The ICSC-Goldman
Sachs retail chain-store sales index is constructed using the
same-store sales (stores open for one year) reported by 78 stores of
seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney,
Sears and Wal-Mart.
 During the last ten years there has been a 69%
correlation between the year-to-year growth in chain store sales and
the growth in general merchandise retail sales. The weekly
figures are available in Haver's SURVEYW database.
Contrary to the trend in purchases, the leading indicator of
chain store sales slipped last week and was down slightly versus one
year ago. The composite leading economic indicator is compiled from
four series: (1) the MBA's volume index of mortgage applications for
home purchase (2) the ABC News/Money magazine's survey of consumer
buying conditions (3) new filings for jobless benefits and (4) the
30-year government bond yield.
Issues in Economic Development is
yesterday's speech by Fed Governor Elizabeth A. Duke and it can be
found <a href="http://www.federalreserve.gov/newsevents/speech/duke20100419a.htm">here</a>.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">04/17/10</th>
<th scope="col">04/10/10</th>
<th scope="col">04/03/10</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>513.8</td>
<td>513.0</td>
<td>512.7</td>
<td>4.6%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
German Investors Upbeat On
Economic Prospects 6 Months Ahead 
by <a href="/comment/Curley.html">Louise
Curley</a> April 20, 2010



<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100420e.jpg" style="width: 353px; height: 265px;" align="right">The
German
financial community is upbeat on Germany's economic prospects over the
next six months despite the disruptions caused by the eruption of the
Icelandic volcano.&nbsp; The ZEW Survey of institutional investors
and analysts took place over the period, March 29 to April 19, that
latter part of which was affected by the eruption of the
volcano.&nbsp; The survey revealed that those expecting
macroeconomic conditions to improve over the next six months exceeded
those expecting conditions to worsen by 53% up from 44.5% in
March.&nbsp; This was the first increase since September of last
year and its magnitude exceeded consensus estimates of a
rise.&nbsp;&nbsp;
 The
change in the appraisal of current conditions was even
greater.&nbsp;&nbsp; The financial community has
had a dim view of current conditions since August, 2008 when the
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100420f.jpg" style="width: 353px; height: 265px;" align="right">pessimists
regarding current conditions began to exceed the
optimists.&nbsp; By May 2009 the excess of pessimists reached
92.8%.&nbsp;&nbsp; Since then, there has been a steady decline
in the percentage of pessimists.&nbsp; In April, the excess of
pessimists was 39.2% an 11.7 point decline from the 51.9% of March. The
percent balances between optimist and pessimists regarding current
conditions and expectations for the next six months are shown in the
first chart.
 The
improved appraisal of current conditions and expectations has led
to some changes in profit expectations.&nbsp; The second chart
shows those industries where profit expectations have increased the
most in the last month.&nbsp; Although expectations for profits in
the Vehicles/Automotive and Consumption/Trade are small and even
negative in the case of the latter, expectations for profits in both
these industries have increased the most in the last month.&nbsp;
Profit expectations for these industries and two other industries where
profit expectations have had big increases--Machinery and
Electronics--are shown in the second chart.&nbsp;&nbsp;
 Over the
past few months
the economic news in Germany had been encouraging.&nbsp; The euro
has declined almost 11% since early December.&nbsp; Unemployment
continues to fall and&nbsp; new orders, particularly foreign, have
been strong. may have contributed to the good feeling in the financial
community
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Percent</th>
<th scope="col">Apr 10</th>
<th scope="col">Mar 10&nbsp;</th>
<th scope="col">Feb 10&nbsp;</th>
<th scope="col">Jan 10</th>
<th scope="col">Dec 09</th>
<th scope="col">Nov 09</th>
<th scope="col">Oct 09</th>
<th scope="col">Sep 09</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Expectation 6 mo
Ahead</td>
<td>53.0</td>
<td>44.5</td>
<td>15.1</td>
<td>47.2</td>
<td>50.4</td>
<td>56.1</td>
<td>56.0</td>
<td>57.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Conditions</td>
<td>-39.2</td>
<td>-51.9</td>
<td>-54.8</td>
<td>-56.6</td>
<td>-60.6</td>
<td>-65.6</td>
<td>-72.2</td>
<td>-74.0</td>
</tr>
<tr>
<td colspan="9" class="firstcol" style="font-weight: bold;">Profit
Expectations</td>
</tr>
<tr class="odd">
<td class="firstcol">Vehicles/Automotive</td>
<td>3.1</td>
<td>-25.4</td>
<td>-29.7</td>
<td>-23.2</td>
<td>-26.5</td>
<td>-33.9</td>
<td>-40.9</td>
<td>-43.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumption/Trade</td>
<td>-2.3</td>
<td>-15.6</td>
<td>-18.9</td>
<td>-12.1</td>
<td>-10.4</td>
<td>-18.4</td>
<td>-16.7</td>
<td>-20.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Machinery</td>
<td>52.1</td>
<td>36.7</td>
<td>29.6</td>
<td>33.8</td>
<td>26.9</td>
<td>16.8</td>
<td>14.4</td>
<td>12.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Electronics</td>
<td>41.2</td>
<td>29.8</td>
<td>22.0</td>
<td>27.0</td>
<td>22.8</td>
<td>18.1</td>
<td>17.4</td>
<td>9.1</td>
</tr>
</tbody>
</table>

</body></html>

U.S. Petroleum Prices Remain NearHigh But Spot Prices Fall

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100419e.jpg" align="left" border="0" height="265" width="353">
The Japanese consumer is becoming a little less pessimistic.
The Economic and Social Research Institute's (ESRI) diffusion index for
Consumer Confidence reached a low point of 26.7 in December 2008. The
index rose steadily through October, 2009. After declining in November
and December the index has risen in each of the past three months and
is now at 41.0 in March, as can be seen in the first chart. Although it
has risen 3.1 points since December, the Index for March shows that
more than half of Japanese consumers continue to be pessimistic..The
ESRI' index does not have a long history, only beginning in April,
2004. Some of the indicators of confidence, however, have a much longer
history. One such is the percentage change in same store sales of
department stores that was released today. This series goes back to
January, 1965 and is shown in the second chart. The correlation between
consumer confidence and the year to year percent change in department
store sales for the period 2004 to date is .63 as can be seem in the
third chart. The R2 is .39, that is the
variation in department sales accounts for 39% of the variation in
confidence. Although far from perfect, the department store sales
history suggests that the level of Japanese consumer confidence
continues at historical lows.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100419f.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100419g.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Mar 10&nbsp;</th>
<th scope="col">Feb 10&nbsp;</th>
<th scope="col">Jan 10</th>
<th scope="col">Dec 09</th>
<th scope="col">Nov 09</th>
<th scope="col">Low</th>
<th scope="col">Date</th>
<th scope="col">High</th>
<th scope="col">Date</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">ConsumerConfidence:
Diffusion Index</td>
<td>41.0</td>
<td>40.0</td>
<td>39.4</td>
<td>37.9</td>
<td>39.9</td>
<td>26.7</td>
<td>Dec 08</td>
<td>50.2</td>
<td>Apr 06</td>
</tr>
<tr>
<td class="firstcol">&nbsp; All
Japan</td>
<td>-3.5</td>
<td>-5.4</td>
<td>-5.7</td>
<td>-5.0</td>
<td>-11.8</td>
<td>-13.1</td>
<td>Mar 09</td>
<td>5.5</td>
<td>Jun 07</td>
</tr>
</tbody>
</table>
</body></html>

The Japanese consumer is becoming a little less pessimistic. The Economic and Social Research Institute's (ESRI) diffusion index for Consumer Confidence reached a low point of 26.7 in December 2008. The index rose steadily through [...]

Japanese Consumer Confidence Improves But Is Still Historically Low

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100416e.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
Forward momentum is building behind business conditions in the
Northeast region of the country. The Federal Reserve Bank of New York
reported that its April Empire State Factory Index of General Business
Conditions rose to its highest level in six months. As a result it was
near the highest since 2004. At 31.86, the diffusion index was up from
its recession low of -32.29 in March 2009. The latest level suggests
positive growth in factory sector activity and it beat Consensus
expectations for a reading of 24.0.
The figure is a diffusion index. Since the series' inception
in 2001, there has been a 74% correlation between its level and the
three-month change in U.S. factory sector production. Like the
Philadelphia Fed Index of General Business Conditions, the Empire State
Business Conditions Index reflects answers to independent survey
questions; it is not a weighted combination of the components. The
series dates back only to 2001.
Amongst the separate survey questions, shipments and
inventories rose strongly. Also strong was the employment index which
rose to 20.25, near its highest since 2004 There has been an 87%
correlation between the employment index and the three-month growth in
factory sector employment as reported by the Labor Department.
The prices paid index rose m/m to 41.77, its highest since
September 2008. Since inception there has been a 76% correlation
between the index of prices paid and the three-month change in the core
intermediate materials PPI.
The Empire State index of expected business
conditions in six months held steady m/m and was near the
highest since early-2004. The capital expenditure and technology
spending series both remained near the highest levels since the
recession began.
The Empire State Manufacturing Survey is a monthly survey of
manufacturers in New York State. Participants from across the state in
a variety of industries respond to a questionnaire and report the
change in indicators from the previous month. Each index is seasonally
adjusted. Respondents also state the likely direction of these same
indicators six months ahead. For more on the Empire State
Manufacturing Survey, including methodologies and the latest report,
click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html">here</a>.
The Empire State data is available in Haver's SURVEYS
database.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100416f.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100416g.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/@S511/@S511.HTM">Empire State
Manufacturing Survey</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">April '09&nbsp;</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">General Business Conditions
(diffusion index, %)&nbsp;&nbsp;</td>
<td>31.86</td>
<td>22.86</td>
<td>24.91</td>
<td>-14.59</td>
<td>-2.76</td>
<td>-9.97</td>
<td>17.22</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; New Orders</td>
<td>29.49</td>
<td>25.43</td>
<td>8.78</td>
<td>-3.99</td>
<td>-2.52</td>
<td>-6.22</td>
<td>15.70</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Inventories</td>
<td>11.39</td>
<td>4.94</td>
<td>0.00</td>
<td>-35.96</td>
<td>-22.89</td>
<td>-7.87</td>
<td>-3.95</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Employment</td>
<td>20.25</td>
<td>12.35</td>
<td>5.56</td>
<td>-28.09</td>
<td>-17.28</td>
<td>-5.36</td>
<td>11.28</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>41.77</td>
<td>29.63</td>
<td>31.94</td>
<td>-14.61</td>
<td>1.33</td>
<td>46.99</td>
<td>35.64</td>
</tr>
</tbody>
</table>
</body></html>

Forward momentum is building behind business conditions in the Northeast region of the country. The Federal Reserve Bank of New York reported that its April Empire State Factory Index of General Business Conditions rose to its highest [...]

Empire State Business Conditions Show Further Gain

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.

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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: April 2010

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