Louise Curley

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030812b.jpg" width="353">
The Japanese economy grew 0.6% in the second quarter, the sixth quarter of growth and well above the consensus estimate of 0.2%. First quarter growth was revised upward from 0.1% to 0.3%. All major sectors except for government consumption, showed increases. Private consumption increased by 0.3%. Gross capital formation increased by 1% in the second quarter, marking its fifth consecutive rise. With exports up 1% and import down by 1%, the foreign trade sector made a significant contribution to growth.. Deflation, however, continues as can be seen in the attached chart that compares nominal and real GDP. Progress has been slow on Prime Minister Koizumi&#39;s attempt to dispose of the 44.5 trillion yen ($370 billion) of bad loans at Japan&#39;s banks and until this problem is resolved there is no assurance of a substantial and sustained recovery in Japan.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"></th>
<th scope="col">Q2/03</th>
<th scope="col">Q1/03</th>
<th scope="col">Q2/02</th>
<th scope="col">Q/Q % Chg</th>
<th scope="col">Y/Y % Chg</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP (Trillion Current Yen SAAR)</td>
<td>498.0</td>
<td>497.3</td>
<td>500.3</td>
<td>0.15</td>
<td>-0.44</td>
<td>500.0</td>
<td>506.3</td>
<td>510.3</td>
</tr>
<tr>
<td class="firstcol">GDP (Trillion 1995 Yen)</td>
<td>547.9</td>
<td>544.8</td>
<td>536.7</td>
<td>0.57</td>
<td>2.09</td>
<td>537.5</td>
<td>535.3</td>
<td>531.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Private Consumption</td>
<td>301.2</td>
<td>300.3</td>
<td>297.4</td>
<td>0.31</td>
<td>1.29</td>
<td>298.2</td>
<td>293.9</td>
<td>287.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Government Consumption</td>
<td>91.1</td>
<td>91.4</td>
<td>90.7</td>
<td>-0.40</td>
<td>0.43</td>
<td>90.9</td>
<td>88.8</td>
<td>86.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Gross Capital Formation</td>
<td>139.4</td>
<td>138.0</td>
<td>134.4</td>
<td>1.02</td>
<td>3.74</td>
<td>134.9</td>
<td>142.7</td>
<td>143.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports</td>
<td>64.6</td>
<td>64.0</td>
<td>60.9</td>
<td>0.96</td>
<td>6.08</td>
<td>60.7</td>
<td>56.1</td>
<td>59.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports</td>
<td>-48.4</td>
<td>-49.0</td>
<td>-46.7</td>
<td>-1.10</td>
<td>3.78</td>
<td>-47.1</td>
<td>-46.2</td>
<td>-46.1</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body>
</html>

The Japanese economy grew 0.6% in the second quarter, the sixth quarter of growth and well above the consensus estimate of 0.2%. First quarter growth was revised upward from 0.1% to 0.3%. All major sectors except for government [...]

Japan's Growth Exceeds Expectations, but Deflation Still a Problem

Tom Moeller

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030812a.jpg" width="353">
Chain store sales ticked 0.1% higher last week according to the BTM-UBSW survey. The mailing of tax-rebate checks, state tax holidays and the beginning of the back-to-school shopping season likely encouraged sales.
The small advance in the first full week of August pulled the level of sales so far this month 1.1% above the July average. July sales rose 1.4% from June.
During the last five years there has been a 62% correlation between the year-to-year percent change in chain store sales and the change in nonauto retail sales less gasoline.
The BTM-UBSW retail chain-store sales index is constructed from the sales results reported by seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">8/9/03</th>
<th scope="col">8/2/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>428.3</td>
<td>427.7</td>
<td>3.7%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
Fed Funds Rate Left Unchanged by FOMC 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 12, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030812c.jpg" width="353">
The Federal Reserve left the target rate for federal funds unchanged at 1.00%. The discount rate also was left unchanged at 2.00%.
The unanimous action was as expected by economists.
The press release which accompanied the Fed&#146;s action contained the following statement. &quot;The Committee continues to believe that an accommodative stance of monetary policy, coupled with still-robust underlying growth in productivity, is providing important ongoing support to economic activity. The evidence accumulated over the intermeeting period shows that spending is firming, although labor market indicators are mixed. Business pricing power and increases in core consumer prices remain muted.&quot;
With regard to the risks to the economic outlook, the Fed stated that &quot;the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal. In contrast, the probability, though minor, of an unwelcome fall in inflation exceeds that of a rise in inflation from its already low level. The Committee judges that, on balance, the risk of inflation becoming undesirably low is likely to be the predominant concern for the foreseeable future.&quot;
<a href="http://www.federalreserve.gov/boarddocs/press/monetary/2003/20030812/default.htm">Here</a> is the complete text of the Fed&#39;s latest press release.
Analysis from the Federal Reserve Bank of St. Louis titled &quot;Alternative Policy Weapons?&quot; can be found in this <a href="http://research.stlouisfed.org/publications/mt/20030801/cover.pdf">link</a>.

</body>
</html>

Chain store sales ticked 0.1% higher last week according to the BTM-UBSW survey. The mailing of tax-rebate checks, state tax holidays and the beginning of the back-to-school shopping season likely encouraged sales. The small advance [...]

Chain Store Sales Tick Higher

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030811b.jpg" width="353">
Since late 2002, the prices manufacturers in the UK pay for the raw materials of their products have generally been rising faster than the prices they receive for their finished products. In July, the year to year increase in input prices was 2.79% while the increase in output prices was 1.38%.. Although labor is, in general, much the largest cost of production and is not included in the input index, the relationship between prices of final goods and the prices of raw material prices is often a good indicator of profit trends. In the UK, corporate profits are defined as the gross operating surplus of corporations in the national accounts. According to this measure, profits in the first quarter of this year have decelerated to 7.4% from an increase of 9.9% in the fourth quarter of 2002. The trend in output and input prices since then, suggests a further squeeze on profits in the UK.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> </th>
<th scope="col">July 2003</th>
<th scope="col">June 2003</th>
<th scope="col">July 2002</th>
<th scope="col">M/M</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">1995=100</td>
<td></td>
<td></td>
<td></td>
<td>%</td>
<td>%</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Input Prices</td>
<td>92.0&nbsp;</td>
<td>91.2</td>
<td>89.5</td>
<td>0.88</td>
<td>2.79</td>
<td>90.0</td>
<td>93.0</td>
<td>93.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Output Prices</td>
<td>110.2</td>
<td>110.0</td>
<td>108.7</td>
<td>0.10</td>
<td>1.38</td>
<td>408.5</td>
<td>408.2</td>
<td>108.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Y/Y % Change</td>
<td>Q1 03</td>
<td>Q4 02</td>
<td>Q3 02</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>2002</td>
<td>2001</td>
<td>2000</td>
</tr>
<tr>
<td class="firstcol">Gross Operating Surplus of Corporations</td>
<td>7.41</td>
<td>9.92</td>
<td>8.82</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>8.36</td>
<td>0.77</td>
<td>4.98</td>
</tr>
</tbody>
</table>
</body>
</html>

Since late 2002, the prices manufacturers in the UK pay for the raw materials of their products have generally been rising faster than the prices they receive for their finished products. In July, the year to year increase in input [...]

Price Trends in UK Manufacturing Industry Point to Further Profit Squeeze

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030811a.jpg" width="353">
The OECD Index of Leading Indicators (Big 7) rose in June for the third consecutive month. The 0.9% gain followed an upwardly revised 0.9% rise in May.
Gains amongst the member country leading indexes perhaps began to broaden out. The leading index for the Euro-zone 12 rose 0.3% following a 0.4% May gain. The leaders in Germany rose 0.5% following a 0.3% uptick in May. In France the leaders managed their third consecutive monthly gain. The leaders in Italy, however, faltered and fell for the second month this year.
The leading index for the Euro-zone 12 was up 0.6% YTD in June. In the U.K. the leaders rose strongly for the third consecutive month.
Leaders for Japan jumped 1.0% in June and a previously reported May decline was revised to +0.6%. Higher share prices led the gains. In Canada the June leading indicators rose 0.5% for the third consecutive gain but the previously reported 2.0% jump in May was revised down to 0.4%.
Improved leading indicators in the United States continued to dominate the upward move in the OECD aggregate. In June the US leaders rose 1.3% for the third consecutive strong monthly gain.
For more from the Organisation for Economic Cooperation and Development (OECD), visit its <a href="http://www.oecd.org/home/">website</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/OECDMEI/OECDMEI.HTM">OECD Main Economic Indicators</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">OECD Major Seven - Leading Index (Trend Restored)</td>
<td>120.4</td>
<td>119.3</td>
<td>1.0%</td>
<td>4.2%</td>
<td>-2.2%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; European Union</td>
<td>117.6</td>
<td>117.1</td>
<td>0.4%</td>
<td>3.1%</td>
<td>-1.8%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Japan</td>
<td>102.6</td>
<td>101.5</td>
<td>1.1%</td>
<td>0.7%</td>
<td>-2.9%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; United States</td>
<td>132.6</td>
<td>130.9</td>
<td>1.7%</td>
<td>5.8%</td>
<td>-2.6%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
</body>
</html>

The OECD Index of Leading Indicators (Big 7) rose in June for the third consecutive month. The 0.9% gain followed an upwardly revised 0.9% rise in May. Gains amongst the member country leading indexes perhaps began to broaden out. The [...]

OECD Leaders Up Again

Carol Stone, CBE

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030808b.jpg" width="353">
Unemployment in Canada remained stubbornly high in July, as the unemployment rate ticked up to 7.8% from 7.7% in June. Forecasters had expected the rate to hold steady at the June level. The number unemployed in July increased 13.2 thousand, almost exactly mirroring a 13.3 thousand decrease in the number employed. The job loss occurred among youth (ages 15-24), while employment among adult workers increased slightly. Employment of young people has in fact declined in three of the four months since March, which was its peak. Adults have fared better, tacking 1.6 thousand in July onto a strong 45.2 thousand increase the month before.
Over longer periods, the chart on the left illustrates the close correlation of Canadian labor markets with US business cycles. In the last four US recessions, employment in Canada has weakened markedly while the unemployment rate has risen. Indeed, in the 1981-82 and 1990-91 experiences, the rate in Canada rose more steeply than that in the US. However, most recently, since the latest US recovery began in November 2001, employment in Canada has been much stronger than that in the US, growing 4.1% compared with just a 0.9% rise in the US (data for both countries based on labor force definitions of &quot;employment&quot;.)

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> </th>
<th scope="col">&nbsp;July 2003</th>
<th scope="col">June 2003</th>
<th scope="col">Year/Year</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="3">Dec/Dec % Change</td>
</tr>
<tr>
<td class="firstcol">Change in Total Employment (Thous)</td>
<td>-13.3</td>
<td>+48.8</td>
<td>1.9%</td>
<td>3.7%</td>
<td>0.1%</td>
<td>2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="3">Annual Average</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>7.8%</td>
<td>7.7%</td>
<td>7.6% (July 2002)</td>
<td>7.6%</td>
<td>7.2%</td>
<td>6.8%</td>
</tr>
</tbody>
</table>
</body>
</html>

Unemployment in Canada remained stubbornly high in July, as the unemployment rate ticked up to 7.8% from 7.7% in June. Forecasters had expected the rate to hold steady at the June level. The number unemployed in July increased 13.2 [...]

Canadian Labor Markets Soften in July as Teenagers Lack Summer Jobs

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030808a.jpg" width="353">
The Federal Reserve indicated that consumer credit outstanding (which excludes mortgages) fell $0.4B (-0.2% AR) in June. Consensus expectations had been for a $6.5B rise. The gain in May was revised up due to raised usage of revolving credit. 
During the first six months of this year, consumer credit usage rose at a 4.1% annual rate.
Nonrevolving credit (which includes auto loans) fell at a 2.2% annual rate in June following a 6.7% gain in May. Year to date, nonrevolving credit usage is up at a 3.8% rate. 
Revolving credit rose at a modest 1.1% annual rate in June. That followed a 4.8% May gain.
The more comprehensive flow of funds figures published by the Federal Reserve indicated that through 1Q03, credit market debt owed by the household sector soared 10.3% y/y. That gain was led by a 13.0% y/y gain in outstanding liabilities on homes.
Analysis from the Federal Reserve Bank of San Francisco titled &quot;Financial Development, Productivity, and Economic Growth&quot; can be found <a href="http://www.frbsf.org/publications/economics/letter/2003/el2003-18.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E103/@E10308/@E10308.HTM">Consumer Credit Outstanding</a></th>
<th scope="col">June m/m</th>
<th scope="col">May m/m</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$-0.4B</td>
<td>$8.2B</td>
<td>3.0%</td>
<td>3.6%</td>
<td>6.9%</td>
<td>10.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$-1.3B</td>
<td>$4.0B</td>
<td>1.8%</td>
<td>1.5%</td>
<td>5.1%</td>
<td>11.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonrevolving</td>
<td>$0.9B</td>
<td>$4.1B</td>
<td>3.8%</td>
<td>5.0%</td>
<td>8.2%</td>
<td>9.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Federal Reserve indicated that consumer credit outstanding (which excludes mortgages) fell $0.4B (-0.2% AR) in June. Consensus expectations had been for a $6.5B rise. The gain in May was revised up due to raised usage of revolving [...]

Consumer Credit Usage Fell

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030807c.jpg" width="353">
The inflation performance among the &quot;transitional&quot; economies of Central and Eastern Europe varies greatly, as indicated by July CPI data released Thursday for Estonia and Slovakia. Year-on-year inflation in Estonia appears at least comparably low to major industrial countries, showing a mere 0.8% rise over July 2002, the third month in a row below 1%. This looks very much like the recent trend in Germany, which had a 0.9% rise in the same period.
The Slovak Republic, however, continues with an erratic pattern, with an 8.7% year-on-year CPI advance in July. This is evidently significantly accounted for by utility cost increases last January. More market-oriented price categories, such as clothing and furniture, have been experiencing lower inflation, lately in a range of 2%-3%. Thus, the varying inflation performance among these countries, at least this year, may reflect differing economic policies. In fact, business operating costs appear to be more similar; unit labor costs in both Estonia and Slovakia have run at a 2% - 3% pace over the last several quarters.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CPI</th>
<th scope="col">&nbsp;July 2003</th>
<th scope="col">June 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">(2000=100)</td>
<td colspan="2">Y/Y% Changes</td>
<td colspan="3">Dec/Dec % Changes</td>
</tr>
<tr>
<td class="firstcol">Estonia</td>
<td>0.81</td>
<td>0.33</td>
<td>2.68</td>
<td>4.20</td>
<td>5.05</td>
</tr>
<tr class="odd">
<td class="firstcol">Slovakia</td>
<td>8.68</td>
<td>8.47</td>
<td>3.38</td>
<td>6.40</td>
<td>8.34</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Housing, Water, Electricity, Etc.</td>
<td>17.88</td>
<td>17.63</td>
<td>2.56</td>
<td>13.10</td>
<td>N.A.</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Clothing</td>
<td>2.50</td>
<td>2.88</td>
<td>3.10</td>
<td>3.30</td>
<td>N.A.</td>
</tr>
</tbody>
</table>
</body>
</html>

The inflation performance among the "transitional" economies of Central and Eastern Europe varies greatly, as indicated by July CPI data released Thursday for Estonia and Slovakia. Year-on-year inflation in Estonia appears at least [...]

CPI Trends Differ in Emerging European Nations

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030807a.jpg" width="353">
Nonfarm labor productivity growth last quarter surged 5.7%, nearly equaling the barn-burner 5.9% growth in 2Q 2002. Consensus expectations had been for 5.0% growth. Prior years&#39; figures were revised up.
The surge in productivity dropped unit labor costs at a 2.1% rate. It was the sixth decline in unit labor costs over the last eight quarters. During that period unit labor costs fell 3.3%. Compensation rose at a moderate 3.5% rate.
Productivity surged as a 3.4% gain in output was accompanied by a 2.2% decline in hours of all persons (employment times hours). Since peaking in three years ago, hours worked have fallen 5.5%.
Manufacturing sector productivity growth in 2Q surged 4.2% (4.8% y/y). That growth was accompanied by a 1.2% (0.7% y/y) gain in unit labor costs as compensation rose a strong 5.4% (5.6% y/y).
Research from the Federal Reserve Bank of San Francisco titled &quot;Productivity Shocks and the Unemployment Rate&quot; can be found <a href="http://www.frbsf.org/publications/economics/review/2003/article2.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Nonfarm Business Sector</a> (SAAR)</th>
<th scope="col">2Q &#39;03 Prelim</th>
<th scope="col">1Q &#39;03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>5.7%</td>
<td>2.1%</td>
<td>3.8%</td>
<td>5.4%</td>
<td>1.9%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>3.5%</td>
<td>4.1%</td>
<td>2.8%</td>
<td>2.8%</td>
<td>3.6%</td>
<td>7.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>-2.1%</td>
<td>2.0%</td>
<td>-1.0%</td>
<td>-2.4%</td>
<td>1.7%</td>
<td>3.9%</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Remained Below 400,000 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 7, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030807b.jpg" width="353">
Initial claims for unemployment insurance remained below 400,000 for the third consecutive period. Claims fell last week by 3,000 to 390,000 but prior weeks&#39; were revised up slightly. Consensus expectations had been for claims of 395,000.
The four-week moving average of initial claims dropped below 400,000 for the first time since late-February to 397,250 (+3.5% y/y).
Continuing claims for unemployment insurance rose 72,000 (2.0%). The gain followed a similar moderate gain the prior week but nevertheless left the claimant level down 2.4% from the late-June peak.
The insured rate of unemployment was stable at 2.9%.
Research from the Federal Reserve Bank of Kansas City titled &quot;A Closer Look at Jobless Recoveries&quot; can be found <a href="http://www.kc.frb.org/Publicat/econrev/Pdf/2q03schr.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">8/02/03</th>
<th scope="col">7/26/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>390.0</td>
<td>393.0</td>
<td>1.0%</td>
<td>404.3</td>
<td>406.0</td>
<td>299.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,691</td>
<td>5.2%</td>
<td>3,575</td>
<td>3,022</td>
<td>2,114</td>
</tr>
</tbody>
</table>
</body>
</html>

Nonfarm labor productivity growth last quarter surged 5.7%, nearly equaling the barn-burner 5.9% growth in 2Q 2002. Consensus expectations had been for 5.0% growth. Prior years' figures were revised up. The surge in productivity [...]

U.S. Productivity Surged in 2nd Quarter

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

Sandy Batten

250430F5.jpg

250430G5.jpg

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

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

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

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

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

250430H5.jpg

250430I5.jpg

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

Economy in Brief: August 2003

Jump to: