Tom Moeller

033244af-fd9b-426b-a420-fe3dac7d47e6_1220420n.jpg

73838b4e-a104-483f-a879-8c1f6eb71783_1220420o.jpg

Existing home sales declined 2.7% (-4.5% y/y) during March to 5.770 million (SAAR) from 5.930 million in February, revised from 6.020 million. It was the lowest level of sales since June 2020 according to the National Association of Realtors (NAR). The Action Economics Forecast Survey expected sales of 5.80 million units in March. These data are compiled when existing home sales close.

The fall in existing home sales included a 2.7% decline (-3.8% y/y) in single-family home sales to 5.130 million, a 21-month low, from 5.270 million in February. Sales of condos and co-ops weakened 3.0% (-9.9% y/y) to 640,000, the lowest level since August 2020.

Sales declined in most of the country last month. Sales in the Midwest were off 4.5% (-3.1% y/y) to 1.270 million. In the South, sales fell 3.0% both m/m and y/y in March to 2.620 million. Existing home sales in the Northeast fell 2.9% (-11.8% y/y) to 670,000. Sales in the West held steady (-4.7% y/y) at 1.210 million.

The number of existing homes on the market rose 11.8% (-9.5% y/y) to 950,000 (NSA). The supply of homes on the market improved to 2.0 months in March from 1.7 months in February. It was the highest level in four months but remained well below the high of 4.6 months in May 2020. These figures date back to January 1999.

The median price of an existing home increased 4.5% (15.0% y/y) to a record $375,300 last month. In the West, prices gained 1.4% last month (5.4% y/y) to $519,900. In March, home prices in the Northeast rose 1.7% (6.8% y/y) to $390,200. Prices in the South rose 4.5% in March (21.2% y/y) to $339,000. In the Midwest, prices surged 9.0% last month (10.4% y/y) to $271,000. The average price of an existing home rose 3.4% (9.6% y/y) to $387,100 in March. The price data are not seasonally adjusted.

The data on existing home sales, prices and affordability are compiled by the National Association of Realtors. The data on single-family home sales extend back to February 1968. Total sales and price data and regional sales can be found in Haver's **USECON** database. Regional price and affordability data and national inventory data are available in the **REALTOR** database. The expectations figure is from the Action Economics Forecast Survey, reported in the **AS1REPNA** database.

The Fed's latest **Beige Book** covering regional economic conditions can be found [here](https://www.federalreserve.gov/monetarypolicy/files/BeigeBook%5F20220420.pdf).

ebed0feb-ec95-4664-a9a5-97a2e8a79c3b_1220420p.jpg

e0c58d3c-aa3a-41d7-b310-9de35fd04bbb_1220420q.jpg

- Sales decline is third in last four months.
- Declines are spread through most of country.
- Median price hits record level.

U.S. Existing Home Sales Fall as Prices Increase in March

707fdd9f-9b33-4287-8c46-cd7acc35008c_1220419f.jpg

47230cda-c6aa-4893-98fd-7033ee6312a1_1220419g.jpg

Housing starts rose 0.3% (3.9% y/y) during March to 1.793 million from 1.788 million in February, revised from 1.769 million. It remained the highest level of starts since June 2006. January starts were revised to 1.679 million from 1.657 million. The Action Economics Forecast Survey expected 1.741 million starts during March.

Starts of single-family units fell 1.7% (-4.4% y/y) last month to 1.200 million after rising to 1.221 million in February. Multi-family housing starts improved 4.6% (26.2% y/y) to 593,000 from 567,000 in February.

By region, housing starts in the Northeast more-than-doubled m/m (77.6% y/y) in March to 293,000. Starts in the West increased 7.7% (13.9% y/y) to 434,000. In the South, housing starts declined 17.2% (-6.4% y/y) to 834,000 units. Starts in the Midwest eased 2.9% (-19.4% y/y) to 232,000 in March.

Building permits rose 0.4% (6.7% y/y) to 1.873 million from 1.865 million in February. Permits to build single-family homes declined 4.8% (-3.9% y/y) in March to 1.147 million units. Permits to build multi-family homes rose 10.0% (29.4% y/y) to 726,000.

The housing starts and permits figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

c9d7d67f-ee3a-48fc-b7cd-630f2e43444c_1220419h.jpg

10c52496-ce6e-469b-9f41-b0e9f09efb88_1220419i.jpg

- Single-family starts ease while multi-family improves.
- Regional changes remain mixed.
- Building permits rise slightly.

U.S. Housing Starts Unexpectedly Edge Higher in March

Carol Stone, CBE

271bea39-8b45-4316-9568-2a668217a2ff_1220419a.jpg

2710b3d9-1ab1-448a-80e7-f9cd1631e9a1_1220419b.jpg

The price of **West Texas Intermediate crude oil** increased to $101.49 per barrel (+63.9% y/y) in the week ended April 15 from $99.18 per barrel the week before. These compare to a high of $113.33 averaged in the fourth week of March. Yesterday, the price rose to $108.21 per barrel, the highest since March 25. The average price of **Brent crude** oil was $106.27 per barrel in the April 15 week (+$62.5%), up from $103.73 the prior week. The price was $114.35 per barrel yesterday.

**Retail gasoline prices** declined somewhat to $4.066 per gallon in the week ended April 18 (+42.4% y/y) from $4.091 per gallon the week before. Prices set a record $4.315 per gallon in the second week of March. Haver Analytics adjusts the gasoline price series for normal seasonal variation, and the seasonally adjusted price was $4.139 per gallon from $4.157 in the prior week.

The price of **natural gas** strengthened again in the April 15 week; it rose to $6.54/mmbtu (152.5% y/y) after rising to $6.08 in the previous week. The price has risen from a low of $1.52/mmbtu averaged in the third week of June 2020. Yesterday, the price bounced up to $7.48/mmbtu.

In the four weeks ended April 8, **gasoline demand** was down 2.3% y/y. Demand had risen 15.2% y/y in late-December 2021. Growth in demand for **all petroleum products** was up just 1.3% y/y in the latest reported four-week period, the smallest y/y increase since late March 2021. Growth in **crude oil input to refineries** was 6.5% y/y. **Gasoline inventories** decreased 0.7% y/y a weakened 0.9% y/y while **crude oil inventories** declined 13.0% y/y.

The **supply of gasoline** inventories in the week ended April 8 was 27.1 days, down slightly from 27.3 days the week before. The supply of crude oil rose to 26.7 days from 26.0 days in the April 1 week and was equal to the average for the 13 weeks so far this year.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price data can be found in Haver's **WEEKLY** and **DAILY** databases. Greater detail on prices, as well as the demand, production and inventory data are in **USENERGY**.

f7e79b25-137e-4720-bccd-94afecbd2983_1220419c.jpg

5520db16-d79c-4203-b802-2a44ea350d84_1220419d.jpg

- Crude oil price up $2.31 per barrel.
- Gasoline prices edge lower again after mid-March record high.
- Natural gas prices continue to rise.

U.S. Crude Oil & Natural Gas Prices Rise While Gasoline Prices Ease

2ad301fe-62f2-4fa8-bfec-0c0862cefe16_1220418N.jpg

0a0cd00d-a413-4a72-a7e0-ac4c572e7b91_1220418o.jpg

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo fell 2.5% (-7.2% y/y) to 77 in April from an unrevised 79 in March. It was the fourth straight monthly decline, pushing the index 14.4% below its peak in November 2020. The decline matched expectations in the INFORMA Global Markets survey.

The current sales reading fell 2.3% (-3.4% y/y) to 85 and stood at its lowest level since September 2021. Moving upward by 4.3% (-8.8% y/y) to 73 was the index of expected sales in the next six months. The index peaked at 89 in November 2020. The index measuring traffic of prospective buyers fell 9.1% (-18.9% y/y) to 60. The index stood at the lowest level since last August and was 22.1% lower than the November 2020 peak.

Regional activity varied in April. The index for the Midwest fell 17.6% (-18.7% y/y) to 61, its lowest level since June 2020. The index for the West declined 7.7%, both m/m and y/y, to 84. Moving 13.8% higher (-11.9% y/y) to 74 was the index for the Northeast. In the South, the home builder index rose 1.2% (-2.4% y/y) to 82. These regional series begin in December 2004.

The NAHB has compiled the Housing Market Index since 1985. It reflects survey questions which ask builders to rate sales and sales expectations as "good," "fair" or "poor" and traffic as "very high," "average" or "very low." The figures are diffusion indexes with values over 50 indicating a predominance of "good"/"very high" readings. In constructing the composite index, the weights assigned to the individual index components are: 0.5920 for single-family detached sales, present time, 0.1358 for single-family detached sales, next six months, and 0.2722 for traffic of prospective buyers. These data are included in Haver's **SURVEYS** database. The Informa Global Markets survey is in Haver's **MMSAMER** database.

fe4e93b8-de6e-4524-8563-c878112771cd_1220418p.jpg

7df3a225-cc10-4d0e-8664-cbdbbb9053f1_1220418q.jpg

- Decline is to lowest level since September 2021.
- Current sales & traffic decline.
- Regional readings remain mixed.

U.S. Home Builder Index Continues to Weaken in April

Winnie Tapasanun

ab134a40-b072-4196-a0dc-9f16f91f8b7a_1220415f.jpg

54d01f2b-0dd7-4d6d-a6b5-ed6c0a862dcd_1220415g.jpg

The Empire State Manufacturing Index of General Business Conditions jumped to 24.6 in April from -11.8 in March and 3.1 in February, according to the Empire State Manufacturing Survey released by the Federal Reserve Bank of New York. A reading of 1.5 had been expected for April in the Action Economics Forecast Survey. The April reading was the highest since December, slightly down from 26.3 in April 2021. An increased 39.6% of respondents reported that conditions had improved in April compared to 23.6% in March, while a lessened 15.0% reported that conditions had worsened compared to 35.4%. The latest survey was conducted between April 4 and April 11.

Haver Analytics constructs an ISM-adjusted Empire State diffusion index using methodology similar to the ISM series. The index was at 60.2 in April, meaningfully up from 55.0 in March but slightly down from 60.5 in April 2021 and a 63.4 high in July 2021, indicating that activity remained robust in April. A reading above 50 signals growth. In contrast to the ISM index, the headline Empire Index reflects the answer to a single question, not calculated from its components.

The new orders index rebounded to 25.1 in April, a four-month high, from -11.2 in March. An increased 43.3% of respondents reported higher orders in April, while 18.2% reported lower orders. The shipments index recovered to 34.5, the highest reading since July 2021, from -7.4. An improved 45.4% of respondents reported higher shipments, while 10.9% reported lower shipments.

The unfilled orders index increased to 17.3 in April, the highest level since December, from 13.1 in March. The delivery times index fell to 21.8 from 32.7, with a lessened 31.8% of respondents reporting higher delivery times and 10.0% of respondents reporting lower delivery times. The inventories index fell to 13.6 in April from March's high of 21.5 (the highest level since September 2001).

The number of employees index dropped to 7.3 in April from 14.5 in March, registering the lowest level since October 2020. A lessened 15.2% of respondents reported increases in employment in April, while 7.9% reported lower employment. The average workweek rebounded to 10.0 from March's low of 3.5 (the lowest since August 2020).

Inflation pressures continued this month. The prices paid index advanced to a record 86.4 in April from 73.8 in March and the prices received index declined to a still-elevated 49.1 from March's record high of 56.1, indicating ongoing substantial rises in both input prices and selling prices. An increased 86.4% of respondents reported higher prices paid in April, while 0% reported lower prices paid. A lessened 49.1% of respondents reported higher prices received in April, while 0% reported lower prices received.

The indexes of expected conditions in six months fell markedly. The index for future business conditions dropped to 15.2 in April, the lowest level since April 2020, from 36.6 in March. Expectations for new orders, shipments, unfilled orders, delivery times, inventories, prices paid, prices received, and employment, all fell this month. Expectations for capital spending eased slightly, still remaining firm. Expectations for technology spending improved modestly.

The Empire State data, reported by the Federal Reserve Bank of New York, reflect business conditions in the manufacturing sector in New York, northern New Jersey and southern Connecticut. The headline measure is constructed from the answer to a single question on business conditions. The Empire State figures are diffusion indexes, which are calculated by subtracting the percent of respondents reporting declines from the percent reporting gains. The data are available in Haver's **SURVEYS** database. The ISM-adjusted headline index dates back to 2001. The Action Economics Forecasts can be found in Haver's **AS1REPNA** database.

19a3b78a-fb8d-4676-b773-4d1c56010cbe_1220415h.jpg

0e82b199-0b86-428b-b794-33dae84e4c58_1220415i.jpg

- Business activity improves noticeably in New York State, w/ the General Business Conditions Index up 36.4 points to 24.6.
- Inflation pressures continue w/ prices paid up 12.6 points to 86.4, a record high.
- Future optimism wanes w/ the Future Business Conditions Index down 21.4 points to 15.2.

U.S. Empire State Manufacturing Index Rebounds in April

4b6a1c6c-ae9c-4079-beb4-8d3ac170703f_1220415x1.jpg

e8c4d362-e5f0-4e35-b341-ef0634b04f0e_1220415x2.jpg

Industrial production increased 0.9% (5.5% y/y) during March following a 0.9% February gain, revised from 0.5%. January's 1.0% rise was revised from 1.4%. A 0.4% increase had been expected in the Action Economics Forecast Survey. Manufacturing output rose 0.9% (4.9% y/y) in March after increasing an unrevised 1.2% in February. January's 0.2% gain compared to 0.1% reported last month. Utilities output rose 0.4% (7.5% y/y) following February's 1.0% decline. Mining output strengthened 1.7% (7.0% y/y) after a 1.2% February increase.

The March production increase was led by a 7.8% rise (3.9% y/y) in motor vehicle output which followed a 4.6% decline. Output of computers & electronic products improved 0.6% (7.5% y/y) following a 2.1% jump. Machinery production rose 0.8% (6.1% y/y) after increasing 0.5% and electrical equipment & appliance production rose 1.0% (5.5% y/y), half the February increase. In the nondurable goods sector, the lessened 0.4% rise reflected a 0.5% gain (-0.3% y/) in apparel production as it came after February's 2.1% surge. Chemical production rose a fairly steady 0.7% (9.8% y/y) while food & beverage output increased 0.3% (0.8% y/y), half the prior month's increase. Petroleum output rose 0.7% (2.4% y/y) after February's 2.4% surge.

In the special classifications, factory output of high technology industries rose 1.4% in March (8.9% y/y) after a 2.6% gain. Less the high technology sector, factory output rose 0.8% (4.8% y/y) following a 1.4% rise. Maufacturing production excluding both high tech and autos rose 0.4% (4.9% y/y) after surging 1.5% in February.

Capacity utilization rose to 78.3% last month from 77.7% in February. A 77.8% rate had been expected. Utilization in the factory sector rose to 78.7%, the highest rate since July 2007. Factory sector capacity rose 0.3% y/y.

Industrial production and capacity are located in Haver's **USECON** database. Additional detail on production and capacity utilization can be found in the **IP** database. The expectations figures come from the **AS1REPNA** database.

c138e00d-c12a-4683-bd16-befefcde794d_1220415x3.jpg

0dc26f68-328a-4535-8092-f5a9c0c47233_1220415x4.jpg

- Overall production growth is steady but factory sector slows.
- Slowdown is broad-based.
- Capacity utilization strengthens.

U.S. Industrial Production Remains Strong in March

Sandy Batten

ba3e81d6-7865-4fda-8f0a-95a6a7dd8d6b_1220414a1.jpg

d9f2d388-c5e3-4624-9013-bb3586d88071_1220414b1.jpg

Initial claims for unemployment insurance file in the week ended April 9 rose to 185,000 (-67.6% y/y) versus 167,000 claims file in the previous week, revised up slightly from 166,000. The Action Economics Forecast Survey expected 173,000 claims for the latest week. Notwithstanding the weekly rise, claims continue to hover around 50-year lows. The 4-week moving average of initial claims increased to 172,250 from 170,250 in the prior week.

In the week ended April 2, continued weeks claimed for unemployment insurance edged down to 1.475 million, the lowest level since March 1970, from an unrevised 1.523 million in the prior week. The insured unemployment rate held steady at a record low of 1.1%.

In the week ended March 26, the number of continued weeks claimed in all unemployment insurance programs continued to fall, declining to 1.703 million from 1.723 million in the prior week. This total includes federal employees, newly discharged veterans, extended benefits and other specialized programs. Continued claims for the Pandemic Unemployment Assistance program and for Pandemic Emergency Unemployment Compensation are no longer reported as both programs have expired.

The state insured rates of unemployment in regular programs vary widely. The highest insured unemployment rates in the week ending March 19 were in California (2.40%), New Jersey (2.37%), Alaska (2.16%), Illinois (2.09%) and Rhode Island (2.07%), The lowest rates were in Virginia (0.18%), Alabama (0.20%), North Carolina (0.32%), Tennessee (0.38%), Florida (0.39%) and New Hampshire (0.39%). Other state insured rates of unemployment in regular programs include New York (1.93%), Pennsylvania (1.62%), Ohio (0.96%) and Texas (0.83%). These state rates are not seasonally adjusted.

Data on weekly unemployment claims going back to 1967 are contained in Haver's **WEEKLY** database, and they are summarized monthly in **USECON**. Data for individual states are in **REGIONW**. The expectations figure is from the Action Economics Forecast Survey and is in the **AS1REPNA** database.

0c94df72-a90c-4b03-a37f-8edbfbb2025f_1220414d1.jpg

db6aaafd-3c72-4a63-a4b2-6f9523dab1a8_1220414c1.jpg

- Despite weekly increase, claims still around 50-year low.
- Continued weeks claimed edged down to lowest level since March 1970.
- Insured unemployment rate holds at record low.

U.S. Initial Unemployment Claims Rose in Most Recent Week

5cdffd2b-15f3-4b27-bc62-4b1865e3082c_1220414f.jpg

07dcd6cc-7e70-43eb-8f75-6dd30be54b7c_1220414g.jpg

Consumer spending growth remains moderate. Total retail sales including food service and drinking establishments increased 0.5% during March (6.9% y/y) after rising 0.8% in February, revised from 0.3%. A 0.6% sales increase had been expected in the Action Economics Forecast Survey. Sales excluding motor vehicles and parts strengthened 1.1% (9.1% y/y) following a 0.6% February increase, revised from 0.2%. Expectations had been for a 0.9% increase.

Reflecting higher prices, gasoline service station sales surged 8.9% (37.0% y/y) after rising 6.7% in February. Gasoline prices rose 18.3% last month (48.0% y/y) as indicated in this week's CPI report.

Sales in the retail control group, which excludes autos, gas stations, building materials and food services, eased 0.1% in March (+4.4% y/y) after falling 0.9% during February, revised from -1.2%.

Elsewhere, there was improvement in sales. General merchandise store sales jumped 5.4% last month (5.2% y/y) after a 0.2% dip in February. Within that category, department store sales eased 0.3% (+7.4% y/y) after strong gains in the prior two months. Electronics & appliance store sales surged 3.3% (-9.7% y/y) following a 0.3% gain. Sporting goods, hobby and book store sales also jumped 3.3% (-5.1% y/y) last month, about the same as in February. Apparel store sales surged 2.6% (7.3% y/y) after rising 0.6%. Furniture & home furnishing store sales rose 0.7% (3.6% y/y) after increasing 2.7% in February. Building materials & garden equipment sales rose 0.5% last month (0.6% y/y) after a 0.9% February rise.

Weakness in retail sales last month reflected a 6.4% decline (+1.8% y/y) in purchases via the internet. Sales fell sharply in three of the last four months. Also falling were motor vehicle sales by 1.9% (-1.2% y/y) after rising 1.5% in February. Unit motor vehicle sales fell 4.6% last month (-23.7% y/y) after declining 6.6% in February.

In the nondiscretionary sales categories, food & beverage store sales surged 1.0% (8.4% y/y) during March after falling 0.3% in February. Health & personal care store sales declined 0.3% (+1.4% y/y) after falling 0.6% in February.

Sales at restaurants & drinking establishments strengthened 1.0% in March (19.4% y/y) after rising 3.0% in February.

The retail sales data can be found in Haver's **USECON** database. The Action Economics forecast is in the **AS1REPNA** database.

**2021: The Year of High Inflation** from the Federal Reserve Bank of St. Louis is available [here](https://www.stlouisfed.org/on-the-economy/2022/apr/2021-year-high-inflation).

697f06ac-b5f8-4d26-af96-48fa56e8b776_1220414h.jpg

8d99ee57-3926-4547-9bc7-3ee7a0233379_1220414i.jpg

- Individual categories are mostly firm.
- Online sales fall sharply.
- Vehicle sales decline.

U.S. Retail Sales Rise With Higher Gasoline Prices in March

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

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

A premier time series data platform for the global strategy, research, and quant communities. 

New York

London

Singapore

Tokyo

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

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

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: April 2022

Jump to: