Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021e.jpg" width="353">
The Confederation of Business Industry (CBI) released the results of its latest surveys of industrial trends. The quarterly survey gathers the opinions of manufacturers on a number of trends--the general business outlook, trends in their own output, orders, including foreign, capital spending, employment, prices and inventories. The monthly survey updates the opinions on trends in orders, inventories, prices and output--past and expected.
The latest quarterly survey shows that only 4% of the respondents were more optimistic about the general business situation than they had been in the previous survey, while 64% were more pessimistic, resulting in a -60 for the quarter. This was the most pessimistic reading of business confidence measure since the third quarter of 1980 when the excess of pessimists was 70%. The first chart shows the history of the CBI&#39;s confidence measure.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021f.jpg" width="353">
Most of the components of the survey showed low points not seen for some time. For example, 31% more of the respondents expected output over the next three months to be lower than those expecting it to be higher. It is necessary to go back to the fourth quarter of 1980 to find as many pessimists on the outlook. A few of the components are shown in the table below together with the date when a comparable figure occurred.
Ian McCafferty, Chief Economic Adviser of CBI remarked that &quot;.....the sharp falls in orders and output show that the slowdown in the UK economy is now spreading to sectors previously resilient to the weakness in the banking and housing sectors. It is also of serious concern that constraints on capital now appear to be affecting manufacturers, in a way that had not been the case earlier.&quot; Indeed, there were spikes in the current quarter in the percentage of respondents who said credit or finance might be a factor in their negative appraisal of output, orders and capital spending, as can be seen in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UNITED KINGDOM CBI INDUSTRIAL TRENDS SURVEY&nbsp;</th>
<th scope="col">Q4&nbsp; 08</th>
<th scope="col">Q3&nbsp;&nbsp;&nbsp; 08&nbsp;</th>
<th scope="col">Q2&nbsp; 08&nbsp;</th>
<th scope="col">Q1&nbsp; 08&nbsp;</th>
<th scope="col">PRE- VIOUS&nbsp;</th>
<th scope="col">DATE&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output over next 3 months</td>
<td>-31</td>
<td>-7</td>
<td>0</td>
<td>8</td>
<td>-31</td>
<td>1980:4</td>
</tr>
<tr>
<td class="firstcol">Capital Spending Buildings</td>
<td>-44</td>
<td>-24</td>
<td>-21</td>
<td>-21</td>
<td>-49</td>
<td>1996:4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Capital Spending Plant &amp; Equipment</td>
<td>-38</td>
<td>-24</td>
<td>-18</td>
<td>-12</td>
<td>-46</td>
<td>1980:4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Domestic Orders</td>
<td>-42</td>
<td>-21</td>
<td>-9</td>
<td>-3</td>
<td>-42</td>
<td>1991:1</td>
</tr>
<tr class="odd">
<td class="firstcol">Export Orders</td>
<td>-21</td>
<td>-8</td>
<td>5</td>
<td>0</td>
<td>-34</td>
<td>2001:4</td>
</tr>
</tbody>
</table>
</body>
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The Confederation of Business Industry (CBI) released the results of its latest surveys of industrial trends. The quarterly survey gathers the opinions of manufacturers on a number of trends--the general business outlook, trends in [...]

The Global Financial Crisis Hits British Industry

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021d.jpg" width="353">
According to the International Council of Shopping Centers, chain store sales fell 1.6% last week. The decline more than reversed the gains of the prior two weeks. The level of sales so far October were 1.0% below the September average which fell 1.9% from August.
The level of sales during the latest week was near the lowest since December of last year.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-Goldman Sachs retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The leading indicator of chain store sales from ICSC-Goldman Sachs fell 0.2% (-4.8% y/y).
The chain store sales figures are available in Haver&#39;s SURVEYW database.

<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">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">10/18/08</th>
<th scope="col">10/11/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>477.0</td>
<td>484.7</td>
<td>0.9%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>


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According to the International Council of Shopping Centers, chain store sales fell 1.6% last week. The decline more than reversed the gains of the prior two weeks. The level of sales so far October were 1.0% below the September [...]

U.S. Chain Store Sales Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021c.jpg" width="353">
The National Activity Index (CFNAI) from the Chicago Federal Reserve Bank for September moved deeper into recession territory. The reading of -2.57 was the lowest since early during the 1981-82 recession.The current index level was then associated with -6.4% (AR) growth in real GDP during 1Q 1982.
The three-month moving average of the index also fell to -1.78 from -1.18 during August. The latest was its lowest since the last recession, early in 1991.
An index level at or below -0.70 typically has indicated negative U.S. economic growth. A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth of roughly 3%. During the last twenty years there has been a 68% correlation between the level of the CFNAI and q/q growth in real GDP.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_october2008.pdf">here</a> and the historical data are available in Haver&#39;s SURVEYS database.
The production and income categories made the largest negative contribution to the total index&#39;s decline during September, though each of the component categories added a negative influence.
Inflationary pressure also was indicated to be low for the coming year with price index at it&#39;s lowest since 1990.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production &amp; income, the labor market, personal consumption &amp; housing, manufacturing &amp; trade sales, and inventories &amp; orders.
In a separate survey, the Chicago Fed indicated that its Midwest manufacturing index fell. The August index level reversed its recent improvement and fell to the lowest level since 2003. A decline in the auto sector component of the series led the weakness.
Revisiting Useful Approaches to Data-Rich Macroeconomic Forecasting from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr327.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/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">September &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-2.57</td>
<td>-1.61</td>
<td>-0.30</td>
<td>-0.43</td>
<td>-0.03</td>
<td>0.27</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-1.78</td>
<td>-1.18</td>
<td>-0.32</td>
<td>--</td>
<td>--</td>
<td>&nbsp;--</td>
</tr>
</tbody>
</table>
</body>
</html>

The National Activity Index (CFNAI) from the Chicago Federal Reserve Bank for September moved deeper into recession territory. The reading of -2.57 was the lowest since early during the 1981-82 recession.The current index level was [...]

Chicago Fed Index Fell Deeper Into Negative Territory

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021a.jpg" width="353">
For the first time since February of this year, the retail price for a gallon of regular gasoline fell below $3.00 per gallon. At $2.91, according to the U.S. Department of Energy survey, the price was the lowest since October of 2007. The latest decline was accompanied by a drop in the average price for all grades of gasoline to $2.97 per gallon.
The spot market price for a gallon of regular gasoline during the last two days reversed some of its earlier weakness and rose to $1.92 after touching $1.78 last Thursday. In futures trading the November contract closed at $1.72 per gallon.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021b.jpg" width="353">
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database. Daily prices are in the DAILY database.
According to the U.S. Department of Energy, the demand for gasoline fell 4.8% during the last four weeks versus the same four weeks last year. The y/y decline was the largest since late 1995.
These DOE figures are available in Haver&#39;s OILWKLY database.
The price for a barrel of West Texas Intermediate crude oil fell sharply last week to an average $75.21 per barrel, down by nearly one half from the high in July of $145.66. In futures trading, the two-month price for crude oil fell yesterday to $74.39 per barrel.
Last week prices for natural gas fell to their lowest level since August of last year. At an average $6.67 per mmbtu prices were down 6.6% year-to-year. The decline stabilized yesterday and prices rose to $6.99 per mmbtu. The high for natural gas prices was in early-July at $13.19/mmbtu.

<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/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">10/20/08</th>
<th scope="col">10/13/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon)</td>
<td>2.91</td>
<td>3.15</td>
<td>3.2%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>75.21</td>
<td>86.23</td>
<td>-14.8%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
</body>
</html>

For the first time since February of this year, the retail price for a gallon of regular gasoline fell below $3.00 per gallon. At $2.91, according to the U.S. Department of Energy survey, the price was the lowest since October of [...]

U.S. Gasoline Prices Below $3.00

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021a.jpg" width="353">
For the first time since February of this year, the retail price for a gallon of regular gasoline fell below $3.00 per gallon. At $2.91, according to the U.S. Department of Energy survey, the price was the lowest since October of 2007. The latest decline was accompanied by a drop in the average price for all grades of gasoline to $2.97 per gallon.
The spot market price for a gallon of regular gasoline during the last two days reversed some of its earlier weakness and rose to $1.92 after touching $1.78 last Thursday. In futures trading the November contract closed at $1.72 per gallon.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021b.jpg" width="353">
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database. Daily prices are in the DAILY database.
According to the U.S. Department of Energy, the demand for gasoline fell 4.8% during the last four weeks versus the same four weeks last year. The y/y decline was the largest since late 1995.
These DOE figures are available in Haver&#39;s OILWKLY database.
The price for a barrel of West Texas Intermediate crude oil fell sharply last week to an average $75.21 per barrel, down by nearly one half from the high in July of $145.66. In futures trading, the two-month price for crude oil fell yesterday to $74.39 per barrel.
Last week prices for natural gas fell to their lowest level since August of last year. At an average $6.67 per mmbtu prices were down 6.6% year-to-year. The decline stabilized yesterday and prices rose to $6.99 per mmbtu. The high for natural gas prices was in early-July at $13.19/mmbtu.

<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/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">10/20/08</th>
<th scope="col">10/13/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon)</td>
<td>2.91</td>
<td>3.15</td>
<td>3.2%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>75.21</td>
<td>86.23</td>
<td>-14.8%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
Chicago Fed Index Fell Deeper Into Negative Territory 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 21, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021c.jpg" width="353">
The National Activity Index (CFNAI) from the Chicago Federal Reserve Bank for September moved deeper into recession territory. The reading of -2.57 was the lowest since early during the 1981-82 recession.The current index level was then associated with -6.4% (AR) growth in real GDP during 1Q 1982.
The three-month moving average of the index also fell to -1.78 from -1.18 during August. The latest was its lowest since the last recession, early in 1991.
An index level at or below -0.70 typically has indicated negative U.S. economic growth. A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth of roughly 3%. During the last twenty years there has been a 68% correlation between the level of the CFNAI and q/q growth in real GDP.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_october2008.pdf">here</a> and the historical data are available in Haver&#39;s SURVEYS database.
The production and income categories made the largest negative contribution to the total index&#39;s decline during September, though each of the component categories added a negative influence.
Inflationary pressure also was indicated to be low for the coming year with price index at it&#39;s lowest since 1990.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production &amp; income, the labor market, personal consumption &amp; housing, manufacturing &amp; trade sales, and inventories &amp; orders.
In a separate survey, the Chicago Fed indicated that its Midwest manufacturing index fell. The August index level reversed its recent improvement and fell to the lowest level since 2003. A decline in the auto sector component of the series led the weakness.
Revisiting Useful Approaches to Data-Rich Macroeconomic Forecasting from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr327.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/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">September &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-2.57</td>
<td>-1.61</td>
<td>-0.30</td>
<td>-0.43</td>
<td>-0.03</td>
<td>0.27</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-1.78</td>
<td>-1.18</td>
<td>-0.32</td>
<td>--</td>
<td>--</td>
<td>&nbsp;--</td>
</tr>
</tbody>
</table>
U.S. Chain Store Sales Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 21, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021d.jpg" width="353">
According to the International Council of Shopping Centers, chain store sales fell 1.6% last week. The decline more than reversed the gains of the prior two weeks. The level of sales so far October were 1.0% below the September average which fell 1.9% from August.
The level of sales during the latest week was near the lowest since December of last year.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-Goldman Sachs retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The leading indicator of chain store sales from ICSC-Goldman Sachs fell 0.2% (-4.8% y/y).
The chain store sales figures are available in Haver&#39;s SURVEYW database.

<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">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">10/18/08</th>
<th scope="col">10/11/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>477.0</td>
<td>484.7</td>
<td>0.9%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
The Global Financial Crisis Hits British Industry 
by <a href="/comment/Curley.html">Louise Curley</a> October 21, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021e.jpg" width="353">
The Confederation of Business Industry (CBI) released the results of its latest surveys of industrial trends. The quarterly survey gathers the opinions of manufacturers on a number of trends--the general business outlook, trends in their own output, orders, including foreign, capital spending, employment, prices and inventories. The monthly survey updates the opinions on trends in orders, inventories, prices and output--past and expected.
The latest quarterly survey shows that only 4% of the respondents were more optimistic about the general business situation than they had been in the previous survey, while 64% were more pessimistic, resulting in a -60 for the quarter. This was the most pessimistic reading of business confidence measure since the third quarter of 1980 when the excess of pessimists was 70%. The first chart shows the history of the CBI&#39;s confidence measure.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021f.jpg" width="353">
Most of the components of the survey showed low points not seen for some time. For example, 31% more of the respondents expected output over the next three months to be lower than those expecting it to be higher. It is necessary to go back to the fourth quarter of 1980 to find as many pessimists on the outlook. A few of the components are shown in the table below together with the date when a comparable figure occurred.
Ian McCafferty, Chief Economic Adviser of CBI remarked that &quot;.....the sharp falls in orders and output show that the slowdown in the UK economy is now spreading to sectors previously resilient to the weakness in the banking and housing sectors. It is also of serious concern that constraints on capital now appear to be affecting manufacturers, in a way that had not been the case earlier.&quot; Indeed, there were spikes in the current quarter in the percentage of respondents who said credit or finance might be a factor in their negative appraisal of output, orders and capital spending, as can be seen in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UNITED KINGDOM CBI INDUSTRIAL TRENDS SURVEY&nbsp;</th>
<th scope="col">Q4&nbsp; 08</th>
<th scope="col">Q3&nbsp;&nbsp;&nbsp; 08&nbsp;</th>
<th scope="col">Q2&nbsp; 08&nbsp;</th>
<th scope="col">Q1&nbsp; 08&nbsp;</th>
<th scope="col">PRE- VIOUS&nbsp;</th>
<th scope="col">DATE&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output over next 3 months</td>
<td>-31</td>
<td>-7</td>
<td>0</td>
<td>8</td>
<td>-31</td>
<td>1980:4</td>
</tr>
<tr>
<td class="firstcol">Capital Spending Buildings</td>
<td>-44</td>
<td>-24</td>
<td>-21</td>
<td>-21</td>
<td>-49</td>
<td>1996:4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Capital Spending Plant &amp; Equipment</td>
<td>-38</td>
<td>-24</td>
<td>-18</td>
<td>-12</td>
<td>-46</td>
<td>1980:4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Domestic Orders</td>
<td>-42</td>
<td>-21</td>
<td>-9</td>
<td>-3</td>
<td>-42</td>
<td>1991:1</td>
</tr>
<tr class="odd">
<td class="firstcol">Export Orders</td>
<td>-21</td>
<td>-8</td>
<td>5</td>
<td>0</td>
<td>-34</td>
<td>2001:4</td>
</tr>
</tbody>
</table>


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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081020f.jpg" align="left" border="0" height="265" width="353">
China's
real Gross Domestic Product in the third quarter of this year, just
released, was 9% over the third quarter of last year.&nbsp; The
increase was below consensus and was the fifth quarter in a row in
which the rate of increase declined, as can be seen in the first
chart.&nbsp; Last year China's economy grew by 11.6%.&nbsp; So
far this year the economy is growing 9.9% over the corresponding period
of&nbsp; 2007.&nbsp; With the outlook for continued slowing of
the economy, the growth for this year as a whole is unlikely to be that
high.&nbsp;&nbsp;
The only sector to show growth
increasing this year is the primary sector that includes farming,
forestry, animal husbandry and fishing.&nbsp; This is the smallest
sector of the economy and the one with the lowest growth
rate.&nbsp; The secondary sector that includes mining and
quarrying, manufacturing, production and supply of electricity, water
and gas, is the largest sector and has experienced the sharpest
deceleration in growth in the economy in the current year
.&nbsp;&nbsp;
The tertiary sector that includes all industries not included
in the
primary or secondary sectors, experienced a slightly smaller
deceleration in growth.&nbsp; The second chart shows the year to
date growth in the total economy and in the three sectors.&nbsp;
The third chart shows the relative magnitudes of the three sectors
in&nbsp; nominal terms (billions of yuan).

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081020h.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081020g.jpg" border="0" height="265" width="312">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">CHINA
&nbsp;</th>
<th scope="col">Q3 08</th>
<th scope="col">Q2&nbsp; 08&nbsp;</th>
<th scope="col">Q1&nbsp; 08&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP Y/Y % Change</td>
<td>9.0</td>
<td>10.1</td>
<td>10.6</td>
<td>11.6</td>
<td>10.7</td>
<td>9.9</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP (YTD %)</td>
<td>9.9</td>
<td>10.4</td>
<td>10.6</td>
<td>11.9*</td>
<td>11.6*</td>
<td>10.4*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Primary
Industry&nbsp; (YTD %)</td>
<td>4.5</td>
<td>3.5</td>
<td>2.8</td>
<td>3.7*</td>
<td>5.0*</td>
<td>5.2*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Secondary
Industry (YTD %)&nbsp;&nbsp;&nbsp;</td>
<td>10.5</td>
<td>11.3</td>
<td>11.5</td>
<td>13.4*</td>
<td>13.0*</td>
<td>11.7*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Tertiary
Industry (YTD %)</td>
<td>10.3</td>
<td>10.5</td>
<td>10.9</td>
<td>12.6*</td>
<td>12.1*</td>
<td>10.5*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Primary
Industry&nbsp; (Billion Yuan)</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>2891</td>
<td>2470</td>
<td>2272</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Secondary
Industry (Billion Yuan)</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>12138</td>
<td>10200</td>
<td>8621</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Tertiary
Industry (Billion Yuan)</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>9633</td>
<td>8270</td>
<td>7340</td>
</tr>
<tr class="odd">
<td colspan="7" class="firstcol">*These are Q4 to Q4 changes.</td>
</tr>
</tbody>
</table>

</body></html>

China's real Gross Domestic Product in the third quarter of this year, just released, was 9% over the third quarter of last year. The increase was below consensus and was the fifth quarter in a row in which the rate of increase [...]

China's Real GDP Continues to Slow

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081020j.jpg" align="left" border="0" height="265" width="353">
French order performance and trends are clear and are clearly
negative. The momentum is not as clearly building a head of steam as in
some countries, however. But, on the other hand, all recent views of
order trends are lower at some disturbing pace. While the 3-month pace
at -6.9% is better than the 6-month pace of -18.5%, the 3-month pace is
still negative and the quarter-to-date growth rate is still severe at
-7.4%.
But, for France as for Italy and others, the foreign sector is
even weaker. For foreign orders we see a 3-month decline at a pace of
-5.6% that compares to a -25% pace over 6 months.
The quarter-to-date growth rate of -11.5% shows a slightly
accelerated negative growth rate compared to the three-month pace and a
rate roughly comparable to the Yr/Yr pace of -13.2%.
What these statistics remind us, is that the various economies
are seeing withering orders (planned economic activity) and the pace of
the disruption to expected activity is still somewhat uneven - but the
view remains one of economies that are contracting. Overall, the growth
rates are weakened and are worrisome. These are not minor pull-backs
nor do they seem to be one-off declines. These are negative growth
rates of such magnitude that the persistence of these declines and the
threat to overall growth is quite clear. Central banks have gotten the
message.
As of today Germany announced it was working on a stimulus
package for its economy. This is after it has assembled a bank bailout
package. At one time &#8211; even a few short weeks ago - Germany insisted
that it did not require either.
Things change. And sometimes they change rapidly. 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead><tr><th colspan="8" scope="col"> French Orders</th>

</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-2-Date</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>-7.2%</td>
<td>4.3%</td>
<td>1.4%</td>
<td>-6.9%</td>
<td>-18.5%</td>
<td>-7.8%</td>
<td>-7.4%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-7.5%</td>
<td>3.4%</td>
<td>3.1%</td>
<td>-5.6%</td>
<td>-25.1%</td>
<td>-13.2%</td>
<td>-11.5%</td>
</tr>
</tbody>
</table>
</body></html>

French order performance and trends are clear and are clearly negative. The momentum is not as clearly building a head of steam as in some countries, however. But, on the other hand, all recent views of order trends are lower at some [...]

French Orders Continue to Slide Sharply

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081020i.jpg" align="left" border="0" height="265" width="353">
Consumer goods inflation has broken lower in Germany. But for capital goods and
intermediate goods, inflation forces are lingering. Headline PPI
inflation has spurted by 7.8% over three months, a far cry from the 2%
limit on consumer prices. The 0.4% headline PPI rise in prices in
September offsets most of the 0.5% decline in August.
For ex-energy prices the rise in September was a thin
0.1%. Over three months, however, the inflation rate is a still
troubling 4.3% and the sequential growth rates show a ramping up of
ex-energy inflation for 12 months to 6 months to 3 months.
Still, Jurgen Stark, a former Bundesbank member and currently
an executive of the ECB says that, "We are seeing that due to the
weakening in growth and the probability of very flat growth in 2009,
the inflation rate will also probably fall somewhat more strongly than
we had earlier expected."
Policy makers are looking at inflation and its trends very
differently these days. They are setting performance and trends aside
because oil prices have dropped so suddenly and economic growth has
dimmed so quickly. Apparently, few policymakers give much credence to
the notion that the OPEC meeting this week could re-boost oil prices in
a way to light a new fire under inflation. Central banks have gotten,
instead, to the point of being so worried about (or sure of) coming
economic weakness and its impact on prices that they are losing their
fear of inflation near term. This is very significant especially for a
central bank like the ECB that only has an inflation mandate &#8211; no
growth mandate. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">Germany PPI
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="5">%-SAAR</td>
</tr>
<tr class="grey3">
<td class="firstcol"></td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
<td>IN Q3</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.4%</td>
<td>-0.5%</td>
<td>2.0%</td>
<td>7.8%</td>
<td>10.1%</td>
<td>8.3%</td>
<td>1.5%</td>
<td>11.7%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.1%</td>
<td>0.2%</td>
<td>0.8%</td>
<td>4.3%</td>
<td>3.9%</td>
<td>3.5%</td>
<td>2.5%</td>
<td>5.3%</td>
</tr>
</tbody>
</table>
</body></html>

Consumer goods inflation has broken lower in Germany. But for capital goods and intermediate goods, inflation forces are lingering. Headline PPI inflation has spurted by 7.8% over three months, a far cry from the 2% limit on consumer [...]

German PPI Pressure Still Lingers

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

250501Z1.jpg

**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

250501Z2.jpg

**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

250501Z3.jpg

**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

250501Z4.jpg

**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

250501Z5.jpg

**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

250501Z6.jpg

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

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Charts of the Week: Tariff Truce, Tenuous Trust

250501J5.jpg

250501K5.jpg

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

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

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

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

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

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

250501L5.jpg

250501M5.jpg

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

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

250501N.jpg

250501O.jpg

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

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

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

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

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

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

U.S. Construction Spending Unexpectedly Drops in March, the First M/M Fall Since September

Carol Stone, CBE

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Initial claims for unemployment insurance rose 18,000 in the week ended April 26 to 241,000, seasonally adjusted.  This is higher by 16,000 than the Action Economics Forecast Survey amount of 225,000 and is the largest amount since the week of February 22. The previous week’s actual count was revised up by 1,000 to 223,000, from 222,000 reported initially.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” – in the week ended April 19 was 1.916 million, up 83,000 from the prior week’s 1.833 million; that earlier amount was revised down by 8,000.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, was 1.3% in the April 19 week, following 1.2% continuously since the week of January 6, 2024.

Economic conditions vary widely across states and territories.  In the week ended April 12, the highest unemployment rates were in New Jersey (2.39%), California (2.24%), Washington (2.19%), Rhode Island (2.17%) and Massachusetts (1.93%).  The lowest rates were in Florida (0.35%), South Dakota (0.40%), Alabama (0.41%), Virginia (0.45%) and Tennessee (0.48%).  Rates in other notable states include the Illinois (1.85%), New York (1.71%), Pennsylvania (1.54%) and Texas (1.09%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in U**SECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Actual initial claims amount is 16,000 more than forecast.
- Total beneficiaries rose by 83,000.
- Insured unemployment rate ticked up to 1.3% after 15 months at 1.2%.

U.S. Initial Jobless Claims Rise Notably in April 28 Week

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Real GDP eased 0.3% SAAR (+2.1% y/y) during the first quarter of 2025 after increasing 2.4% in Q4’24 and 3.1% in Q3’24. A 0.4% increase had been expected in the Action Economics Forecast Survey. It was the first decline since Q1 2022.

Foreign trade subtracted 4.83 percentage points from growth last quarter as imports surged 41.3% (13.4% y/y) ahead of tariffs, which began to come into effect in the first quarter. The rise followed a 1.9% decline in Q4’24. Exports rose 1.8% (3.0% y/y) after easing 0.2% in Q4. Inventories added 2.25 percentage points to growth after subtracting 0.84 percentage point from Q4 growth.

Real final sales to domestic purchasers grew 2.3% (2.9% y/y) in Q1 after rising 3.0% in Q4. Personal consumption expenditures rose 1.8% (3.1% y/y) following a 4.0% gain. Durable goods spending fell 3.4% (+5.3% y/y) after surging 12.4% in Q4. Motor vehicle purchases declined 11.1% (+5.5% y/y) after strengthening 19.7% in Q4. Spending on home furnishings & appliances gained 1.5% (6.1% y/y) following a 5.4% rise. Recreational goods & vehicle outlays rose 2.5% (7.0% y/y) last quarter after a 13.9% Q4 increase.

Nondurable goods outlays rose 2.7% (3.0% y/y) following 3.1% growth in Q4. Apparel spending increased 6.7% (2.5% y/y) following a 5.0% rise. Food & beverage buying gained 2.5% (2.3% y/y) after a 1.8% increase. Gasoline & fuel oil purchases increased 4.6% (3.4% y/y) after falling 2.0% in Q4.

Spending on services increased 2.4% last quarter (2.7% y/y) after a 3.0% gain. Outlays on housing & utilities increased 3.4% (1.8% y/y) after rising 1.1% in Q4. Health care expenditures rose 4.0% (4.8% y/y) following a 4.7% strengthening. Transportation outlays increased 5.3% (4.6% y/y) after a 3.7% rise while recreation spending rose 4.7% (2.8% y/y) following a 4.5% rise. Restaurant & hotel expenditures declined 2.1% (+0.5% y/y) following a 2.8% rise. Financial services expenditures rose 1.9% (2.0% y/y) after a 3.1% Q4 increase.

Business fixed investment increased 9.8% (3.6% y/y) following a 3.0% decline in Q4. Expenditures on structures rose 0.4% (-0.4% y/y) after a 2.9% increase. Expenditures on producers’ durable equipment jumped 22.5% (8.0% y/y) after falling 8.7%.  Outlays on information processing equipment soared 69.3% (18.9% y/y) following a 7.3% decline. Industrial equipment investment fell 1.4% (-0.3% y/y) after easing 0.9%. Intellectual property product spending rose 4.1% (1.8% y/y) following a 0.5% decline. 

Residential structures investment increased 1.3% (-0.1% y/y) in Q1 after a 5.5% Q4 rise.

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Government spending fell 1.5% (+2.4% y/y) after a 3.1% Q4 rise. Federal government expenditures declined 5.1% (+2.9% y/y) after rising 4.0% in Q4. National defense expenditures declined 8.0% (+4.0% y/y) after increasing 4.8% in Q4. State & local government spending rose 0.8% (2.1% y/y) following a 2.5% rise.

The GDP price index rose 3.7% (2.6% y/y) after increasing 2.3% in Q4. It was the largest increase since Q4’22. A 2.4% increase had been expected. The PCE chain price index increased 3.6% (2.5% y/y) following a 2.4% rise. The PCE price index excluding food and energy rose 3.5% (2.8% y/y) after increasing 2.6% in Q4. The business fixed investment price index rose 0.4% (1.8% y/y) after 1.5% rise. The residential price index strengthened 3.9% (3.2% y/y) after a 1.9% rise while the government price index increased 4.7% (2.8% y/y) following a 2.1% rise.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Decline in GDP is first in three years.
- Foreign trade subtracts substantially ahead of tariffs.
- Domestic final demand growth weakens.
- Price index strengthens with higher core PCE prices.

Economy in Brief: October 2008

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