Tom Moeller

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&bull; NFIB Small Business Optimism fell to lowest level in three months.
&bull; Economic growth worries surge.
&bull; Pricing gauges continue to strengthen.

The National Federation of Independent Business' (NFIB) Small
Business Optimism Index weakened to 101.4 during November, down from the recent
high of 104.0 and the record 108.8 in August 2018. Nevertheless, it remained up
from the April low of 90.9.

A greatly lessened net 8% of respondents felt that the
economy would improve, the least since March and down from 39% in June. A
slightly lower net 10% expected higher real sales and earnings trends
deteriorated. A diminished net 12% of firms of firms thought that now was a good
tine to expand, down from the August 2018 peak of 34%. A lessened 47% of firms
found few or no qualified candidates to fill job openings. Working higher m/m
were the net 21% of firms which planned to raise employment, up from one percent
in April, though steady y/y.

Credit was less hard to get by a low two percent of
respondents, down from April's high of four percent.

Pricing power improved again. An increased net 18% of firms
raised prices, up from price deflation during the spring. A higher net 21% were
planning to raise prices in November, the most since January. An improved net 24%
of firms raised worker compensation, the most since March, while a markedly
higher 20% planned to do so over the next three months, up from April's sevenpercent.

The most important issues for small businesses were the
quality of labor (24%), taxes (20%), up from 14% twelve months earlier, and poor
sales (13%). The cost of labor troubled a lessened six percent of respondents
while competition from large businesses troubled a steady nine percent.

Roughly 24 million small businesses exist in the U.S. and
they create 80% of all new jobs. The typical NFIB member employs 10 people and
reports gross sales of about $500,000 a year. The NFIB figures can be found in
Haver's SURVEYS database.

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<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" >National Federation of
 Independent Business (SA, Net % of Firms)</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Nov'19</th>
 <th scope="col" >2019</th>
 <th scope="col" >2018</th>
 <th scope="col" >2017</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Small Business Optimism Index (1986=100)</td>
 <td>101.4</td>
 <td>104.0</td>
 <td>104.0</td>
 <td>104.7</td>
 <td>103.0</td>
 <td>106.7</td>
 <td>104.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms Expecting Economy to Improve</td>
 <td>8</td>
 <td>27</td>
 <td>32</td>
 <td>13</td>
 <td>13</td>
 <td>32</td>
 <td>39</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms Expecting Higher Real Sales</td>
 <td>10</td>
 <td>11</td>
 <td>8</td>
 <td>13</td>
 <td>18</td>
 <td>26</td>
 <td>23</td>
 </tr>
 <tr>
 <td class="firstcol" >Firms Reporting Now Is a Good Time to
 Expand the Business</td>
 <td>12</td>
 <td>13</td>
 <td>13</td>
 <td>29</td>
 <td>25</td>
 <td>30</td>
 <td>23</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms Planning to Increase Employment</td>
 <td>21</td>
 <td>18</td>
 <td>23</td>
 <td>21</td>
 <td>19</td>
 <td>21</td>
 <td>18</td>
 </tr>
 <tr>
 <td class="firstcol" >Firms with Few or No Qualified
 Applicants for Job Openings (%)</td>
 <td>47</td>
 <td>48</td>
 <td>50</td>
 <td>53</td>
 <td>52</td>
 <td>51</td>
 <td>49</td>
 </tr>
 <tr>
 <td class="firstcol" >Earnings Trends</td>
 <td>-7</td>
 <td>-3</td>
 <td>-12</td>
 <td>2</td>
 <td>-5</td>
 <td>-2</td>
 <td>-11</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms Reporting that Credit Was Harder
 to Get</td>
 <td>2</td>
 <td>3</td>
 <td>2</td>
 <td>3</td>
 <td>4</td>
 <td>4</td>
 <td>4</td>
 </tr>
 <tr>
 <td class="firstcol" >Firms Raising Average Selling Prices</td>
 <td>18</td>
 <td>15</td>
 <td>13</td>
 <td>12</td>
 <td>13</td>
 <td>15</td>
 <td>7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms Raising Worker Compensation</td>
 <td>24</td>
 <td>23</td>
 <td>23</td>
 <td>30</td>
 <td>31</td>
 <td>33</td>
 <td>27</td>
 </tr>
 </tbody>
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• NFIB Small Business Optimism fell to lowest level in three months. • Economic growth worries surge. • Pricing gauges continue to strengthen. The National Federation of Independent Business' (NFIB) Small Business Optimism Index [...]

U.S. Small Business Optimism Weakens in November

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&bull; Gasoline prices reach eight-week high.
&bull; Crude oil costs strengthen to highest level since March.
&bull; Natural gas prices are trending higher.

The price of regular gasoline increased four cents
last week to $2.16 per gallon (-15.8% y/y), adding to the prior week's two cent
increase to $2.12. It was the highest level since the third week of October.
Haver Analytics adjusts the gasoline price series for normal seasonal variation.
The seasonally adjusted price rose six cents to $2.28 per gallon last week, its
highest level since the third week of March.

West Texas Intermediate crude oil prices increased to
an average of $45.38 per barrel (-21.3% y/y) in the week ended December 4 from
$44.44 per barrel in the previous week. This was the highest price since
early-March. The price was $45.76 yesterday. The average price of Brent crude
oil rose to $48.28 per barrel (-22.3% y/y) last week from $47.10 per barrel in
the previous week. It increased to $48.71 yesterday.

The price of natural gas improved to $2.69/mmbtu (13.5%
y/y) in the week ended December 4 from $2.39/mmbtu in the previous week. Prices
have been moving up from $1.52/mmbtu since the third week of June. The price
fell to $2.39 yesterday.

In the four weeks ended November 27, gasoline demand
declined 9.9% y/y. Total petroleum product demand fell 9.0% y/y. Crude oil input
to refineries was down 15.1% y/y over the past four weeks. Gasoline
inventories increased 1.9% y/y and inventories of all petroleum products
rose 5.2% y/y. The supply of gasoline in inventory recently has risen to 28.2
days, up from 26.1 days early in October.

These data are reported by the U.S. Department of Energy. The
price data can be found in Haver's WEEKLY and DAILY databases.
Greater detail on prices, as well as the demand, production and inventory data,
along with regional breakdowns, are in OILWKLY.

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 <th class="firstcol" scope="col" >Weekly Energy Prices</th>
 <th>12/07/20</th>
 <th>11/30/20</th>
 <th>11/23/20</th>
 <th>Y/Y %</th>
 <th>2019</th>
 <th>2018</th>
 <th>2017</th>
 </tr>
 </thead>
 <tbody>
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 <td class="firstcol" >Retail Gasoline ($ per Gallon, Regular,
 Monday)</td>
 <td>2.16</td>
 <td>2.12</td>
 <td>2.10</td>
 <td>-15.8</td>
 <td>2.57</td>
 <td>2.27</td>
 <td>2.47</td>
 </tr>
 <tr>
 <td class="firstcol" >Light Sweet Crude Oil, WTI ($ per bbl,
 Previous Week's Average)</td>
 <td>45.38</td>
 <td>44.44</td>
 <td>41.59</td>
 <td>-21.3</td>
 <td>56.91</td>
 <td>64.95</td>
 <td>50.87</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Natural Gas ($/mmbtu, LA, Previous
 Week's Average)</td>
 <td>2.69</td>
 <td>2.39</td>
 <td>2.39</td>
 <td>13.5</td>
 <td>2.57</td>
 <td>3.18</td>
 <td>2.99</td>
 </tr>
 </tbody>
 </table>
 
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• Gasoline prices reach eight-week high. • Crude oil costs strengthen to highest level since March. • Natural gas prices are trending higher. The price of regular gasoline increased four cents last week to $2.16 per gallon (-15.8% [...]

U.S. Energy Prices Firm

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The National Association for Business Economics raised its
projection for real GDP growth in 2021 to 3.8% from 3.6%. This follows a record
recession this year, with GDP expected to contract 3.5%, versus the prior
forecast of a 4.3% decline. Quarterly growth is expected to average 3.4%
next year, revised from 3.6%, after quarterly declines averaging 3.8% this year,
revised from -3.9%. Personal consumption expenditures are forecast to improve
4.6% in 2021, revised from 4.1%, after falling 3.8% in 2020, revised from -4.6%.
Business fixed investment growth is expected to rise 3.7% next year, revised
from 2.4% and recover most of this year's 4.8% fall, revised from -6.0%.
Expected growth of 6.8% in residential investment next year, revised from 3.5%,
will follow 4.4% growth in 2020, revised from the 1.1% previously expected. Government
spending growth is expected to slow to 0.2%, earlier estimated to be 0.9%, and
then move down sharply from gains this year and in 2019. Deterioration in net
exports is forecast to continue next year at an increased rate. Slow recoveries
abroad are expected to limit U.S. export growth to 5.2% next year versus an 8.0%
rise in imports. In the current year, exports are now projected to decline an
unrevised 13.5%, while imports are forecasted to drop by 10.4%, revised from -12.3%.
The expected rate of inventory investment is expected to pick up next year after
a sharp rate of decumulation in 2020.

Housing starts are forecasted to rise next year to an average
1.41 million units, revised from 1.35 million, and add to this year's rise to an
unrevised 1.35 million. Expected light vehicle sales of 16.1 million units next
year was lifted from 15.8 million units, after falling to 14.5 million this
year, revised from 14.1 million. Sales should remain below the 2016 peak of 17.5
million. An average monthly gain in payroll employment of 387,000 next year
(earlier projected as 350,000) recovers from a little-changed 681,000 decline
this year. Expectations for the unemployment rate in 2021 place it at 6.3%,
revised from 6.8%, following 8.1% this year, revised from 8.4%.

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The Consumer Price Index is projected to rise 2.0% Q4/Q4 in
2021, revised from 1.9%, versus 1.2% this year, which was changed from 1.1%.
Price inflation next year, as measured by the PCE price index, is expected to
rise1.8%, revised from 1.9% Q4/Q4 from an estimated 1.2% this year, changed from
1.1%. The chain PCE price index excluding food &amp; energy should rise 1.8%
next year (Q4/Q4), revised from 1.6%, after increasing 1.5% this year, changed
from 1.2%. The cost of crude oil is expected to average a little-changed $46 per
barrel at the end of 2021, rising slightly versus a projected $41 at the end of 2020.

The forecasted 1.15% interest rate on a ten-year Treasury
note at yearend 2021 was increased from 1.1% and compares to 0.84% at the end of
2020, revised from 0.75%. The Federal funds rate is projected to be steady
around 0.125% until the end of next year. After-tax corporate profits should
rise 9.5% next year, revised from 8.5%, after a 9.8% decline in 2020, revised
from -11.0%. The expected Federal government budget deficit should surge to a
slightly reduced expectation of $3.132 trillion in FY20, then ease to $2.185
trillion next year, revised from $1.981.

The figures from the latest NABE report can be found in
Haver's SURVEYS database.

The Fed's latest Beige Book covering regional economic
conditions is available <a href="https://www.federalreserve.gov/monetarypolicy/files/BeigeBook_20201202.pdf">here</a>.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">National
 Association For Business Economics</a></th>
 <th scope="col" >2021</th>
 <th scope="col" >2020</th>
 <th scope="col" >2019</th>
 <th scope="col" >2018</th>
 <th scope="col" >2017</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Real GDP (% Chg. SAAR)</td>
 <td>3.8</td>
 <td>-3.5</td>
 <td>2.2</td>
 <td>3.0</td>
 <td>2.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Personal Consumption
 Expenditures</td>
 <td>4.6</td>
 <td>-3.8</td>
 <td>2.4</td>
 <td>2.7</td>
 <td>2.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Business Fixed Investment</td>
 <td>3.7</td>
 <td>-4.8</td>
 <td>2.9</td>
 <td>6.9</td>
 <td>3.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Residential Investment</td>
 <td>6.8</td>
 <td>4.4</td>
 <td>-1.7</td>
 <td>-0.6</td>
 <td>4.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Gov't Consumption &amp; Gross
 Investment</td>
 <td>0.2</td>
 <td>1.2</td>
 <td>2.3</td>
 <td>1.8</td>
 <td>0.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Change in Real Business
 Inventories (Bil. $)</td>
 <td>54</td>
 <td>-83.0</td>
 <td>48.5</td>
 <td>53.4</td>
 <td>15.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Net Exports (Bil. $)</td>
 <td>-1,028</td>
 <td>-899.0</td>
 <td>-917.6</td>
 <td>-877.7</td>
 <td>-816.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Housing Starts (Mil. Units)</td>
 <td>1.41</td>
 <td>1.35</td>
 <td>1.29</td>
 <td>1.25</td>
 <td>1.20</td>
 </tr>
 <tr>
 <td class="firstcol" >Light Vehicle Sales (Mil. Units)</td>
 <td>16.1</td>
 <td>14.5</td>
 <td>17.0</td>
 <td>17.2</td>
 <td>17.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Payroll Employment Average Monthly
 Change (000s)</td>
 <td>387</td>
 <td>-681</td>
 <td>178</td>
 <td>193</td>
 <td>176</td>
 </tr>
 <tr>
 <td class="firstcol" >Civilian Unemployment Rate (%)</td>
 <td>6.3</td>
 <td>8.1</td>
 <td>3.7</td>
 <td>3.9</td>
 <td>4.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Consumer Price Index (Q4/Q4 %)</td>
 <td>2.0</td>
 <td>1.2</td>
 <td>2.0</td>
 <td>2.2</td>
 <td>2.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Chain Price Index for PCE (Q4/Q4 %)</td>
 <td>1.8</td>
 <td>1.2</td>
 <td>1.5</td>
 <td>2.0</td>
 <td>1.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Chain Price Index excl. Food &amp;
 Energy (Q4/Q4 %)</td>
 <td>1.8</td>
 <td>1.5</td>
 <td>1.6</td>
 <td>2.0</td>
 <td>1.7</td>
 </tr>
 <tr>
 <td class="firstcol" >Fed Funds Rate (%, Year-End)</td>
 <td>0.125</td>
 <td>0.125</td>
 <td>1.625</td>
 <td>2.375</td>
 <td>1.375</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >10-Year Treasury Note (%, Year-End)</td>
 <td>1.15</td>
 <td>0.84</td>
 <td>1.92</td>
 <td>2.69</td>
 <td>2.40</td>
 </tr>
 </tbody>
 </table>
 
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The National Association for Business Economics raised its projection for real GDP growth in 2021 to 3.8% from 3.6%. This follows a record recession this year, with GDP expected to contract 3.5%, versus the prior forecast of a 4.3% [...]

NABE Increases 2021 Growth Expectations, Forecasting More Consumer Spending

Robert Brusca

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Germany's industrial production gained 3.2% in October after a 2.3% rise in September to put together two strong months of results. Sequential growth rates show IP up at very strong rates of change over both three months and six months but lower on balance over 12 months. Compared to February just before the Covid-19 shutdowns swept through Europe, IP is lower by 4.9% (as are all main sectors). What is clear is that IP is still recovering. It has not gained all that it last since the virus struck. And growth in the just unfolding fourth quarter is extremely strong.

In the quarter-to-date, the consumer sector is showing output curtailment while capital goods output is coming on strong. Intermediate goods output has been posting steady and strong increases over the past three months. Construction output, however, has been spotty; it pulled back in October.

Manufacturing drives the IP result and it shows the same general patterns as IP overall. Orders and real sector sales both improved, strengthening for two months in a row further cementing a positive signal.

Other manufacturing surveys also underscore the manufacturing revival. The Markit manufacturing PMI continues to show steady gain through October. However, we also know that in November same PMI will make a sharp pull back as a new round of covid-19-containing closures was set in motion in Germany and across Europe. Since the PMI data are a bit more timely, we know where this is headed next month despite the strong trends through October.

The ZEW current reading has a negative disposition, but it has been steadily improving. The IFO reading is also improving but improving more slowly. IFO manufacturing expectations were set back in October. Meanwhile, the EU Commission index for industry is climbing back to stronger readings.


<img border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/201207.png" width="660" height="470">


On balance, the various industrial indicators show the same picture, but that is only as far as things go this month. We are set for a setback in November and then we except another recovery since we are living in ‘real time' in December and we can see from this vantage point that some of the restrictions are being taken off and plans are in place to remove more in Germany as well as across Europe. The U.S. is behind Europe in this phase of the cycle with its infection rates still peaking.

We can't ever take any economic trend to the bank because the virus, if it emerges, trumps even the strongest trend. But what these various surveys all agree on is that when the Covid-19 restrictions are taken off the economy does rebound, and so far, it has rebounded strongly. With vaccines getting ready for deployment, this should be an encouraging finding even though it is no guarantee about how soon or how fast conditions can return to something that is more normal. The virus has done economic damage, but the global economy remains resilient.

</html>

Germany's industrial production gained 3.2% in October after a 2.3% rise in September to put together two strong months of results. Sequential growth rates show IP up at very strong rates of change over both three months and six [...]

German IP Continues to Snap Back

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&bull; Nonrevolving usage remains firm.
&bull; Credit card balances are reduced further.

Consumer credit outstanding increased $7.2 billion (0.2%
y/y) during October following a $15.0 billion September strengthening, revised from
$16.2 billion. A $16.5 billion increase had been expected by the Action Economics Forecast Survey.

Nonrevolving credit usage jumped $12.7 billion (4.0%
y/y), about the same as it did in September, revised from $12.2 billion. Federal
government borrowing, which issues over 40% of nonrevolving credit, grew 5.3%
y/y. Depository institution loans (29% of credit) grew a greatly lessened 2.4%
y/y, down from 6.8% y/y growth as of December. Finance company borrowing (16.0%
of loans) firmed 3.7% y/y and credit union loans (14.0% of the total) also increased 3.7% y/y.

Revolving consumer credit balances retreated $5.5 billion in
October after September's $2.6 billion increase, revised from $4.0
billion. It was the seventh decline in the last eight months, which included
double-digit balance pay-downs this spring. Credit provided
by depository institutions (90% of the total and mostly credit card debt),
dropped 10.5% y/y. Credit union borrowing fell 5.6% y/y and finance company loans
were off 25.8% y/y.

These Federal Reserve Board figures are break-adjusted and
calculated by Haver Analytics. The breaks in the series in 2005, 2010 and 2015
are the result of the incorporation of the Census and Survey of Finance
Companies, as well as changes in the seasonal adjustment methodology.

The consumer credit data are available in Haver's USECON
database. The Action Economics figures are contained in the AS1REPNA database.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th height="25" class="firstcol" scope="col" >&nbsp;Consumer
 Credit Outstanding (M/M Chg, SA)</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Oct y/y</th>
 <th scope="col" >2019</th>
 <th scope="col" >2018</th>
 <th scope="col" >2017</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total ($ bil)</td>
 <td>7.2</td>
 <td>15.0</td>
 <td>-8.6</td>
 <td>0.2%</td>
 <td>4.6%</td>
 <td>4.8%</td>
 <td>5.3%</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; &nbsp;Nonrevolving</td>
 <td>12.7</td>
 <td>12.4</td>
 <td>2.2</td>
 <td>4.0</td>
 <td>4.9</td>
 <td>5.2</td>
 <td>5.1</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; &nbsp;Revolving</td>
 <td>-5.5</td>
 <td>2.6</td>
 <td>-10.8</td>
 <td>-10.4</td>
 <td>3.8</td>
 <td>3.6</td>
 <td>6.0</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

• Nonrevolving usage remains firm. • Credit card balances are reduced further. Consumer credit outstanding increased $7.2 billion (0.2% y/y) during October following a $15.0 billion September strengthening, revised from $16.2 billion. [...]

U.S. Consumer Credit Increase Continues in October

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The National Association for Business Economics raised its
projection for real GDP growth in 2021 to 3.8% from 3.6%. This follows a record
recession this year, with GDP expected to contract 3.5%, versus the prior
forecast of a 4.3% decline. Quarterly growth is expected to average 3.4%
next year, revised from 3.6%, after quarterly declines averaging 3.8% this year,
revised from -3.9%. Personal consumption expenditures are forecast to improve
4.6% in 2021, revised from 4.1%, after falling 3.8% in 2020, revised from -4.6%.
Business fixed investment growth is expected to rise 3.7% next year, revised
from 2.4% and recover most of this year's 4.8% fall, revised from -6.0%.
Expected growth of 6.8% in residential investment next year, revised from 3.5%,
will follow 4.4% growth in 2020, revised from the 1.1% previously expected. Government
spending growth is expected to slow to 0.2%, earlier estimated to be 0.9%, and
then move down sharply from gains this year and in 2019. Deterioration in net
exports is forecast to continue next year at an increased rate. Slow recoveries
abroad are expected to limit U.S. export growth to 5.2% next year versus an 8.0%
rise in imports. In the current year, exports are now projected to decline an
unrevised 13.5%, while imports are forecasted to drop by 10.4%, revised from -12.3%.
The expected rate of inventory investment is expected to pick up next year after
a sharp rate of decumulation in 2020.

Housing starts are forecasted to rise next year to an average
1.41 million units, revised from 1.35 million, and add to this year's rise to an
unrevised 1.35 million. Expected light vehicle sales of 16.1 million units next
year was lifted from 15.8 million units, after falling to 14.5 million this
year, revised from 14.1 million. Sales should remain below the 2016 peak of 17.5
million. An average monthly gain in payroll employment of 387,000 next year
(earlier projected as 350,000) recovers from a little-changed 681,000 decline
this year. Expectations for the unemployment rate in 2021 place it at 6.3%,
revised from 6.8%, following 8.1% this year, revised from 8.4%.

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The Consumer Price Index is projected to rise 2.0% Q4/Q4 in
2021, revised from 1.9%, versus 1.2% this year, which was changed from 1.1%.
Price inflation next year, as measured by the PCE price index, is expected to
rise1.8%, revised from 1.9% Q4/Q4 from an estimated 1.2% this year, changed from
1.1%. The chain PCE price index excluding food &amp; energy should rise 1.8%
next year (Q4/Q4), revised from 1.6%, after increasing 1.5% this year, changed
from 1.2%. The cost of crude oil is expected to average a little-changed $46 per
barrel at the end of 2021, rising slightly versus a projected $41 at the end of 2020.

The forecasted 1.15% interest rate on a ten-year Treasury
note at yearend 2021 was increased from 1.1% and compares to 0.84% at the end of
2020, revised from 0.75%. The Federal funds rate is projected to be steady
around 0.125% until the end of next year. After-tax corporate profits should
rise 9.5% next year, revised from 8.5%, after a 9.8% decline in 2020, revised
from -11.0%. The expected Federal government budget deficit should surge to a
slightly reduced expectation of $3.132 trillion in FY20, then ease to $2.185
trillion next year, revised from $1.981.

The figures from the latest NABE report can be found in
Haver's SURVEYS database.

The Fed's latest Beige Book covering regional economic
conditions is available <a href="https://www.federalreserve.gov/monetarypolicy/files/BeigeBook_20201202.pdf">here</a>.

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<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" ><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">National
 Association For Business Economics</a></th>
 <th scope="col" >2021</th>
 <th scope="col" >2020</th>
 <th scope="col" >2019</th>
 <th scope="col" >2018</th>
 <th scope="col" >2017</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Real GDP (% Chg. SAAR)</td>
 <td>3.8</td>
 <td>-3.5</td>
 <td>2.2</td>
 <td>3.0</td>
 <td>2.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Personal Consumption
 Expenditures</td>
 <td>4.6</td>
 <td>-3.8</td>
 <td>2.4</td>
 <td>2.7</td>
 <td>2.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Business Fixed Investment</td>
 <td>3.7</td>
 <td>-4.8</td>
 <td>2.9</td>
 <td>6.9</td>
 <td>3.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Residential Investment</td>
 <td>6.8</td>
 <td>4.4</td>
 <td>-1.7</td>
 <td>-0.6</td>
 <td>4.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Gov't Consumption &amp; Gross
 Investment</td>
 <td>0.2</td>
 <td>1.2</td>
 <td>2.3</td>
 <td>1.8</td>
 <td>0.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Change in Real Business
 Inventories (Bil. $)</td>
 <td>54</td>
 <td>-83.0</td>
 <td>48.5</td>
 <td>53.4</td>
 <td>15.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Net Exports (Bil. $)</td>
 <td>-1,028</td>
 <td>-899.0</td>
 <td>-917.6</td>
 <td>-877.7</td>
 <td>-816.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Housing Starts (Mil. Units)</td>
 <td>1.41</td>
 <td>1.35</td>
 <td>1.29</td>
 <td>1.25</td>
 <td>1.20</td>
 </tr>
 <tr>
 <td class="firstcol" >Light Vehicle Sales (Mil. Units)</td>
 <td>16.1</td>
 <td>14.5</td>
 <td>17.0</td>
 <td>17.2</td>
 <td>17.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Payroll Employment Average Monthly
 Change (000s)</td>
 <td>387</td>
 <td>-681</td>
 <td>178</td>
 <td>193</td>
 <td>176</td>
 </tr>
 <tr>
 <td class="firstcol" >Civilian Unemployment Rate (%)</td>
 <td>6.3</td>
 <td>8.1</td>
 <td>3.7</td>
 <td>3.9</td>
 <td>4.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Consumer Price Index (Q4/Q4 %)</td>
 <td>2.0</td>
 <td>1.2</td>
 <td>2.0</td>
 <td>2.2</td>
 <td>2.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Chain Price Index for PCE (Q4/Q4 %)</td>
 <td>1.8</td>
 <td>1.2</td>
 <td>1.5</td>
 <td>2.0</td>
 <td>1.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Chain Price Index excl. Food &amp;
 Energy (Q4/Q4 %)</td>
 <td>1.8</td>
 <td>1.5</td>
 <td>1.6</td>
 <td>2.0</td>
 <td>1.7</td>
 </tr>
 <tr>
 <td class="firstcol" >Fed Funds Rate (%, Year-End)</td>
 <td>0.125</td>
 <td>0.125</td>
 <td>1.625</td>
 <td>2.375</td>
 <td>1.375</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >10-Year Treasury Note (%, Year-End)</td>
 <td>1.15</td>
 <td>0.84</td>
 <td>1.92</td>
 <td>2.69</td>
 <td>2.40</td>
 </tr>
 </tbody>
 </table>
 
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The National Association for Business Economics raised its
projection for real GDP growth in 2021 to 3.8% from 3.6%. This follows a record
recession this year, with GDP expected to contract 3.5%, versus the prior
forecast of a 4.3% decline. Quarterly growth is expected to average 3.4%
next year, revised from 3.6%, after quarterly declines averaging 3.8% this year,
revised from -3.9%. Personal consumption expenditures are forecast to improve
4.6% in 2021, revised from 4.1%, after falling 3.8% in 2020, revised from -4.6%.
Business fixed investment growth is expected to rise 3.7% next year, revised
from 2.4% and recover most of this year's 4.8% fall, revised from -6.0%.
Expected growth of 6.8% in residential investment next year, revised from 3.5%,
will follow 4.4% growth in 2020, revised from the 1.1% previously expected. Government
spending growth is expected to slow to 0.2%, earlier estimated to be 0.9%, and
then move down sharply from gains this year and in 2019. Deterioration in net
exports is forecast to continue next year at an increased rate. Slow recoveries
abroad are expected to limit U.S. export growth to 5.2% next year versus an 8.0%
rise in imports. In the current year, exports are now projected to decline an
unrevised 13.5%, while imports are forecasted to drop by 10.4%, revised from -12.3%.
The expected rate of inventory investment is expected to pick up next year after
a sharp rate of decumulation in 2020.
Housing starts are forecasted to rise next year to an average
1.41 million units, revised from 1.35 million, and add to this year's rise to an
unrevised 1.35 million. Expected light vehicle sales of 16.1 million units next
year was lifted from 15.8 million units, after falling to 14.5 million this
year, revised from 14.1 million. Sales should remain below the 2016 peak of 17.5
million. An average monthly gain in payroll employment of 387,000 next year
(earlier projected as 350,000) recovers from a little-changed 681,000 decline
this year. Expectations for the unemployment rate in 2021 place it at 6.3%,
revised from 6.8%, following 8.1% this year, revised from 8.4%.
The Consumer Price Index is projected to rise 2.0% Q4/Q4 in
2021, revised from 1.9%, versus 1.2% this year, which was changed from 1.1%.
Price inflation next year, as measured by the PCE price index, is expected to
rise1.8%, revised from 1.9% Q4/Q4 from an estimated 1.2% this year, changed from
1.1%. The chain PCE price index excluding food &amp; energy should rise 1.8%
next year (Q4/Q4), revised from 1.6%, after increasing 1.5% this year, changed
from 1.2%. The cost of crude oil is expected to average a little-changed $46 per
barrel at the end of 2021, rising slightly versus a projected $41 at the end of
2020.
The forecasted 1.15% interest rate on a ten-year Treasury
note at yearend 2021 was increased from 1.1% and compares to 0.84% at the end of
2020, revised from 0.75%. The Federal funds rate is projected to be steady
around 0.125% until the end of next year. After-tax corporate profits should
rise 9.5% next year, revised from 8.5%, after a 9.8% decline in 2020, revised
from -11.0%. The expected Federal government budget deficit should surge to a
slightly reduced expectation of $3.132 trillion in FY20, then ease to $2.185
trillion next year, revised from $1.981.
The figures from the latest NABE report can be found in
Haver's SURVEYS database.
The Fed's latest Beige Book covering regional economic
conditions is available here <a href="https://www.federalreserve.gov/monetarypolicy/files/BeigeBook_20201202.pdf">https://www.federalreserve.gov/monetarypolicy/files/BeigeBook_20201202.pdf</a>
&nbsp;
<table width="1871" class="centered" border="0" cellSpacing="0">
 <colgroup>
 <col>
 <col>
 <col>
 <col>
 <col>
 <col>
 <col>
 <col>
 </colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="1127"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">National
 Association For Business Economics</a></th>
 <th scope="col" width="148">2021</th>
 <th scope="col" width="148">2020</th>
 <th scope="col" width="148">2019</th>
 <th scope="col" width="148">2018</th>
 <th scope="col" width="148">2017</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="1127">Real GDP (% Chg. SAAR)</td>
 <td width="148" align="center">3.8</td>
 <td width="148" align="center">-3.5</td>
 <td width="148" align="center">2.2</td>
 <td width="148" align="center">3.0</td>
 <td width="148" align="center">2.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1127">&nbsp;&nbsp;Personal Consumption
 Expenditures</td>
 <td width="148" align="center">4.6</td>
 <td width="148" align="center">-3.8</td>
 <td width="148" align="center">2.4</td>
 <td width="148" align="center">2.7</td>
 <td width="148" align="center">2.6</td>
 </tr>
 <tr>
 <td class="firstcol" width="1127">&nbsp; Business Fixed Investment</td>
 <td width="148" align="center">3.7</td>
 <td width="148" align="center">-4.8</td>
 <td width="148" align="center">2.9</td>
 <td width="148" align="center">6.9</td>
 <td width="148" align="center">3.7</td>
 </tr>
 <tr>
 <td class="firstcol" width="1127">&nbsp;&nbsp;Residential Investment</td>
 <td width="148" align="center">6.8</td>
 <td width="148" align="center">4.4</td>
 <td width="148" align="center">-1.7</td>
 <td width="148" align="center">-0.6</td>
 <td width="148" align="center">4.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1127">&nbsp; Gov't Consumption &amp; Gross
 Investment</td>
 <td width="148" align="center">0.2</td>
 <td width="148" align="center">1.2</td>
 <td width="148" align="center">2.3</td>
 <td width="148" align="center">1.8</td>
 <td width="148" align="center">0.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1127">&nbsp;&nbsp;Change in Real Business
 Inventories (Bil. $)</td>
 <td width="148" align="center">54</td>
 <td width="148" align="center">-83.0</td>
 <td width="148" align="center">48.5</td>
 <td width="148" align="center">53.4</td>
 <td width="148" align="center">15.8</td>
 </tr>
 <tr>
 <td class="firstcol" width="1127">&nbsp;&nbsp;Net Exports (Bil. $)</td>
 <td width="148" align="center">-1,028</td>
 <td width="148" align="center">-899.0</td>
 <td width="148" align="center">-917.6</td>
 <td width="148" align="center">-877.7</td>
 <td width="148" align="center">-816.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1127">Housing Starts (Mil. Units)</td>
 <td width="148" align="center">1.41</td>
 <td width="148" align="center">1.35</td>
 <td width="148" align="center">1.29</td>
 <td width="148" align="center">1.25</td>
 <td width="148" align="center">1.20</td>
 </tr>
 <tr>
 <td class="firstcol" width="1127">Light Vehicle Sales (Mil. Units)</td>
 <td width="148" align="center">16.1</td>
 <td width="148" align="center">14.5</td>
 <td width="148" align="center">17.0</td>
 <td width="148" align="center">17.2</td>
 <td width="148" align="center">17.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1127">Payroll Employment Average Monthly
 Change (000s)</td>
 <td width="148" align="center">387</td>
 <td width="148" align="center">-681</td>
 <td width="148" align="center">178</td>
 <td width="148" align="center">193</td>
 <td width="148" align="center">176</td>
 </tr>
 <tr>
 <td class="firstcol" width="1127">Civilian Unemployment Rate (%)</td>
 <td width="148" align="center">6.3</td>
 <td width="148" align="center">8.1</td>
 <td width="148" align="center">3.7</td>
 <td width="148" align="center">3.9</td>
 <td width="148" align="center">4.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1127">Consumer Price Index (Q4/Q4 %)</td>
 <td width="148" align="center">2.0</td>
 <td width="148" align="center">1.2</td>
 <td width="148" align="center">2.0</td>
 <td width="148" align="center">2.2</td>
 <td width="148" align="center">2.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1127">Chain Price Index for PCE (Q4/Q4 %)</td>
 <td width="148" align="center">1.8</td>
 <td width="148" align="center">1.2</td>
 <td width="148" align="center">1.5</td>
 <td width="148" align="center">2.0</td>
 <td width="148" align="center">1.8</td>
 </tr>
 <tr>
 <td class="firstcol" width="1127">&nbsp;Chain Price Index excl. Food &amp;
 Energy (Q4/Q4 %)</td>
 <td width="148" align="center">1.8</td>
 <td width="148" align="center">1.5</td>
 <td width="148" align="center">1.6</td>
 <td width="148" align="center">2.0</td>
 <td width="148" align="center">1.7</td>
 </tr>
 <tr>
 <td class="firstcol" width="1127">Fed Funds Rate (%, Year-End)</td>
 <td width="148" align="center">0.125</td>
 <td width="148" align="center">0.125</td>
 <td width="148" align="center">1.625</td>
 <td width="148" align="center">2.375</td>
 <td width="148" align="center">1.375</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1127">10-Year Treasury Note (%, Year-End)</td>
 <td width="148" align="center">1.15</td>
 <td width="148" align="center">0.84</td>
 <td width="148" align="center">1.92</td>
 <td width="148" align="center">2.69</td>
 <td width="148" align="center">2.40</td>
 </tr>
 </tbody>
</table>

&nbsp;
U.S. Consumer Credit Increase Continues in October 
by <a href="http://www.haver.com/comment/Moeller.html">Tom
Moeller</a>&nbsp;&nbsp;December 7, 2020
• Nonrevolving usage remains firm.
• Credit card balances are reduced further.
Consumer credit outstanding increased $7.2 billion (0.2%
y/y) during October following a $15.0 billion September strengthening, revised from
$16.2
billion. A $16.5 billion increase had been expected by the Action Economics
Forecast Survey.
Nonrevolving credit usage jumped $12.7 billion (4.0%
y/y), about the same as it did in September, revised from $12.2 billion. Federal
government borrowing, which issues over 40% of nonrevolving credit, grew 5.3%
y/y. Depository institution loans (29% of credit) grew a greatly lessened 2.4%
y/y, down from 6.8% y/y growth as of December. Finance company borrowing (16.0%
of loans) firmed 3.7% y/y and credit union loans (14.0% of the total) also
increased 3.7% y/y.
Revolving consumer credit balances retreated $5.5 billion in
October after September's $2.6 billion increase, revised from $4.0
billion. It was the seventh decline in the last eight months, which included
double-digit balance pay-downs this spring. Credit provided
by depository institutions (90% of the total and mostly credit card debt),
dropped 10.5% y/y. Credit union borrowing fell 5.6% y/y and finance company loans
were off 25.8% y/y.
These Federal Reserve Board figures are break-adjusted and
calculated by Haver Analytics. The breaks in the series in 2005, 2010 and 2015
are the result of the incorporation of the Census and Survey of Finance
Companies, as well as changes in the seasonal adjustment methodology.
The consumer credit data are available in Haver's USECON
database. The Action Economics figures are contained in the AS1REPNA
database.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th height="25" class="firstcol" scope="col" width="1034">&nbsp;Consumer
 Credit Outstanding (M/M Chg, SA)</th>
 <th scope="col" width="119">Oct</th>
 <th scope="col" width="119">Sep</th>
 <th scope="col" width="119">Aug</th>
 <th scope="col" width="119">Oct y/y</th>
 <th scope="col" width="119">2019</th>
 <th scope="col" width="119">2018</th>
 <th scope="col" width="119">2017</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="1034">Total ($ bil)</td>
 <td width="119" align="center">7.2</td>
 <td width="119" align="center">15.0</td>
 <td width="119" align="center">-8.6</td>
 <td width="119" align="center">0.2%</td>
 <td width="119" align="center">4.6%</td>
 <td width="119" align="center">4.8%</td>
 <td width="119" align="center">5.3%</td>
 </tr>
 <tr>
 <td class="firstcol" width="1034">&nbsp; &nbsp;Nonrevolving</td>
 <td width="119" align="center">12.7</td>
 <td width="119" align="center">12.4</td>
 <td width="119" align="center">2.2</td>
 <td width="119" align="center">4.0</td>
 <td width="119" align="center">4.9</td>
 <td width="119" align="center">5.2</td>
 <td width="119" align="center">5.1</td>
 </tr>
 <tr>
 <td class="firstcol" width="1034">&nbsp; &nbsp;Revolving</td>
 <td width="119" align="center">-5.5</td>
 <td width="119" align="center">2.6</td>
 <td width="119" align="center">-10.8</td>
 <td width="119" align="center">-10.4</td>
 <td width="119" align="center">3.8</td>
 <td width="119" align="center">3.6</td>
 <td width="119" align="center">6.0</td>
 </tr>
 </tbody>
</table>


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&bull; Job gains held back as coronavirus spreads.
&bull; Earnings growth picks up.
&bull; Jobless rate declines to eight-month low.

The rate of labor market improvement has slowed following an
initial bounce-back from recession declines. Nonfarm payroll employment
increased 245,000 during November (-6.0% y/y) after rising 610,000 in October,
revised from 638,000, and 711,000 in September, revised from 672,000. August's
gain of 1.493 million was unchanged. This was the weakest of seven consecutive
months of job gains. A 490,000 employment increase had been expected in the
Action Economics Forecast Survey. The estimates amongst 25 forecasters had
ranged from 320,000 to 700,000.

Average hourly earnings increased 0.3% (4.4% y/y) last month
following two months of 0.1% improvement. It was the largest increase in three
months. No change in earnings had been expected.

The unemployment rate fell to 6.7% during November from
October's 6.9%. A decline to 6.8% had been expected. Employment in the household
survey fell 74,000 (-5.6% y/y) after increasing 2.243 million in October while
the labor force declined 400,000 (-2.4% y/y) after rising 724,000 in October.
The overall jobless rate, including those who were marginally attached or
working part-time for economic reasons, slipped to 12.0% from 12.1%, its lowest
point since March.

From the payroll survey, the 245,000 increase in jobs
reflected a 27,000 rise in factory sector employment, which followed a 33,000
increase in October. It was the smallest rise since May. Construction sector
employment also rose 27,000, the smallest increase in three months. Mining
&amp; logging sector employment edged 1,000 higher (-13.9% y/y).

In the private service sector, employment rose a weakened 289,000
as the number of trade, transportation and utilities jobs rose a lessened 121,000
(-3.3% y/y) reflecting a 34,700 decline (-3.7% y/y) in retail trade employment.
Leisure &amp; hospitality jobs increased just 31,000 (-19.8% y/y) following four
months of triple digit increases. Professional &amp; business services employment
gained 60,000 (-4.7% y/y), the weakest rise of the last seven months. Hiring of
temporary workers slackened to 32,200 (-9.8% y/y) from 123,000 in October.
Education &amp; health care services employment improved 54,000 (-4.4% y/y)
after rising 337,000. Financial services employment improved 15,000 (-0.8% y/y)
last month, half that in October.

Government sector employment declined 99,000, the third
consecutive monthly drop. Federal government employment fell 86,000 (+1.7% y/y)
in November and 142,000 in October with the exit of&nbsp; 241,000 Census workers
over the two months. State government employment held steady (-6.3%
y/y) following two straight 67,000 declines. Local government employment fell 13,000
(-6.2% y/y), the smallest of three consecutive declines.

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The 0.3% increase in average hourly earnings reflected a 0.4%
rise (3.3% y/y) in factory pay which followed two months of decline.
Construction sector pay rose 0.3% (2.7% y/y), the largest increase since July. A
0.3% increase (4.7% y/y) in private service sector earnings was led by a 0.6%
increase (6.9% y/y) in financial services pay which came after October's 1.2%
jump. Education &amp; health services earnings gained 0.5% (3.1% y/y) while
professional &amp; business services earnings improved 0.2% (3.4% y/y). Trade,
transportation &amp; utilities earnings improved 0.2% (3.9% y/y) but retail
earnings held steady (5.4% y/y). Leisure &amp; hospitality earnings slipped 0.1%
(+1.7% y/y) following two straight 0.2% increases.

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Hours-worked in the private sector held steady at 34.8 for
the third straight month. Mining &amp; logging sector hours improved to 44.5,
but they still were down from last year's average of 46.2. Construction sector hours
rose m/m to 38.9, the highest in six months. Factory sector hours eased to 40.3
but remained up from 38.0 in April. Overtime factory hours eased to 3.1, but
remained above April's 2.1 low.

Private service sector hours eased to
33.7, down from the 33.8 record high reached in May. (The series dates back to
2006.) Financial sector hours held at 37.8 and matched their record in October
2018. Information sector hours held at an elevated 36.8, while professional
&amp; business service hours were steady at the record 36.6. Education &amp;
health hours also held at the record 33.5 but leisure &amp; hospitality eased to
a still high 25.8.

From the household survey, the decline in the
unemployment rate to 6.7% during November occurred as the labor force
participation rate eased m/m to 61.5%. It remained down from 63.4% in February.
The teenage participation rate eased slightly to 35.9%. For those aged 20-24, it
slipped to 70.8%, but still as higher than April's low of 64.5%. For workers
aged 25-54, the rate eased to 80.9% and remained down from the January high of
83.1%. For men aged 25-54, the rate fell to 87.4% and remained down from the
89.3% high sustained nine months earlier. For women of that age, the rate fell
minimally to 74.5% and remained well below its February record high of 77.0%.
For workers aged 55 &amp; over, the participation rate held at 38.7%.

The employment/population ratio for all workers eased m/m to
57.3% in November but remained up from April's low of 51.3%, though sharply
lower than January's high of 61.2%. The average duration of unemployment rose to
23.2 weeks, up from 6.1 weeks in April.

The teenage unemployment rate edged higher to 14.0% from 13.9%
and remained below the record 31.9% in April. The rate for workers aged 20-24
fell to 10.5%, down from the April record of 25.7%. For workers aged 25-54, the
rate declined m/m to 6.0%, down from the 12.8% April high. For those over 55,
the jobless rate rose to 5.8% but was below the record 13.6% in April.

By educational attainment, the rate of unemployment of
workers without a high school diploma fell sharply to 9.0%, down from 21.2% in
April. High school graduates without any college were 7.7% unemployed last
month, down from April's high of 17.3% but higher than the 3.6% in February. Those
with some college but no degree were 6.3% unemployed, down sharply from the
15.0% April peak but still up from last December's near-record low of 2.7%.
College graduates experienced a steady 4.2% unemployment rate in November, still
significantly higher than its 1.9% low in February.

The employment &amp; earnings data are collected from surveys
taken each month during the week containing the 12th 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.

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<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" >Employment (SA, M/M Change,
 000s)</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Nov Y/Y</th>
 <th scope="col" >2019</th>
 <th scope="col" >2018</th>
 <th scope="col" >2017</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Payroll Employment</td>
 <td>245</td>
 <td>610</td>
 <td>711</td>
 <td>-6.0%</td>
 <td>1.4%</td>
 <td>1.6%</td>
 <td>1.6%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Previous Estimate</td>
 <td>--</td>
 <td>638</td>
 <td>672</td>
 <td>--</td>
 <td>--</td>
 <td>--</td>
 <td>--</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Manufacturing</td>
 <td>27</td>
 <td>33</td>
 <td>60</td>
 <td>-4.8</td>
 <td>1.2</td>
 <td>2.0</td>
 <td>0.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Construction</td>
 <td>27</td>
 <td>72</td>
 <td>35</td>
 <td>-2.4</td>
 <td>2.8</td>
 <td>4.6</td>
 <td>3.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Private Service-Producing</td>
 <td>289</td>
 <td>770</td>
 <td>833</td>
 <td>-6.5</td>
 <td>1.5</td>
 <td>1.5</td>
 <td>1.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Government</td>
 <td>-99</td>
 <td>-267</td>
 <td>-219</td>
 <td>-5.3</td>
 <td>0.6</td>
 <td>0.5</td>
 <td>0.4</td>
 </tr>
 <tr>
 <td class="firstcol" >Average Weekly Hours - Private Sector</td>
 <td>34.8</td>
 <td>34.8</td>
 <td>34.8</td>
 <td>34.3</td>
 <td>34.4</td>
 <td>34.5</td>
 <td>34.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Private Sector Average Hourly Earnings
 (%)</td>
 <td>0.3</td>
 <td>0.1</td>
 <td>0.1</td>
 <td>4.4</td>
 <td>3.3</td>
 <td>3.0</td>
 <td>2.6</td>
 </tr>
 <tr>
 <td class="firstcol" >Unemployment Rate (%)</td>
 <td>6.7</td>
 <td>6.9</td>
 <td>7.9</td>
 <td>3.5</td>
 <td>3.7</td>
 <td>3.9</td>
 <td>4.3</td>
 </tr>
 </tbody>
 </table>
 
 </body></html>

• Job gains held back as coronavirus spreads. • Earnings growth picks up. • Jobless rate declines to eight-month low. The rate of labor market improvement has slowed following an initial bounce-back from recession declines. Nonfarm [...]

U.S. Payroll Growth Slows Broadly

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

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Tian Yong Woon

In this week’s Letter, we continue to track developments in the Middle East and their implications for Asia. While the recent US–Iran ceasefire initially provided some relief to markets, subsequent complications have kept uncertainty elevated, with no conclusive resumption of trade flows yet through the Strait of Hormuz (chart 1)—flows that are critical to restoring the global energy system to more normal conditions.

Overall, our Blue Chip Economic Indicators panellists have broadly downgraded growth expectations for Asia this year, with the exceptions of China and Taiwan, while inflation forecasts have been revised higher across the board (chart 2). That said, the growth and inflation impact from the conflict are largely viewed as transitory, with most panellists expecting them to last between six and twelve months (chart 3). Nonetheless, central banks in the region appear increasingly reluctant to ease policy further. This is evident in the latest round of decisions, where India, South Korea, and New Zealand all held policy rates steady (chart 4), citing heightened uncertainty stemming from the ongoing conflict.

While inflationary pressures are beginning to build more broadly across the region, China had already been experiencing a pickup in recent months (chart 5). This has been supported by easing producer price deflation and improving industrial profits, alongside policy efforts to curb excessive price competition among producers. Attention now turns to China’s upcoming Q1 GDP release and the full slate of monthly data due later this week (chart 6).

**Middle east conflict developments**
Crude oil prices fell sharply earlier last week following news of a temporary US–Iran ceasefire. That said, the geopolitical backdrop remains highly fragile, as reflected in continued rhetoric from both sides, alongside the US announcement of a naval blockade over the strait after talks failed to yield an agreement. Compounding this, Iran has indicated that it cannot fully reopen the strait, citing uncertainty over the location of sea mines it had previously laid—further complicating any swift normalization of oil flows. Even prior to these latest developments, IMF-tracked shipping volumes had only begun to show tentative signs of recovery and remain well below pre-escalation levels. As such, while the ceasefire provides a welcome reprieve, meaningful economic relief will hinge on a sustained restoration of oil flows—crucially without additional frictions or costs that could impair global trade. Until then, crude prices are likely to remain elevated, albeit possibly off recent highs, weighing on growth while sustaining inflationary pressures. In Asia, where many economies are heavily reliant on oil imports, the region is likely to bear a disproportionate share of these effects.

260413T1.jpg

**The latest Blue Chip Economic Indicators survey**
In light of recent developments, our latest Blue Chip Economic Indicators (BCEI) survey provides a timely update. It is a monthly poll of forecasters covering key economic indicators across a wide range of economies. As shown in chart 2, panellists have generally trimmed their 2026 growth forecasts across most Asian economies. Taiwan is a notable exception, with growth expectations revised higher, likely continuing to be supported by the ongoing AI-driven expansion. Meanwhile, forecasts for China’s 2026 growth were left unchanged. On the inflation front, expectations for 2026 have been revised higher across all Asian economies, consistent with the pass-through from the recent surge in oil prices. The largest upward revision was seen in Australia (+0.7 ppts), while increases were more modest in economies such as Japan and China (+0.3 ppts each).

260413T2.jpg

Digging deeper into this month’s BCEI survey, the special questions provide additional insight into panellists’ views. In particular, one question asked about the time horizon over which current energy supply chain disruptions are expected to materially affect global inflation and growth. Panellists largely view the impact as short term (chart 3), with most clustering around a six- to twelve-month window. Smaller shares see effects lasting either less than six months or extending between one and three years, while only a very small minority expect disruptions to persist beyond three years. Overall, while the recent oil price surge represents a clear shock to the global economy, it is widely seen as transitory—temporarily lifting inflation and weighing modestly on growth, but unlikely to drive a fundamental shift in the broader macroeconomic outlook.

260413T3.jpg

**The week’s central bank decisions**
Turning to last week’s key monetary policy decisions in the region, the central banks of India (RBI), South Korea (BoK), and New Zealand (RBNZ) all kept policy rates unchanged, with several common threads across their communications. Notably, each highlighted the considerable uncertainty stemming from the Middle East conflict, which has already begun to feed into global inflation via higher oil prices. This aligns with broader investor sentiment: the bar for further policy easing has risen given renewed inflationary pressures, while the threshold for a shift toward tightening remains high, as most economies are still far from overheating. On central bank–specific nuances, the RBI emphasized the delicate trade-off between anchoring inflation expectations and minimizing growth sacrifices. The BoK noted that its policy rate is around the neutral level, while flagging potential additional pressure on the won from elevated oil prices. Meanwhile, the RBNZ signalled that near-term inflation is likely to rise even as the economic recovery softens, citing significant supply chain disruptions linked to the Middle East conflict.

260413T4.jpg

**China and the week ahead**
Lastly, we turn to China and the week ahead. As shown in chart 5, even prior to the Middle East conflict, China had already begun to see a pickup in inflation—an early indication that it may be moving out of its prolonged period of chronically low, or even negative, price pressures. This recent firming in CPI inflation has been accompanied by more sustained growth in industrial profits and a steady improvement in producer price pressures, with PPI inflation recently turning positive after a multi-year stretch of deflation. Together, these trends point to gradually strengthening price dynamics. The shift in inflation also reflects underlying policy efforts to curb excessive price competition among producers, which had weighed on prices for an extended period. Looking ahead, the recent oil price shock could provide an additional boost to inflation, as higher energy costs begin to feed through into future readings.

260413T5.jpg

Looking ahead to the coming week, Asia faces a packed data calendar, with the spotlight firmly on China as its Q1 GDP release and the usual slate of monthly indicators are due (chart 6). A key focus will be how March data shapes overall Q1 growth, particularly given that activity in the first two months of the year largely surprised to the upside. Investors will also be watching for any early signs of spillovers from the Middle East conflict in the March prints. Retail sales will be closely monitored as a gauge of the effectiveness of policy support for consumption, while developments in house prices will remain in focus as the property downturn continues to unfold gradually.

260413T6.jpg

Asia

Economic Letter from Asia: A Shifting Consensus

Michael J. Moran

260410L.jpg

260410M.jpg

The Consumer Price Index rose 0.9% in March, easily the sharpest monthly rise since the inflation burst in 2022. Although pronounced in magnitude, the increase was not surprising, as essentially all analysts had built in pressure from the energy sector. Energy prices jumped 10.9%, led by a surge of 21.2% in gasoline prices. Other energy components wiggled: charges for electricity services rose 0.8%, offsetting declines in the prior two months; a drop 0.9% in the price of natural gas services followed sharp increases in the prior three months.

The press report from the Bureau of Labor Statistics showed food prices as unchanged, but calculating the shift to more than one decimal point showed a marginal decline (-0.005%) The dip was almost imperceptible, but it nevertheless was a welcome rarity. The decline occurred in the food-at-home component (i.e. grocery store prices, -0.2%); prices of food away from home (i.e. at restaurants and bars) rose 0.2%.

Core prices rose 0.2 percent, softer than the expected increase of 0.3%. Only two areas posted high-side readings. Apparel prices increased 1.0% after a jump of 1.3% in February, perhaps reflecting hope for an active spring selling season. Airfares jumped 2.7%, hardly surprising in light of recent energy developments. Sharper increases are likely in coming months because of higher fuel prices. Most other core items were contained, including declines of 1.0% in medical-care commodities and 0.4% in the prices of used motor vehicles. Prices of medical-care commodities have been quiet since the middle of 2024; the latest year-over-year change totaled only 0.3%. Prices of used cars and trucks have declined for four consecutive months, leaving a year-over-year decline of 3.2%.

Although core prices were well contained in March, the outlook is uncertain because of potential passthrough from higher energy prices. At the same time, recent trends in the inflation rates for core goods and core services offer a reason to be optimistic, as both are decelerating. As shown in the left chart below, core goods prices in the past six months have been subdued, which has pulled the year-over-year change from 1.5% last fall (August to October) to 1.2% in March. Core service prices, shown in the right chart below, have registered changes of 0.3% or 0.4% in the three months before the 0.2% reading in March. However, results for October and November were restrained, and changes in the past six months in total show deceleration. The year-over-year change of 3.0% in core service prices in March reflects an advance of 3.3% in the first six months of this span (annual rate) and 2.7% in the past six months. The pattern is choppy, but it traces a decelerating trend.

The Consumer Price figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

260410N.jpg

260410O.jpg

- Gasoline prices drove the energy component higher; electricity prices also contributed.
- Food prices provided a surprise by posting a fractional decline.
- Core prices rose less than expected; both goods and services components were contained.

March CPI: Pressure in the Energy Sector (as Expected); Tame Elsewhere (Surprisingly)

Winnie Tapasanun

260410F.jpg

260410G.jpg

Total factory orders were virtually unchanged m/m in February following a flat reading in January and a 0.4% decline in December, data from the U.S. Census Bureau showed. The Action Economics Forecast Survey had expected a 0.2% m/m February increase. The year-on-year growth rate eased to 3.7% in February, the lowest since October, from 4.2% in January (+3.0% in February 2025), remaining far below the April 2021 peak of 39.6%. Notably, orders for nondefense aircraft & parts plunged 28.6% m/m in February following decreases of 1.7% in January and 22.7% in December, while orders for defense aircraft & parts fell 2.1% after a 26.9% January slump and an 11.8% December jump. Factory orders excluding defense edged up 0.1% (3.6% y/y), the third m/m increase in four months, following a 0.4% January rebound. Factory orders excluding the transportation sector rose 1.2% (2.5% y/y), the strongest of four consecutive m/m gains, after a 0.5% January increase.

Durable goods orders fell 1.3% (+7.4% y/y) in February after a 0.4% decline in January (in line with a 1.4% m/m decrease in the advance report on April 7), marking the fourth m/m decline in five months. The February m/m fall reflected a 5.3% orders drop (+10.2% y/y) in transportation equipment following a 1.9% January decrease, alongside m/m declines of 0.5% (+2.4% y/y) in furniture & related products and 0.3% (+4.9% y/y) in electrical equipment, appliances & components. Other major durable goods orders categories rose m/m in February, led by a 2.4% gain (10.5% y/y) in primary metals, followed by increases of 1.7% (9.5% y/y) in machinery, 0.5% (5.4% y/y) in fabricated metal products, and 0.2% (7.7% y/y) in computers & electronic products.

Nondurable goods orders, which equal nondurable goods shipments, advanced 1.5% (0.1% y/y) in February, the biggest of three successive m/m gains, after a 0.5% increase in January. The February m/m rise was led by a 6.2% jump (-6.4% y/y) in petroleum & coal products, followed by gains of 5.9% (-5.8% y/y) leather & allied products, 1.2% (-2.8% y/y) in textile mills, 1.0% (1.6% y/y) in paper products, 0.9% (1.2% y/y) in plastics & rubber products, 0.6% (3.7% y/y) in beverage & tobacco products, 0.5% (3.2% y/y) in chemical products, 0.4% (3.2% y/y) in apparel, and 0.2% (0.5% y/y) in food products. To the downside, nondurable goods shipments for textile products (-1.4%; -1.5% y/y) and printing (-0.4%; -0.9% y/y) fell m/m in February following their January increases.

Total shipments rose 1.4% (3.5% y/y) in February after gains of 0.7% in January and December, registering the fourth m/m rise in five months. Excluding transportation, shipments advanced 1.4% (2.3% y/y), the fifth m/m gain in six months, after a 0.5% January increase. Shipments of durable goods industries also rose 1.4% (6.9% y/y), up for the fifth time in six months, after a 0.9% January gain. This reflected m/m increases across nearly all durable goods shipments categories, led by a 2.5% rise (10.1% y/y) in primary metals, followed by gains of 1.7% (5.5% y/y) in electrical equipment, appliances & components, 1.7% (4.0% y/y) in furniture & related products, 1.6% (9.7% y/y) in transportation equipment, 1.4% (7.6% y/y) in machinery, 1.3% (3.8% y/y) in nonmetallic mineral products, 1.0% (6.1% y/y) in computers & electronic products, 1.0% (2.5% y/y) in miscellaneous durable goods, and 0.9% (5.4% y/y) in fabricated metal products. In contrast, durable goods shipments for wood products were the only category with a monthly decline in February, easing 0.1% (-2.9% y/y) following a flat January reading.

Unfilled orders edged up 0.1% (11.1% y/y) in February, the smallest of seven consecutive m/m increases, following a 0.6% rise in January. Excluding transportation, unfilled orders grew 0.2% (1.9% y/y), up for the seventh straight month, after a 0.3% January increase. Backlogs of durable goods ticked up 0.1% (11.1% y/y) in February, led by gains of 0.5% (2.0% y/y) in machinery and 0.2% (4.9% y/y) in electrical equipment, appliances & components, partially offset by declines of 0.7% (+1.5% y/y) in furniture & related products and 0.1% (+2.3% y/y) in primary metals.

Inventories inched up 0.1% (0.8% y/y) in February, the fourth successive m/m increase, following matching 0.1% gains in January and December. Excluding transportation, inventories edged up 0.1% (1.0% y/y) after no change in January. Durable goods inventories increased 0.1% (1.8% y/y) in February after rising 0.2% for four straight months, while nondurable goods inventories were virtually unchanged (-0.8% y/y) after declining 0.3% in January and December.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Factory orders virtually unchanged (+3.7% y/y) in Feb. for second straight month; still 7.6% above the Jan. ’24 low.
- Durable goods orders (-1.3%), fourth m/m fall in five mths.; nondurable goods orders (+1.5%), largest of three successive m/m gains; shipments (+1.4%), fourth m/m rise in five mths.
- Transportation orders -5.3% m/m, led by a 28.6% plunge in nondefense aircraft orders.
- Unfilled orders +0.1%, smallest of seven straight m/m increases.
- Inventories +0.1%, holding within a narrow 0.1%-0.2% range for four consecutive mths.

U.S. Factory Orders Flat in February on Weak Nondefense Aircraft Orders

Andrew Cates

**Positive Growth Surprises, Negative Inflation Surprises—For Now**
The global macro backdrop heading into the latest Middle East shock was, by recent standards, relatively constructive. As the chart shows, growth data had been consistently surprising to the upside, while inflation surprises have been in negative territory—an unusually benign combination suggesting resilient activity alongside easing price pressures. What is striking, however, is that—at least through March and into early April—this pattern has not yet been meaningfully dislodged. For now, the data flow still reflects a world that was stabilising rather than deteriorating. That said, this is almost certainly a lagging signal. Supply-side shocks of this nature—particularly those centred on energy—tend to work with a delay but can be highly disruptive once they feed through. The risk, therefore, is that the current “goldilocks” surprise dynamic proves short-lived as higher energy costs, supply chain frictions and rising uncertainty begin to reshape the incoming data in the weeks ahead.

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**Monetary Policy Expectations Shift as Easing Bets Are Repriced**
How policymakers respond to the evolving situation in the Middle East will be critical in shaping both market dynamics and the broader global outlook. This chart, based on the latest April Blue Chip Financial Forecasts survey, suggests that expectations are already beginning to shift. Forecasters are now less inclined to anticipate policy easing in the period ahead—particularly in the euro area, where expectations for rate cuts have been scaled back. Similarly, some of the easing previously priced for the Federal Reserve and the Bank of England has been pared back over the next 12 months. While this is not yet a full pivot toward tightening, it does point to a more cautious policy backdrop, reflecting the risk that renewed energy-driven inflation pressures could constrain central banks’ ability to support growth.

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**Delay, Don’t Tighten: Central Banks’ Likely Playbook**
If the previous chart highlights a shift in policy expectations, this one gives a clearer sense of the reaction function underpinning it. When asked how central banks would respond if energy-driven inflation proves more persistent, most panellists point not to renewed tightening, but to a more cautious delay in easing. In other words, the hurdle for rate cuts has risen, even if the bar for  hikes remains relatively high. This distinction matters. It suggests that policymakers are likely to treat the shock as a supply-driven inflation impulse—one that complicates the outlook but does not automatically warrant aggressive tightening. At the same time, the responses underscore a second important theme: divergence. A sizeable share of forecasters expect policy paths to vary significantly across regions, reflecting differences in energy exposure, inflation dynamics and domestic growth conditions. Taken together, the message is one of constrained flexibility. Central banks may want to support growth, but persistent energy pressures could keep them on hold for longer than previously anticipated—reinforcing the more cautious policy outlook already evident in market pricing.

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**Markets Signal Fiscal Concern, Not Inflation Panic**
If central banks are likely to proceed cautiously, financial markets are already beginning to draw their own conclusions. This chart shows that the recent adjustment in US Treasury markets has been driven primarily by a rise in real yields rather than a meaningful increase in inflation expectations. In other words, markets are not yet pricing a loss of monetary policy credibility or a sharp unanchoring of inflation expectations. Instead, the move points more toward concerns around the broader policy mix—particularly the fiscal backdrop and the potential for increased borrowing needs in an environment of heightened geopolitical risk. This distinction is important. A rise in inflation expectations would suggest fears of central banks falling behind the curve. What we are seeing instead is a repricing of real rates, consistent with tighter financial conditions and a higher risk premium. For now, at least, markets appear to view the shock less as a classic inflation spiral and more as a development that complicates the growth outlook and places greater strain on policy frameworks—especially on the fiscal side.

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**Electricity Prices Reflect Energy Dependence**
The initial response in electricity markets since the Middle East disruption has followed a familiar pattern. Economies with greater domestic energy capacity—such as Scandinavia and, to a lesser extent, the US—have seen relatively contained electricity prices. By contrast, those more reliant on imported energy—most notably the UK and parts of Europe—continue to face significantly higher costs

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**Generation Capacity Determines Energy Resilience**
These price dynamics are closely linked to underlying differences in electricity generation capacity. As the sixth chart shows, countries with higher per capita electricity production—again including Scandinavia and the US—are structurally better positioned to absorb external shocks. In contrast, economies with more limited domestic generation capacity, such as the UK and Germany, are inherently more exposed to fluctuations in global energy markets. This structural divide is likely to prove increasingly important in the period ahead, influencing not just near-term inflation outcomes but also the relative resilience of growth across economies as energy costs remain volatile.

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Amid further tentative signs of de-escalation—most notably President Trump’s decision on April 7th to step back from further escalation—financial markets have stabilised somewhat, but the macroeconomic implications of the Middle East crisis remain highly uncertain. As our charts show, the global economy entered this shock from a position of relative strength, with positive growth surprises and easing inflation pressures still evident in the data (chart 1). However, that benign backdrop now looks vulnerable. Central banks are already reassessing the outlook, with expectations for policy easing being pared back (chart 2) and a growing consensus that any response to persistent energy-driven inflation will likely involve delaying cuts rather than tightening aggressively—albeit with significant regional divergence (chart 3). Financial markets, for their part, are not yet signalling a loss of inflation control, but the rise in real yields suggests increasing concern around the broader policy mix, particularly fiscal pressures (chart 4). Finally, the adjustment to the shock is unlikely to be uniform. Structural differences in domestic energy capacity are already driving wide divergences in electricity prices, leaving more import-dependent economies exposed to higher costs and sharper trade-offs between growth and inflation (charts 5 and 6). Taken together, the message is clear: even if geopolitical tensions ease, the economic aftershocks are likely to be uneven, persistent and increasingly shaped by structural constraints.

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Charts of the Week: From Oil Shock to Policy Dilemma

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This monthly report is always packed with information relating to the household sector. At this time, most observers will probably be most interested in price developments, and the results for February were a bit unsettling. The headline price index rose 0.4%, influenced by a jump of 0.8% in energy prices. This increase was largely anticipated and not especially troubling when viewed in isolation. Energy prices have shown little net change in the past two years, and the latest reading of the index was comfortably within the recent range of observations. However, given developments in the Middle East, energy prices undoubtedly will surge out of that recent range in the months ahead.

Core PCE prices also rose 0.4%, a touch firmer than the expected increase of 0.3%. An increase of 0.4% in core inflation is a quick pace even when viewed in Isolation, but this advance followed a similar increase in January, and the December reading almost rounded to 0.4%. These recent changes pulled the year-over-year increase in core prices to 3.0%, a full percentage point above the Federal Reserve’s target.

Nominal personal income dipped 0.1% in February, which translated to a decline of 0.4% after adjusting for inflation (almost rounding to -0.5%). The softness is striking, but a review of the detail suggests that special factors played a role. Much of the weakness reflected a decline of 1.7% in dividend income, which followed a jump of 1.9% in January. Dividend payments in the prior two years followed the same pattern, leaving one to suspect that seasonal adjustment has gone awry. Government transfer payments also declined, with the miscellaneous category accounting for most of the drop. Medicaid payments also fell, marking the fifth consecutive decline, most likely driven by the tightening of provisions included in the One Big Beautiful Bill Act.

Nominal consumer expenditures rose 0.5%, a seemingly strong result, but the change amounted to only 0.1% in real terms. The small increase followed a flat reading in January and increases of only 0.1% in November and December. Consumers spent actively in the second and third quarters of last year, but they have become cautious recently. The data in hand suggest real outlay growth of approximately 1.0% in the first quarter, slower than the average pace of 3.0% in the middle of last year and 1.9% in 2025-Q4.

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- The energy component contributed to a high-side reading on the price index for personal consumption expenditures; the core component was firm as well.
- Consumer spending showed signs of slowing.

Economy in Brief

Jump to:

U.S. Small Business Optimism Weakens in November

U.S. Energy Prices Firm

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