Tom Moeller

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 A trip to the gas station is becoming more costly. The
 price for a gallon of regular gasoline increased to
 $3.68 last week (5.4% y/y), up four cents from the week
 prior. It was the highest price since early-March though
 it remained down from the $3.78 per gallon peak reached a
 month earlier. Haver Analytics constructs seasonal factors
 to account for seasonal volatility. The adjusted price
 made up for earlier losses and jumped to $3.61 per gallon
 from an early-May low of $3.30. It remained below
 the February peak of $3.94.
 Light sweet crude oil prices also have been on
 an uptrend. Last week's $2.17 rise to $106.98 per barrel
 (18.4% y/y) pulled prices to the highest level since the
 first week of March. Prices have jumped from the June 2012
 low of $80.29. Yesterday prices were stable at $106.91.
 Brent crude oil prices also rose last week to $109.49 per
 barrel (3.4% y/y), but they remained down from the
 February high of $118.50.
 Natural gas prices stabilized last week at $3.71
 per mmbtu (26.9% y/y) and were $3.70 yesterday, down from
 the April peak of $4.26.
 The demand for gasoline rose 2.3% y/y last week while
 the arrival of the summer driving season raised gasoline
 demand 7.4% since the April low. Residual fuel oil
 needs, used for heating, gained 7.1% y/y and distillate
 demand jumped 12.0% y/y. Gasoline inventories jumped 9.1%
 y/y.
 The energy price data are reported by the U.S.
 Department of Energy and can be found in Haver's WEEKLY
 database. The daily figures are in DAILY and
 the gasoline demand figures are in OILWKLY.
 
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	<colgroup><col><col><col><col><col><col><col><col></colgroup>
	
 <thead>
 <tr>
 <th class="firstcol" scope="col" >Weekly
 Energy Prices</th>
 <th scope="col" >07/22/13</th>
 <th scope="col" >07/15/13</th>
 <th scope="col" >06/08/13</th>
 <th scope="col" >Y/Y%</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 <th scope="col" >2010</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Retail Gasoline ($
 per Gallon, Regular)</td>
 <td >3.68</td>
 <td >3.64</td>
 <td >3.49</td>
 <td >5.4</td>
 <td >3.62</td>
 <td >3.52</td>
 <td >2.78</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Light Sweet Crude
 Oil, WTI ($ per bbl.)</td>
 <td >106.98</td>
 <td >104.81</td>
 <td >100.03</td>
 <td >18.4</td>
 <td >94.20</td>
 <td >95.14</td>
 <td >79.51</td>
 </tr>
 <tr>
 <td class="firstcol" >Natural Gas
 ($/mmbtu)</td>
 <td >3.71</td>
 <td >3.66</td>
 <td >3.54</td>
 <td >26.9</td>
 <td >2.75</td>
 <td >3.99</td>
 <td >4.00</td>
 </tr>
 </tbody>
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A trip to the gas station is becoming more costly. The price for a gallon of regular gasoline increased to $3.68 last week (5.4% y/y), up four cents from the week prior. It was the highest price since early-March though it remained [...]

U.S. Gasoline Prices Rise To Highest Level Since March

Robert Brusca

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French business climate improved by two points in July, with the index rising to 95 from 93 in June. The standing of the index is its highest in 15 months. The reading for the recent trend improved much more sharply to -30 in July from -41 in June. The reading for the 'likely trend' switched over into positive territory, registering a plus-one reading in July after a -1 reading in June. That's the first positive reading since February of this year although still it's below the February level. 

Orders and demand improved to a -25 reading from -29 in June, making it the strongest reading since September of last year. Conversely, foreign orders and demand deteriorated, slipping back to -31 from -28 in June. Apparently the improvement in France is home-grown. The foreign orders and demand reading is the weakest the since January of this year.

Despite the widespread improvement the French metrics remain. The industry climate index sits in the 48th percentile of its high low range since February 1990. But if we position it in its rank of observations historically: its standing is still barely above the bottom third of its historic queue of values sitting at the 34.8 percentage point of its ordered queue (that is to say, that it is weaker than this only about 35% of the time). Similarly the 'recent trend' standing is in the 25th percentile of its ordered queue, the 'likely trend' is in the 34th percentile of its ordered queue. Orders and demand are in the 36 percentile of their ordered queue with foreign orders and demand much weaker in the lower 17th percentile of their ordered queue. The data for France are showing some near-term life but the readings continue to be weak in historic context. But that has to be clear from plot in the chart.

There are other signs of improvement in the euro-Zone, although none of them really help us to understand why French business confidence is improving. The Bank of Spain for example still sees recession but sees recession forces abating in the second quarter. In the UK exports are giving off the strongest reading since the recession according to a survey of UK exporters. 

However, debt to GDP ratios are still rising in the European Monetary Union as a result of austerity. Austerity has continued to drive up debt demands across the euro-Zone while the straitjacket of austerity has prevented growth from restarting thereby making debt to GDP ratios even worse (higher).

Globally a new plan announced by China to try for public works programs that will employ some of its domestic industries that are the slackest, was greeted well by markets yesterday.

On balance we welcome these signs of improved activity in the euro-Zone and in France. The improving survey in France adds to some signals from the PMI surveys of manufacturing and services improvement there that tell us also that the extent of weakness is abating. 

The July reading for services industries and for manufacturing industries each separately improved in in France. It's another encouraging signal for the French business sector. However, the household sector, where data lag by one month and are currently only available through June does not show the same sort of improvement. The index of household confidence slipped in June by one point compared to May after May fell by four points from April's level. While overall business confidence might be the highest in 15 months, compared with its level of one year ago, the household confidence index, at 78, is well below its value of 90 from one year ago. French businesses are feeling better without engendering any improved feeling of well-being on the part of households. Indeed, household rankings back to January 1990 are the weakest on record as are the statistics on living standards for the past and future 12 months. French consumers continue to evaluate their financial situation extremely poorly. The environment for spending is in at least the bottom 10 percentile of what it's been historically.

Against this background, while it is encouraging to see some improvement in the attitudes of French businesses it's unclear where that comes from or how long it can last. Apparently it isn't underpinned by improved foreign demand, judging from responses in the survey itself. Clearly it's not improved because of improved domestic spending conditions or household confidence. Since we continue to get reports of extremely difficult international trading conditions it's hard to imagine that France, given its competitiveness challenges, is doing better on the world stage of competition. And the French fiscal deficit and deficit outlooks is poor enough that it's really not possible for the French government to make any additional promises to French business to ineffectively underpin improved attitudes. While I don't doubt the results in the French business survey, I have to declare that I can't completely understand what they're based on. I feel much more comfortable understanding them with regard to how low they are in their historic standing rather than gaining any comfort from the degree to which they've improved in recent months.








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French business climate improved by two points in July, with the index rising to 95 from 93 in June. The standing of the index is its highest in 15 months. The reading for the recent trend improved much more sharply to -30 in July [...]

French Businesses Are More Upbeat - Do They Know Something?

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 Strength in the housing market continues to exhibit itself in
 rising selling prices. The U.S. House Price Index from the Federal
 Housing and Finance Agency (FHFA) rose 0.7% during May following a
 0.5% April rise. The 7.3% y/y rate of increase was double the gain
 during all of last year. During the last three months prices have
 risen at a firmer 11.2% annual rate.
 Home price appreciation was broad-based in the U.S. It continued
 to be greatest in the Pacific (15.8% y/y) and Mountain (12.7% y/y)
 states. Lesser gains were logged across the country with prices in
 the East South Central region up the least (2.7% y/y).
 The FHFA house price index is a weighted repeat sales index. It
 measures average price changes in repeat sales or refinancings on
 the same properties. It is based on transactions involving
 conforming, conventional mortgages purchased or securitized by
 Fannie Mae or Freddie Mac. Only mortgage transactions on single
 family properties are included. The FHFA data is available in
 Haver's USECON database.&nbsp;
 
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	<colgroup><col><col><col><col><col><col><col><col></colgroup>
	
 <thead>
 <tr>

 <th class="firstcol" >FHFA U.S. House Price Index
 Purchase Only (SA %) </th>
 <th scope="col" >May</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >Y/Y</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 <th scope="col" >2010</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >0.7</td>
 <td >0.5</td>
 <td >1.5</td>
 <td >7.3</td>
 <td >3.5</td>
 <td >-4.1</td>
 <td >-2.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Pacific</td>
 <td >0.8</td>
 <td >1.8</td>
 <td >2.4</td>
 <td >15.8</td>
 <td >4.9</td>
 <td >-7.0</td>
 <td >-2.2</td>

 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Mountain</td>
 <td >-0.1</td>
 <td >1.9</td>
 <td >1.3</td>
 <td >12.7</td>
 <td >8.2</td>
 <td >-6.9</td>
 <td >-6.5</td>

 </tr>
 <tr>
 <td class="firstcol" >&nbsp; South Atlantic</td>
 <td >1.8</td>
 <td >-0.6</td>
 <td >1.3</td>
 <td >8.0</td>
 <td >4.1</td>
 <td >-5.2</td>
 <td >-4.8</td>

 </tr>
 <tr>
 <td class="firstcol" >&nbsp; West South Central</td>
 <td >0.9</td>
 <td >0.1</td>
 <td >0.3</td>
 <td >6.1</td>
 <td >4.3</td>
 <td >-1.1</td>
 <td >-0.3</td>

 </tr>
 <tr>
 <td class="firstcol" >&nbsp; East North Central</td>
 <td >0.5</td>
 <td >0.7</td>
 <td >1.8</td>
 <td >4.7</td>
 <td >2.2</td>
 <td >-3.7</td>
 <td >-3.2</td>

 </tr>
 <tr>
 <td class="firstcol" >&nbsp; West North Central</td>
 <td >-0.0</td>
 <td >0.2</td>
 <td >1.1</td>
 <td >4.4</td>
 <td >3.5</td>
 <td >-3.3</td>
 <td >-2.0</td>

 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; New England</td>
 <td >0.8</td>
 <td >0.1</td>
 <td >1.3</td>
 <td >3.9</td>
 <td >-0.1</td>
 <td >-2.2</td>
 <td >-2.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Middle Atlantic</td>
 <td >0.9</td>
 <td >0.4</td>
 <td >1.5</td>
 <td >3.3</td>
 <td >-0.0</td>
 <td >-3.2</td>
 <td >-1.1</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; East South Central</td>
 <td >-1.5</td>
 <td >0.8</td>
 <td >1.8</td>
 <td >2.7</td>
 <td >2.6</td>
 <td >-2.6</td>
 <td >-2.8</td>
 </tr>
 </tbody>
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 <tr>
 <td> 
 New England: Maine, New Hampshire, Vermont,
 Massachusetts, Rhode Island and Connecticut 
 Middle Atlantic: New York, New Jersey &amp;
 Pennsylvania. 
 East North Central: Michigan, Wisconsin, Illinois,
 Indiana and Ohio. 
 West North Central: North Dakota, South Dakota,
 Minnesota, Nebraska, Iowa, Kansas and Missouri. 
 South Atlantic: Delaware, Maryland, District of
 Columbia, Virginia, West Virginia, North Carolina, South
 Carolina, Georgia and Florida. 
 East South Central: Kentucky, Tennessee, Mississippi
 and Alabama. 
 West South Central: Oklahoma, Arkansas, Texas and
 Louisiana. 
 Mountain: Montana, Idaho, Wyoming, Nevada, Utah,
 Colorado, Arizona and New Mexico. 
 Pacific: Hawaii, Alaska, Washington, Oregon and
 California. 
 </td>
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Strength in the housing market continues to exhibit itself in rising selling prices. The U.S. House Price Index from the Federal Housing and Finance Agency (FHFA) rose 0.7% during May following a 0.5% April rise. The 7.3% y/y rate of [...]

FHFA Home Price Index Builds Upward Momentum

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 Existing home sales edged down 1.2% in June
 (+15.2% y/y) to 5.080 mil. units (AR), according to the National Association
 of Realtors. The May figure was revised down to 5.140 mil. from 5.180 mil.
 reported last month. Consensus expectations had been for 5.260 mil. Sales of
 existing single-family homes alone fell 1.1% to 4.500 mil. (+14.5% y/y.
 These data have a longer history than the total sales series.) Sales of
 condos and co-ops decreased 1.7% m/m to 0.580M (+20.8% y/y).
 Sales slipped across the nation by roughly equal amounts. In the
 Northeast sales fell 1.6% to .630 mil. (+16.7% y/y). Sales declined 1.6% in
 the West to 1.210 mil. (11.0 y/y while sales in the South were off 1.5% to
 2.030 mil. (+16.0 y/y). Sales in the Midwest were unchanged at 1.210 mil. (17.5%
 y/y).
 Potentially holding back sales was the diminished supply of homes on the
 market. It edged up last month to 5.1 months of sales but that remained down
 from a high of 11.9 months in July of 2010. The actual number of homes on
 the market fell 7.6% y/y last month and added to a 21.1% decline during all
 of last year and a 23.2% drop in 2011.
 The median price of an existing home jumped another 5.5% in June to $214,200
 (13.5% y/y). This was the highest price reading since June 2008. The peak
 was $230,300 in July 2006.
 Reported earlier this month, the May composite index of home price affordability dropped 6.3% (-8.3% y/y) to its lowest level since August
 2010. The decline was due to the 5.5% price increase (13.2% y/y). The
 average mortgage rate slipped m/m to 3.57% but was up from the 3.43%
 December low.&nbsp; 
 The data on existing home sales, prices and affordability can be found in Haver's USECON database. The regional price, affordability and inventory data are available in the REALTOR database. The
 expectations figure is from the Action Economics survey, reported in the AS1REPNA
 database.&nbsp;
 
 
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	<colgroup><col><col><col><col><col><col><col><col></colgroup>
	
 
 <tr>
 <td class="firstcol" >Existing Home Sales (SAAR, 000s)</td>
 <td >Jun</td>
 <td >May</td>
 <td >Apr</td>
 <td >Y/Y %</td>
 <td >2012</td>
 <td >2011</td>
 <td >2010</td>
 </tr>
 <tr>
 <td class="firstcol" >Total</td>
 <td >5,080</td>
 <td >5,140</td>
 <td >4,970</td>
 <td >15.2</td>
 <td >4,661</td>
 <td >4,278</td>
 <td >4,183</td>
 </tr>
 <tr class="even">
 <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;Northeast</td>
 <td >630</td>
 <td >640</td>
 <td >640</td>
 <td >16.7</td>
 <td >596</td>
 <td >543</td>
 <td >563</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;Midwest</td>
 <td >1,210</td>
 <td >1,210</td>
 <td >1,120</td>
 <td >17.5</td>
 <td >1067</td>
 <td >918</td>
 <td >909</td>
 </tr>
 <tr class="even">
 <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;South</td>
 <td >2,030</td>
 <td >2,060</td>
 <td >2,010</td>
 <td >16.0</td>
 <td >1,833</td>
 <td >1,683</td>
 <td >1,626</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;West</td>
 <td >1,210</td>
 <td >1,230</td>
 <td >1,200</td>
 <td >11.0</td>
 <td >1,165</td>
 <td >1,133</td>
 <td >1,084</td>
 </tr>
 <tr class="even">
 <td class="firstcol" >Single-Family Sales</td>
 <td >4,500</td>
 <td >4,500</td>
 <td >4,380</td>
 <td >14.5</td>
 <td >4,130</td>
 <td >3,793</td>
 <td >3,705</td>
 </tr>
 <tr>
 <td class="firstcol" >Median Price Total ($, NSA)</td>
 <td >214,200</td>
 <td >203,100</td>
 <td >191,800</td>
 <td >13.5</td>
 <td >175,442</td>
 <td >164,542</td>
 <td >172,442</td>
 </tr>
 
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Existing home sales edged down 1.2% in June (+15.2% y/y) to 5.080 mil. units (AR), according to the National Association of Realtors. The May figure was revised down to 5.140 mil. from 5.180 mil. reported last month. Consensus [...]

U.S. Existing Home Sales Unexpectedly Slip as Inventories Drop; Prices Improve

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On the surface Spain's prices appear to be fairly well behaved. In the recession producer prices, import prices and export prices all fell year-over-year. As recovery came, all these prices begin to expand year-over-year and generally with a good deal of vigor. That occurred until about the middle of 2012. Since then, prices in Spain have continued to ease their rate of expansion and have been posting extremely week rates of growth. Import prices ratcheted down year-over-year and export import prices both had also posted year-over-year drops and are now closer to posting flat trends.


When we dig slightly deeper into the commodity composition of price inflation we see very different things going on at the producer level, at the export level and at the import level for consumer prices, intermediate goods prices, and investment goods or capital goods prices.


We focus on 12-month price trends to simplify the comparisons. PPI prices are rising by 0.8% year-over-year. That's a small increases yet it is faster than for overall export or import prices, both of which are falling on balance over 12-months. Look at individual categories: we find consumer goods import prices are strongest, followed by producer prices and exports. Yet Spain's consumer sector does not seem very strong. Why are its import prices relatively so firm?


Intermediate goods prices are falling for all categories; their strongest result is for producer prices where the decline is only 0.5% over 12 months. For intermediate goods, the weakness grows for export prices and for import prices- the latter are down by 7.8% year-over-year. Lest you think this is being driven by commodity prices, the biggest year-over-year weakness is in imports but it's from capital goods down by 15.3% Year-over-year. By comparison capital goods export prices are down but only by 3.4% year-over-year and domestically investment goods prices are flat over 12 months.


If we look to see where Spain ranks in the Eurozone on inflation performance over the last 12 months it's back in the pack suffering a relatively higher inflation rate than most of the original European monetary union members; its producer price inflation ranks it as the seventh lowest among the original 11 EMU members who have reported figures. Spain is not doing an excellent job on inflation compared to the rest of the Zone. Its producer prices are generally holding up better than either export import prices. This is despite the fact that Spain's economy has been weak, yet the export and import universe appears to be much worse.


With weakness in global demand and rampant conditions of excess supply, it's not so surprising to find weakness in capital goods prices. In Spain's particular business cycle weakness was concentrated in the construction sector. It's not surprising to find capital goods prices are being dragged down by a tremendous oversupply and weakness in Spain's construction sector. Still globally capital goods export and import prices are even weaker than in Spain's domestic market. 


Spanish export goods generally are finding world markets weaker than the Spanish markets at home, at least judging from the performance of export prices for goods intermediate goods and capital goods and even for consumer goods.


While the trends for overall export, import and producer prices seem to more or less track together over the cycle, the various sectors are showing very wide differences in performance. And even with Spain as one of the weaker countries in the monetary union, the additional weakness in its export and import prices is not reassuring either for Spain or for the prospects for growth for the rest of EMU. 


Since 2001 export prices have risen relative to import prices for each commodity category but the rise has been greatest for intermediate goods where export prices have risen much more than import prices since 1991. 


Just today the Bundesbank has issued a warning for a slowdown in the German economy in the second half. The Bundesbank is admitting a pickup in the second quarter but attributing it largely to weather and is seeing further weakness as its view shifts to the third quarter. Germany does depend a lot on capital goods exports and we know it has cultivated Chinese markets. The weakness there may be having blowback effects on Germany and that may be another factor that's been picked up in week Spanish import prices for capital goods.


There are a lot of cross currents in Europe. This analysis of various trends in Spanish prices is a reminder to look deeper into price trends to find out what's really going on rather than to simply rely on headlines to tell the story. The headlines are not telling the story. This is especially true when you look at the headlines being made by our monetary policy makers or our fiscal policymakers or by our international policymakers at the G 20. Be very careful to look at the details because that's where you'll find the real story. The devil is truly in the details.



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On the surface Spain's prices appear to be fairly well behaved. In the recession producer prices, import prices and export prices all fell year-over-year. As recovery came, all these prices begin to expand year-over-year and generally [...]

Spain's price trends reveal global turbulence

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 The Chicago Federal Reserve indicated that its
 National Activity Index (CFNAI) again was negative last month. The rate of
 decline moderated, however,&nbsp; to -0.13 from its worst of -0.98 in
 August of last year. The three-month moving average of deterioration
 moderated slightly to -0.26, better than the low of -0.50 last August.
 During the last ten years, there has been a 79% correlation between the
 Chicago Fed Index and the q/q change in real GDP.
 Monthly changes in the index components have been mixed. The Production
 &amp; Income component showed the greatest m/m improvement with a m/m
 recovery to a minimal 0.04. That's up from last year's low of -0.49. The
 Employment, Unemployment &amp; Hours series gained minimally to 0.06. The
 Personal Consumption &amp; Housing reading deteriorated -0.19 and reversed
 four months of improvement. Sales, Inventories &amp; Inventories slipped
 to -0.04 and has been in a sideways trend since early 2011. The Chicago
 Fed reported that during June, 41 of the 85 individual indicators made
 positive contributions to the overall index while 44 made negative
 contributions.
 The CFNAI is a weighted average of 85 indicators of national economic
 activity. It is constructed to have an average value of zero and a
 standard deviation of one. Since economic activity tends toward trend
 growth rate over time, a positive index reading corresponds to growth
 above trend and a negative index reading corresponds to growth below
 trend.
 The Chicago Federal Reserve figures are available in Haver's SURVEYS
 database.&nbsp;
 
 <a href="/comment/130722b_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130722b.png"></a>
 <a href="/comment/130722c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130722c.png"></a>
 
<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
 
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="600">Chicago Federal Reserve
 Bank</th>
 <th scope="col" >Jun</th>
 <th scope="col" >May</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Jun'12</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 <th scope="col" >2010</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="600">CFNAI</td>
 <td >-0.13</td>
 <td >-0.29</td>
 <td >-0.37</td>
 <td >-0.47</td>
 <td >-0.08</td>
 <td >-0.08</td>
 <td >0.02</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="600">&nbsp;3-Month Moving Average</td>
 <td >-0.26</td>
 <td >-0.37</td>
 <td >-0.07</td>
 <td >-0.20</td>
 <td >--</td>
 <td >--</td>
 <td >--</td>
 </tr>
 <tr>
 <td class="firstcol" width="600">&nbsp;&nbsp;Personal Consumption
 &amp; Housing</td>
 <td >-0.19</td>
 <td >-0.15</td>
 <td >-0.18</td>
 <td >-0.27</td>
 <td >-0.22</td>
 <td >-0.30</td>
 <td >-0.30</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="600">&nbsp;&nbsp;Employment,
 Unemployment &amp; Hours</td>
 <td >0.06</td>
 <td >0.00</td>
 <td >-0.02</td>
 <td >0.01</td>
 <td >0.10</td>
 <td >0.14</td>
 <td >0.03</td>
 </tr>
 <tr>
 <td class="firstcol" width="600">&nbsp;&nbsp;Production &amp; Income</td>
 <td >0.04</td>
 <td >-0.12</td>
 <td >-0.26</td>
 <td >-0.04</td>
 <td >0.04</td>
 <td >0.05</td>
 <td >0.20</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="600">&nbsp;&nbsp;Sales, Orders &amp;
 Inventories</td>
 <td >-0.04</td>
 <td >-0.02</td>
 <td >0.10</td>
 <td >-0.13</td>
 <td >-0.01</td>
 <td >0.04</td>
 <td >0.09</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

The Chicago Federal Reserve indicated that its National Activity Index (CFNAI) again was negative last month. The rate of decline moderated, however, to -0.13 from its worst of -0.98 in August of last year. The three-month moving [...]

U.S. Chicago Fed National Activity Index Remains Negative

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 Global Inflation Trends are Locked Together

 
 
 
 

 
 <a href="/comment/130719f_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130719f.png"></a>
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Local inflation trends seem to be launched on highly similar paths. Headline inflation in Canada is up by 1.2% compared to 1.8% in the US and 1.6% in the European Monetary Union. Canada's inflation of 1.2% is its highest since August 2012 when it ran a 1.3%. From November 2012 through May 2013 Canada's inflation rate has been under 1% for every month except February 2013 when it eked out 1.1%. However, it's poked up to 1.2% in June and the Bank of Canada, with a new governor, is looking to extend its record of having run excellent monetary policy.


Over the years economists have basically been taught to observe inflation as principally a monetary phenomenon which means it's principally a domestic monetary phenomenon. And, of course, no sooner do we teach everyone this sort of lesson that it no longer seems to be true. I realize that that's a bit of heresy.


Clearly global demand conditions have a lot to do with keeping inflation low on a worldwide basis at the moment. Having come through a financial crisis and, in fact, not having really having come all the way through it, we find that we are possibly still only in the eye of the storm. There is still the final leg of the extraction from the crisis to be accomplished. The crisis both revealed and created substantial worldwide debt problems. These problems, in turn, threw nations and their individual transactors into a state of disequilibrium, forcing them to deal with what they suddenly realized was a situation of excess debt. Thus the need for individuals and nations to devote more resources to paying off past debts rather than to piling on more debt and spending in excess of income has knocked spending trends off their patterns leaving many industries with excess supply. 

Excess supply drives prices lower.
In this situation, excess supply has exerted substantial pressure, downward pressure, on global prices. That's one of the reasons that we see inflation subdued globally. Countries are linked by international trading and capital flows so that price disturbances in one area also affect another area.


However, what we also see is that while there are substantial growth rate differences in the growth of the M2 money stocks in the United States, the European Monetary Union, and in Canada, their money growth rates also have broadly gone through the same sorts of transitions. 


Prior to the onset of the financial crisis money growth rates were accelerating. In EMU the growth rate of money peaked before the financial crisis; in both the US and in Canada the growth rate of money spurted and peaked during the crisis. 


In all three regions money growth rates dived during the crisis. Early on, during the workout phase, money growth was moderate and low in Canada and in EMU, accelerating only in middle-to-late 2011, while, in the US, money growth rates have been much stronger from the outset. They saw a bubble in the growth rate emerge, then growth rate settled back down below 7 1/2%. Currently growth rates in these three countries see M2 roughly between 5% and 7 1/2%.


Monetary theory warns us never to be too certain about predicting inflation. The monetary expert Milton Friedman long ago warned of how money supply had long and variable lags in its effect on the economy. However, I think in this increasingly open global economy, with increased reliance on capital flows, the rules and linkages between money supplies and prices have become even more complicated. Technology and the use of different kinds of monies for transactions also complicates the relationship between money supply and inflation overall.


When we compare national inflation rates we are comparing apples with apples. Whatever the new forces are that are interposing themselves between the money supply growth and inflation, are occurring throughout the global economy and having more or less the same effect on price developments everywhere. Central banks currently are trying to decide how much they can introduce more stimulus without risking the spillover to more inflation.


While the chart of money supply shows what's going on with money supply and we been warned about the effects of excess money growth on the price level, there is another, perhaps greater, risk than money growth. Countries have also been experimenting with policies of quantitative easing: the Federal Reserve in the United States, the Bank of England, the Bank of Japan and the National Bank of Switzerland, all have substantially ballooned the central bank balance sheets to an even greater extent than money supply begins to hint. 


There are great concerns of what happens when central banks began to unwind these policies. Although I think what that really means is that there are great concerns about what happens when economic conditions normalize and these excess reserve conditions begin to have that effect that we would construe as a normal impact on the economy requiring central banks to take countervailing actions.


Just today North Korea has asked that countries begin to think about some kind of global approach to what happens when United States actually begins its tapering activities and then eventually does what it needs to do to unwind the effects of its massive quantitative easing program. There will be international repercussions. The Fed won't be the only central bank with a balance sheet bloat to unwind. 


You'll remember that the initial impact of quantitative easing was to weaken the dollar and that led Brazil, and other BRIC countries, to scream bloody murder. In reaction, Fed Chairman Ben Bernanke urged to them to provide their own stimulus and lower their own domestic savings rates. This argument (that will never be settled!) is that the US deficit is in some sense the residual outcome of other countries running surpluses that are too large because they pursue strategies of export-led growth. In a monetary system with the dollar as the center country the US will be what economists call the 'N-minus-one' country and will soak up whatever is the residual of other countries actions. The Chinese have pushed back against this argument for a long time. However, with the financial crisis in tow, with US companies flush with funds on their balance sheet, with US banks having billions upon billions of dollars of excess reserves (which they choose not the lend), the question remains why is the US sucking and one half of one trillion dollars per year or more in capital flows? Why? 


Surely the US has plenty of capital and liquidity? It has no inability to satisfy financial needs. But, of course, the real reason the US does this is because it needs to finance its trade deficit not because it needs more capital inflows. The US does not need more 'capital', it needs more foreign currency to pay its bills or for the foreigners it increasingly owes to hold more dollars. The last thing the US needs is more capital inflows - or more foreign debt. Interest rates already are low and investors are scrambling to figure out what to do with their monies. The Fed's tilt on quantitative easing which is in fact a policy that leans heavily on the credit channel, is to scoop up most of the highly rated and safe financial assets and force the private sector to make decisions to engage in more risky lending. Foreign inflows are not a solution to the problem.


These capital flows often bring foreigners into markets that they understand less well than they should. To the extent that foreign monies are plowing into countries less for the reason of making a certain investment return than for the reason of pursuing a national macro-economic objective of pegging their exchange rate, the more likely it is that the monies invested are not invested productively.


For now problems, risks and uncertainties in the credit side of the market are constraining bank lending and risk-taking in securities markets. Banks, for their part, are lending more cautious because they are wary of changes that might come from ongoing legislation. Lawmakers are trying to solve the too big to fail problem as well as to make sure that banks are well enough capitalized so that the problems of the last financial crisis do not re-visit us.


This explains why the economic recovery is so much less than robust. We have not simply put our shoulder to the wheel to try to advance economic growth as fast as possible. We have been dealing with the problems caused by the past financial crisis and recession. In addition to dealing with those issues we have also been planning ahead, trying to reconfigure our economy and financial environment so that it is safer in the future. It's a little bit like trying to drive your car and to repair it at the same time.


This week has put the Federal Reserve in the limelight with the Federal Reserve Chairman's biannual presentation on monetary policy in front of the House and Senate financial committees. About the only thing that is clear in the wake of these testimonies is that the Fed really doesn't know what it's going to do yet. By that I don't mean that it's confused but that is still keeping its options open since there is still some dissent within the Fed about what the Fed's role should be and there is still considerable uncertainty about the economy - both domestic and global- as well as uncertainty about the US fiscal agenda that will be faced in the second half of the year.



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Local inflation trends seem to be launched on highly similar paths. Headline inflation in Canada is up by 1.2% compared to 1.8% in the US and 1.6% in the European Monetary Union. Canada's inflation of 1.2% is its highest since August [...]

As Central Banks Struggle With Policy,

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<body>
	 
 
 
 
 
 <a href="/comment/130719a_big.png" name="modal"><img class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130719a.png" align="left"></a>
 
 Economic analysts suggest that GDP growth
 softened last quarter following its 1.8% rise during Q1'13. Recent
 movement in commodity prices support that conclusion. Yesterday's
 industrial commodity price index, from the Foundation for International
 Business and Economic Research (FIBER), was 163.2 and 8.2% lower than in
 mid-February.
 
 Prices in the miscellaneous group have led the decline. Prices
 for both structural panels and framing lumber have declined by roughly
 one-quarter since April. Natural rubber prices have moved down as well.
 Prices in the metals group have been only
 somewhat less weak. Aluminum prices are 17.0% below the December high and
 are off 6.0% during the last twelve months. Copper prices have fallen a
 like amount since February and are down 10.0% y/y. With a 12.0% decline
 since April, steel scrap prices (-6.4% y/y) have been weak as well.
 
 <a href="/comment/130719b_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130719b.png"></a>
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 In the textile group, prices also have
 been soft. Burlap prices are down 14.0% since March and by 7.0% y/y.
 Cotton prices have been more stable, showing little-change since April but
 a one-quarter improvement y/y. Also to the upside have been crude
 oil &amp; benzene prices. Crude oil prices have risen one-quarter
 since their November low but are still below the high of $113.93 per
 barrel in May 2011. Working the other way, prices for the petrochemical
 benzene are off 20.0% since February (-3.2% y/y). 
 
 The current industrial output forecast from the National Association
 for Business Economics calls for 3.1% growth this year but then a pickup
 to 3.5% in 2014. These growth rates suggest some future firming of
 industrial commodity prices. During the last ten years there has been a
 42% correlation between the three-month change in prices and the change in
 factory sector industrial production.
 
 Commodity price data can be found in Haver's DAILY, WEEKLY, USECON
 and CMDTY databases.
 
 <a href="/comment/130719d_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130719d.png"></a>
 <a href="/comment/130719e_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130719e.png"></a>
 
 <table class="centered" width="100%" border="0" cellspacing="0">
 
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
	<thead>
 <tr>
 <th class="firstcol" scope="col" >FIBER Industrial
 Materials Price Index (1990=100)</th>
 <th scope="col" >07/18/13</th>
 <th scope="col" >Y/Y %</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 <th scope="col" >2010</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >All Items</td>
 <td >163.2</td>
 <td >1.1</td>
 <td >166.4</td>
 <td >173.0</td>
 <td >157.9</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" >&nbsp;Textiles</td>
 <td >77.8</td>
 <td >2.2</td>
 <td >77.9</td>
 <td >86.1</td>
 <td >81.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Cotton (cents per
 pound)</td>
 <td >79.8</td>
 <td >20.7</td>
 <td >74.5</td>
 <td >132.8</td>
 <td >87.8</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" >&nbsp;Metals</td>
 <td >222.2</td>
 <td >-2.1</td>
 <td >243.0</td>
 <td >278.7</td>
 <td >240.0</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Aluminum ($ per metric
 ton)</td>
 <td >1,772.0</td>
 <td >-5.1</td>
 <td >2,019.6</td>
 <td >2,400.9</td>
 <td >2,172.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Copper Scrap (cents per
 pound)</td>
 <td >314.0</td>
 <td >-8.8</td>
 <td >360.6</td>
 <td >400.3</td>
 <td >326.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Steel Scrap ($ per ton)</td>
 <td >324.3</td>
 <td >-6.7</td>
 <td >366.7</td>
 <td >412.6</td>
 <td >326.5</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" >&nbsp;Crude Oil &amp; Benzene</td>
 <td >211.8</td>
 <td >5.9</td>
 <td >204.1</td>
 <td >199.3</td>
 <td >182.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Crude Oil (WTI, $ per
 Barrel)</td>
 <td >106.4</td>
 <td >18.3</td>
 <td >94.2</td>
 <td >95.0</td>
 <td >79.4</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" >&nbsp;Miscellaneous</td>
 <td >205.0</td>
 <td >0.7</td>
 <td >205.3</td>
 <td >190.6</td>
 <td >179.1</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Framing Lumber ($ per
 1000 board ft.)</td>
 <td >335</td>
 <td >5.0</td>
 <td >321</td>
 <td >273</td>
 <td >283</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Natural Rubber (cents
 per pound)</td>
 <td >176.0</td>
 <td >-13.1</td>
 <td >211.9</td>
 <td >262.3</td>
 <td >182.9</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

Economic analysts suggest that GDP growth softened last quarter following its 1.8% rise during Q1'13. Recent movement in commodity prices support that conclusion. Yesterday's industrial commodity price index, from the Foundation for [...]

FIBER: Industrial Commodity Prices Weaken This Year

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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250502A5.jpg

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Nonfarm payrolls increased 177,000 (1.2% y/y) during April after rising 185,000 in March, revised from 228,000, and 102,000 in February, revised from 117,000. Expectations had been for a 130,000 rise in the Action Economics Forecast Survey. The latest figure left the three-month average change at 155,000 in April, down from 232,000 in January.

Average hourly earnings rose 0.2% during April after unrevised increases of 0.3% in March and 0.2% in February. Earnings growth of 3.8% y/y was below the 5.9% high in March 2022.

The unemployment rate, measured in the household survey, held m/m at an expected 4.2% in April, and compared to 4.1% in February and 4.0% in January. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, eased to 7.8% in April from 7.9% in March.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

- Job growth spreads across most sectors.
- Earnings growth trend decelerates.
- Jobless rate holds steady.

U.S. Job Growth Is Firm in April but March Gain Is Lessened

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.

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

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Charts of the Week: Tariff Truce, Tenuous Trust

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U.S. light vehicle sales dropped 2.9% (+6.5% y/y) to 17.31 million units (SAAR) in April after surging 10.8% to 17.82 million units in March. The retreat in April vehicle sales accompanied a 1.7% y/y rise in real disposable income through March, which compared to 2.0% growth last year.

Sales declines were broad-based last month. Light truck sales fell 1.3% (+9.9% y/y) during April to 14.34 million units (SAAR), after rising 12.4% in March. Purchases of domestically-made light trucks declined 1.2% (+11.9% y/y) to 11.02 million units, after jumping 12.5% in March. Sales of imported light trucks fell 1.8% (+4.4% y/y) to 3.32 million units, following an 11.6% March surge.

Trucks’ record 82.8% share of the light vehicle market last month compared to 81.5% in March and 80.3% in April of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales also declined last month, down 9.5% (-7.5%) to 2.97 million units (SAAR) following a 3.5% March rise. The decline reversed all of the increase over the prior two months. Purchases of domestically-produced cars fell 9.8% (-4.3% y/y) last month to 2.22 million units, after rising 3.8% in March. Sales of imported autos declined 9.6% (-15.7% y/y) to 0.75 million units, following a 2.5% March increase.

Imports' 23.5% share of the U.S. light vehicle market was little changed from 23.6% in March and compared to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market held steady at 25.3% last month and compared to 27.7% in April of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market eased to 23.2% last month after falling to 23.3% in March.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the I**NDUSTRY** database.

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- Light truck sales pull back, while auto sales tumble.
- Both domestic and imported sales decline.
- Imports' market share slips further.

U.S. Light Vehicle Sales Fall in April

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The ISM Purchasing Managers Index of activity in the manufacturing sector slipped to 48.7 in April from 49.0 during March and 50.3 in February. It remained up from a low of 46.9 in October of last year. A level of 50 is the break-even point between a rising and falling level of activity. The Action Economics Forecast Survey expected a reading of 47.8 for April. The series reached a monthly high of 63.8 in March 2021.

Two of the five component indexes weakened last month. The April production index fell to 44.0 after declining to 48.3 in March. It was the lowest level since May 2020. A lessened 19.8% (NSA) of respondents reported higher production while an increased 24.2% reported lower output. The inventories index declined to 50.8 last month from 53.4 in March. The index remained up from a low of 43.2 in October of last year.

Moving higher, the new orders index rose to 47.2 last month from 45.2 in March. The index remained below a January high of 55.1. Twenty-eight percent (NSA) of respondents reported higher new orders while 26.7% reported a decline. The employment index rose to 46.5 from 44.7 in March. It was below a high of 50.3 in January. A greater 13.1% (NSA) of respondents reported more hiring while a fewer 16.2% indicated less. The supplier delivery index rose to 55.2 from 53.5 in March. A higher 16.6% (NSA) of respondents reported slower delivery speeds while a fairly steady 6.2% reported a quickening.

The prices index, which is not part of the composite series, edged up to 69.8 (NSA) in April after increasing to 69.4 in March. It was the highest level since June 2022, up from a December 2022 low of 39.4. An increased 49.2% of respondents reported higher prices last month, up from 12.2% in November, while a higher 9.7% reported lower prices.

In other series, the export orders index plummeted to 43.1 in April from 49.6 during March. It was down from the high of 52.4 in January. The imports index fell sharply to 47.1 from 50.1 in March. It was the lowest reading since December 2023. The order backlog index dropped to 43.7 (NSA) last month from 44.5 in March. It was the lowest level in five months.

The ISM figures are based on responses from over 400 purchasing executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These indexes are diffusion indexes where a reading above 50 indicates expansion and a reading below 50 points to contraction. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- Declines in last three months follow earlier improvement.
- Production & inventories account for m/m shortfall.
- Prices index edges up to another three-year high.

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

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The value of construction put in place unexpectedly fell 0.5% m/m in March after rises of 0.6% in February (+0.7% initially) and 0.1% in January (-0.5% previously), data from the U.S. Census Bureau showed. The March reading was the first m/m fall following five straight m/m gains. A 0.3% m/m March rise had been expected in the Action Economics Forecast Survey. The year-on-year rate of increase decelerated to 2.8% in March, the lowest since May 2019, after registering at 3.4% in February and January. The latest y/y figure was lower than 8.7% in March 2024; thus, having remained below its recent high of 9.8% in January 2024 and a peak of 18.6% in April 2022.

Private construction slid 0.6% (+2.3% y/y) in March, down for the first time since September, following increases of 0.7% in February (+0.9% initially) and 0.1% in January (-0.7% previously). Residential private construction fell 0.4% (+2.8% y/y) in March, the first m/m fall in six months, after an unrevised 1.3% gain in February. Home improvement building dropped 1.2% (+13.4% y/y), the first m/m decline since December, following a 2.3% February gain; it was 41.1% of the residential private construction. Single-family building edged up 0.1% (-0.8% y/y), the smallest of seven consecutive m/m increases, after a 0.8% February rise; it was 46.6% of the residential private construction. Meanwhile, multi-family building was essentially unchanged m/m (-12.1% y/y) in March following 15 straight m/m decreases; it was 12.3% of the residential private construction.

Nonresidential private construction fell 0.8% (+1.6% y/y) in March after a 0.1% increase in February (+0.4% initially) and a 0.1% easing in January (-0.2% previously). The March fall reflected m/m drops in the following nonresidential private constructions. These included religious (-2.9%; +16.4% y/y), health care (-2.2%; -5.2% y/y), office (-1.8%; +2.7% y/y), educational (-1.7%; -4.2% y/y), lodging (-1.6%; -1.0% y/y), commercial (-1.0%; -5.8% y/y), manufacturing (-0.4%; +3.6% y/y), communication (-0.3%; +2.2% y/y), and utilities (-0.1%; +7.0% y/y). In contrast, private constructions for amusement & recreation (1.5%; 7.0% y/y) and transportation (0.7%; 10.2% y/y) rose m/m in March.

The value of public construction declined 0.2% (+4.7% y/y) in March after holding steady in February (+0.2% initially), reflecting a 0.2% increase (-1.9% y/y) in residential public construction and a 0.2% easing (+4.8% y/y) in nonresidential public construction. The March decline reflected m/m drops in the following nonresidential public constructions. These included utilities (-4.8%; -12.8% y/y), commercial (-1.6%; +40.3% y/y), amusement & recreation (-1.0%; +19.1% y/y), educational (-0.6%; +7.6% y/y), sewage & waste disposal (-0.6%; +10.6% y/y), and health care (-0.4%; +13.0% y/y). Notably, spending on highways & streets, which made up 28.7% of public construction spending, fell 0.5% (-2.4% y/y) in March, the first m/m fall since October, following a 0.9% increase in February. To the upside, the following public constructions rose m/m in March: office (1.6%; 6.0% y/y), transportation (1.4%; 7.3% y/y), public safety (0.7%; 4.1% y/y), conservation & development (0.6%; 4.7% y/y), and water supply (0.6%; 12.2% y/y).

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

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- March construction spending -0.5% m/m; +2.8% y/y, the lowest y/y rate since May ’19.
- Residential private construction -0.4% m/m, led by a 1.2% drop in home improvement building.
- Nonresidential private construction -0.8% m/m, down for the second month in three.
- Public sector construction -0.2% m/m, reflecting a 0.2% decline in nonresidential public building.

Economy in Brief: July 2013

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