Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041117e.jpg" width="353">
Mortgage applications rose 4.3% last week and reversed nearly all of the prior week&#39;s decline, according to the Mortgage Bankers Association (MBA).
Applications to refinance jumped 10.7%, up 74.3% from the early June low.
Purchase applications slipped for the second week but a late month jump lifted the November average so far 5.0% versus October. During the last ten years there has been a 60% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The effective interest rate on a conventional 30-year mortgage was about stable at 5.95%. It averaged 5.92% in October. The effective rate on a 15-year mortgage also was about stable at 5.40%.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">11/12/04</th>
<th scope="col">11/05/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">Total Market Index</td>
<td>758.3</td>
<td>727.3</td>
<td>14.3%</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>480.3</td>
<td>483.0</td>
<td>12.8%</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
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<td class="firstcol">&nbsp; Refinancing</td>
<td>2,375.4</td>
<td>2,148.7</td>
<td>16.2%</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
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Mortgage applications rose 4.3% last week and reversed nearly all of the prior week's decline, according to the Mortgage Bankers Association (MBA). Applications to refinance jumped 10.7%, up 74.3% from the early June low. Purchase [...]

Mortgage Applications Rise on Higher Refis

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041117c.jpg" width="353">
In October, housing starts rose 6.4% to 2.027M, the highest level of the year.Consensus expectations had been for 1.96M starts.
Single-family starts recouped nearly all of the prior month&#39;s decline with a 5.7% gain. Year to date single family starts averaged 1.605M, up 6.6% from last year&#39;s full year average. Multi-family starts rose 9.5% and the year to date average equals last year.
Building permits fell 0.7% m/m to 1.984M. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041117d.jpg" width="353">
The Composite Housing Market Index from the National Association of Home Builders (NAHB) was stable in November t the downwardly revised October level of 71.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
The index of current single family home sales also surged to its highest in a year and the index of expected sales in six months jumped the highest level since 1999.
During the last ten years there has been a 60% correlation between the level of single family housing starts and the NAHB Index.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
<tbody>
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<td class="firstcol">Total</td>
<td>2,027</td>
<td>1,905</td>
<td>2.2%</td>
<td>1,8 53</td>
<td>1,7 10</td>
<td>1,601</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,645</td>
<td>1,556</td>
<td>0.1%</td>
<td>1,505</td>
<td>1,3 63</td>
<td>1,272</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>3 82</td>
<td>349</td>
<td>12.7%</td>
<td>348</td>
<td>347</td>
<td>330</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,984</td>
<td>1 ,998</td>
<td>-1.5%</td>
<td>1,8 89</td>
<td>1,749</td>
<td>1,637</td>
</tr>
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<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<td class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></td>
<td>Nov</td>
<td>Oct</td>
<td>Nov &#39;03</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr class="odd">
<td class="firstcol">Composite Housing Market Index</td>
<td>7 1</td>
<td>71</td>
<td>7 0</td>
<td>64</td>
<td>61</td>
<td>56</td>
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In October, housing starts rose 6.4% to 2.027M, the highest level of the year.Consensus expectations had been for 1.96M starts. Single-family starts recouped nearly all of the prior month's decline with a 5.7% gain. Year to date [...]

Housing Starts Stronger Than Expected

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041117b.jpg" width="353">
Industrial production rose a firm 0.7% following a downwardly revised 0.1% rise the prior month. Consensus expectations had been for a 0.4% increase in October.
Production in the factory sector jumped 0.8% (6.0% y/y) after the unrevised 0.3% decline the prior month.
Motor vehicles output recovered 2.3% (2.8% y/y) following the prior month&#39;s decline. Furniture output also recovered 0.9% (2.0% y/y) after two down months and textile output rose 0.8% (-2.2% y/y). High tech sector output again was firm with a 0.9% (18.8% y/y) rise.
Factory sector output excluding motor vehicles &amp; high tech rose 0.5% (+5.3% y/y).
Total capacity utilization rose to 77.7% as capacity grew 1.5% y/y.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">Industrial Production</td>
<td>0.7%</td>
<td>0.1%</td>
<td>5.2%</td>
<td>0.3%</td>
<td>-0.6%</td>
<td>-3.4%</td>
</tr>
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<td class="firstcol">Capacity Utilization</td>
<td>77.7%</td>
<td>77.3%</td>
<td>75.0%(11/03)</td>
<td>74.8%</td>
<td>75.6%</td>
<td>77.4%</td>
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</tbody>
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Industrial production rose a firm 0.7% following a downwardly revised 0.1% rise the prior month. Consensus expectations had been for a 0.4% increase in October. Production in the factory sector jumped 0.8% (6.0% y/y) after the [...]

Industrial Production Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041117a.jpg" width="353">
The Consumer Price Index (CPI-U) jumped 0.6% last month, the strongest increase since May. The gain easily beat Consensus forecasts for a 0.4% rise. The 0.2% gain in prices less food and energy just beat the Consensus forecast for a 0.1% rise.
Gasoline prices jumped 8.6% (26.6% y/y) last month but so far in November have not risen further. Fuel oil prices also were strong and surged 8.1% (35.0% y/y). Natural gas prices fell for the second month (+3.1% y/y).
&quot;Core&quot; commodities prices again rose and the 0.4% gain was driven by a 1.0% (0.8% y/y) rise in household furnishings &amp; operation. New motor vehicle prices also increased for the first month in four, up 0.4% (-0.5% y/y) and apparel prices rose 0.2% (-0.7% y/y) .
The increase in services prices less energy eased a bit to 0.2% as the gain in shelter prices fell to just 0.1% (2.8% y/y). Health care services rose 0.4% (5.1% y/y) and tuition &amp; child care costs rose 0.4% (6.8% y/y). Public transportation prices rose 1.4% (-2.3% y/y) after two months of decline.
The chained CPI, which adjusts for shifts in the mix of consumer purchases rose 0.5%. Similar to the PCE price deflator, core chain prices rose 0.4% for the second consecutive month.
&quot;Labor Markets, Energy Prices, and the Outlook for 2005&quot; from Michael H. Moskow, President &amp; CEO of the Federal Reserve Bank of Chicago are available <a href="http://www.chicagofed.org/news_and_conferences/speeches/2004_11_16_wbbm.cfm"> here</a>.

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<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
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<td class="firstcol">Total&nbsp;</td>
<td>0.6%</td>
<td>0.2%</td>
<td>3.2%</td>
<td>2.3%</td>
<td>1.6%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.0%</td>
<td>1.5%</td>
<td>2.3%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.4%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>-2.0%</td>
<td>-1.1%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>3.8%</td>
<td>3.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>4.2%</td>
<td>-0.4%</td>
<td>15.2%</td>
<td>12.2%</td>
<td>-5.8%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.6%</td>
<td>0.0%</td>
<td>3.5%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a></td>
<td>0.5%</td>
<td>0.3%</td>
<td>2.7%</td>
<td>1.9%</td>
<td>1.3%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.4%</td>
<td>0.4%</td>
<td>1.7%</td>
<td>1.1%</td>
<td>1.9%</td>
<td>&nbsp;2.0%</td>
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</tbody>
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</body>
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The Consumer Price Index (CPI-U) jumped 0.6% last month, the strongest increase since May. The gain easily beat Consensus forecasts for a 0.4% rise. The 0.2% gain in prices less food and energy just beat the Consensus forecast for a [...]

Consumer Prices Strong

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041117a.jpg" width="353">
The Consumer Price Index (CPI-U) jumped 0.6% last month, the strongest increase since May. The gain easily beat Consensus forecasts for a 0.4% rise. The 0.2% gain in prices less food and energy just beat the Consensus forecast for a 0.1% rise.
Gasoline prices jumped 8.6% (26.6% y/y) last month but so far in November have not risen further. Fuel oil prices also were strong and surged 8.1% (35.0% y/y). Natural gas prices fell for the second month (+3.1% y/y).
&quot;Core&quot; commodities prices again rose and the 0.4% gain was driven by a 1.0% (0.8% y/y) rise in household furnishings &amp; operation. New motor vehicle prices also increased for the first month in four, up 0.4% (-0.5% y/y) and apparel prices rose 0.2% (-0.7% y/y) .
The increase in services prices less energy eased a bit to 0.2% as the gain in shelter prices fell to just 0.1% (2.8% y/y). Health care services rose 0.4% (5.1% y/y) and tuition &amp; child care costs rose 0.4% (6.8% y/y). Public transportation prices rose 1.4% (-2.3% y/y) after two months of decline.
The chained CPI, which adjusts for shifts in the mix of consumer purchases rose 0.5%. Similar to the PCE price deflator, core chain prices rose 0.4% for the second consecutive month.
&quot;Labor Markets, Energy Prices, and the Outlook for 2005&quot; from Michael H. Moskow, President &amp; CEO of the Federal Reserve Bank of Chicago are available <a href="http://www.chicagofed.org/news_and_conferences/speeches/2004_11_16_wbbm.cfm"> here</a>.

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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>0.6%</td>
<td>0.2%</td>
<td>3.2%</td>
<td>2.3%</td>
<td>1.6%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.0%</td>
<td>1.5%</td>
<td>2.3%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.4%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>-2.0%</td>
<td>-1.1%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>3.8%</td>
<td>3.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>4.2%</td>
<td>-0.4%</td>
<td>15.2%</td>
<td>12.2%</td>
<td>-5.8%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.6%</td>
<td>0.0%</td>
<td>3.5%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a></td>
<td>0.5%</td>
<td>0.3%</td>
<td>2.7%</td>
<td>1.9%</td>
<td>1.3%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.4%</td>
<td>0.4%</td>
<td>1.7%</td>
<td>1.1%</td>
<td>1.9%</td>
<td>&nbsp;2.0%</td>
</tr>
</tbody>
</table>
Industrial Production Firm 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 17, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041117b.jpg" width="353">
Industrial production rose a firm 0.7% following a downwardly revised 0.1% rise the prior month. Consensus expectations had been for a 0.4% increase in October.
Production in the factory sector jumped 0.8% (6.0% y/y) after the unrevised 0.3% decline the prior month.
Motor vehicles output recovered 2.3% (2.8% y/y) following the prior month&#39;s decline. Furniture output also recovered 0.9% (2.0% y/y) after two down months and textile output rose 0.8% (-2.2% y/y). High tech sector output again was firm with a 0.9% (18.8% y/y) rise.
Factory sector output excluding motor vehicles &amp; high tech rose 0.5% (+5.3% y/y).
Total capacity utilization rose to 77.7% as capacity grew 1.5% y/y.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Industrial Production</td>
<td>0.7%</td>
<td>0.1%</td>
<td>5.2%</td>
<td>0.3%</td>
<td>-0.6%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>77.7%</td>
<td>77.3%</td>
<td>75.0%(11/03)</td>
<td>74.8%</td>
<td>75.6%</td>
<td>77.4%</td>
</tr>
</tbody>
</table>
Housing Starts Stronger Than Expected 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 17, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041117c.jpg" width="353">
In October, housing starts rose 6.4% to 2.027M, the highest level of the year.Consensus expectations had been for 1.96M starts.
Single-family starts recouped nearly all of the prior month&#39;s decline with a 5.7% gain. Year to date single family starts averaged 1.605M, up 6.6% from last year&#39;s full year average. Multi-family starts rose 9.5% and the year to date average equals last year.
Building permits fell 0.7% m/m to 1.984M. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041117d.jpg" width="353">
The Composite Housing Market Index from the National Association of Home Builders (NAHB) was stable in November t the downwardly revised October level of 71.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
The index of current single family home sales also surged to its highest in a year and the index of expected sales in six months jumped the highest level since 1999.
During the last ten years there has been a 60% correlation between the level of single family housing starts and the NAHB Index.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>2,027</td>
<td>1,905</td>
<td>2.2%</td>
<td>1,8 53</td>
<td>1,7 10</td>
<td>1,601</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,645</td>
<td>1,556</td>
<td>0.1%</td>
<td>1,505</td>
<td>1,3 63</td>
<td>1,272</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>3 82</td>
<td>349</td>
<td>12.7%</td>
<td>348</td>
<td>347</td>
<td>330</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,984</td>
<td>1 ,998</td>
<td>-1.5%</td>
<td>1,8 89</td>
<td>1,749</td>
<td>1,637</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></td>
<td>Nov</td>
<td>Oct</td>
<td>Nov &#39;03</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr class="odd">
<td class="firstcol">Composite Housing Market Index</td>
<td>7 1</td>
<td>71</td>
<td>7 0</td>
<td>64</td>
<td>61</td>
<td>56</td>
</tr>
</tbody>
</table>
Mortgage Applications Rise on Higher Refis 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 17, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041117e.jpg" width="353">
Mortgage applications rose 4.3% last week and reversed nearly all of the prior week&#39;s decline, according to the Mortgage Bankers Association (MBA).
Applications to refinance jumped 10.7%, up 74.3% from the early June low.
Purchase applications slipped for the second week but a late month jump lifted the November average so far 5.0% versus October. During the last ten years there has been a 60% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The effective interest rate on a conventional 30-year mortgage was about stable at 5.95%. It averaged 5.92% in October. The effective rate on a 15-year mortgage also was about stable at 5.40%.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">11/12/04</th>
<th scope="col">11/05/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>758.3</td>
<td>727.3</td>
<td>14.3%</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>480.3</td>
<td>483.0</td>
<td>12.8%</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,375.4</td>
<td>2,148.7</td>
<td>16.2%</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
</body>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041116d.jpg" width="353">
Inflation in the UK continues to be well behaved. The official measure of inflation is the year-over-year percent change in the Consumer Price Index (CPI). In October, the inflation was 1.18%, up from the September rate of 1.09%, due largely to increases in gasoline and home heating oil.
The CPI was formerly called the Harmonized Index of Consumer Prices (HICP) and is based on the same methodology used by Eurostat to measure inflation; thus, it provides a measure of inflation that is directly comparable with the other members of the EU. Currently, at 1.2% inflation in the UK is well below that in the EU as a whole, which is running at about 2%.
The Retail Price Index was, for many years, the most widely quoted measure of inflation in the U. K. In the UK data base, Haver publishes data that explain the difference between inflation computed by the RPI and the CPI.
Before adopting the CPI, the Bank of England had used the Retail Price Index excluding Mortgage Interest Payments (RPIX) as its target, Inflation under this measure was generally 1 to 2 percentage points higher than that of the CPI, as shown in the attached chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">U.K. Inflation Indicators</th>
<th scope="col">Oct 04</th>
<th scope="col">Sep 04</th>
<th scope="col">Oct 03</th>
<th scope="col">Sep 03&nbsp;&nbsp;</th>
<th scope="col">Y/Y Oct</th>
<th scope="col">Y/Y Sep</th>
<th scope="col">&nbsp;2003&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2002&nbsp;</th>
<th scope="col">&nbsp; 2001&nbsp; &nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">CPI (1996=100)</td>
<td>111.7</td>
<td>111.4</td>
<td>110.4</td>
<td>110.2</td>
<td>1.18</td>
<td>1.09</td>
<td>109.8</td>
<td>108.3</td>
<td>106.9</td>
</tr>
<tr>
<td class="firstcol">RPI (87=100)</td>
<td>188.6</td>
<td>188.1</td>
<td>182.6</td>
<td>183.5</td>
<td>3.29</td>
<td>3.07</td>
<td>181.3</td>
<td>176.2</td>
<td>173.3</td>
</tr>
<tr class="odd">
<td class="firstcol">RPIX (87=100)</td>
<td>185.1</td>
<td>184.7</td>
<td>181.2</td>
<td>181.3</td>
<td>2.10</td>
<td>1.88</td>
<td>180.0</td>
<td>175.1</td>
<td>171.3</td>
</tr>
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Inflation in the UK continues to be well behaved. The official measure of inflation is the year-over-year percent change in the Consumer Price Index (CPI). In October, the inflation was 1.18%, up from the September rate of 1.09%, due [...]

Oil Prices Largely Responsible for Small Rise in Inflation in the United Kingdom

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041116c.jpg" width="353">
Chain store sales fell 0.4% on the heels of the prior week&#39;s 1.3% surge, according to the International Council of Shopping Centers (ICSC)-UBS.
The decline left sales so far in November 0.5% ahead of October.
During the last ten years there has been a 60% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
Last week&#39;s sales decline was preceded by a 0.4% w/w fall in the leading indicator of chain store sales from ICSC.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">11/13/04</th>
<th scope="col">11/06/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>436.1</td>
<td>438.0</td>
<td>3.4%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
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Chain store sales fell 0.4% on the heels of the prior week's 1.3% surge, according to the International Council of Shopping Centers (ICSC)-UBS. The decline left sales so far in November 0.5% ahead of October. During the last ten years [...]

Chain Store Sales Off

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041116b.jpg" width="353">
The PPI for finished goods surged 1.7% last month, nearly triple Consensus expectations for a 0.6% gain and the strongest monthly increase since January 1990. Less food &amp; energy, the 0.3% rise in &quot;core&quot; prices also was triple expectations for a 0.1% gain.
Finished energy prices spiked 6.8% (17.0% y/y) higher paced by a 14.2% (45.3% y/y) rise in gasoline prices and an 18.7% (66.4% y/y) gain in fuel oil prices. Residential natural gas prices rose 1.7% (8.2% y/y).
A 0.2% gain in core finished consumer goods prices reflected a modest 0.2% (1.7% y/y) gain in nondurable goods prices but durables prices rose 0.4% (1.6% y/y) for the second consecutive month.Finished capital goods prices also rose 0.4% (1.9% y/y) for the second month.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041116a.jpg" width="353">
Finished food prices jumped 1.6% (2.4% y/y) reflecting strong gains in prices for fruits, vegetables and meats.
&quot;Cattle prices on a two-year wild ride&quot; from the Federal Reserve Bank of Minneapolis can be found <a href="http://minneapolisfed.org/pubs/fedgaz/04-03/cattle.cfm"> here</a>.
Crude prices reversed the prior month&#39;s decline with a 4.3% jump. Less food &amp; energy, crude prices were more than firm with a 5.5% spike as metals prices took off; iron &amp; steel scrap, +90.7% y/y; copper scrap, +47.2% y/y; nonferrous metal ores, +46.2% y/y. During the last thirty years &quot;core&quot; crude prices have been a fair indicator of industrial sector activity with a 51% correlation between the six month change in core crude prices and the change in factory sector industrial production.
Intermediate goods prices jumped 0.9% higher as energy prices rose 4.3% (16.6% y/y). Core intermediate prices were tame and rose 0.3%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>1.7%</td>
<td>0.1%</td>
<td>4.4%</td>
<td>3.2%</td>
<td>-1.3%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.3%</td>
<td>0.3%</td>
<td>1.7%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.9%</td>
<td>0.1%</td>
<td>8.9%</td>
<td>4.7%</td>
<td>-1.5%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.3%</td>
<td>0.7%</td>
<td>7.8%</td>
<td>2.0%</td>
<td>-0.5%</td>
<td>-0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>4.3%</td>
<td>-4.2%</td>
<td>15.8%</td>
<td>25.1%</td>
<td>-10.6%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>5.4%</td>
<td>-2.5%</td>
<td>28.3%</td>
<td>12.4%</td>
<td>3.8%</td>
<td>-10.0%</td>
</tr>
</tbody>
</table>
</body>
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The PPI for finished goods surged 1.7% last month, nearly triple Consensus expectations for a 0.6% gain and the strongest monthly increase since January 1990. Less food & energy, the 0.3% rise in "core" prices also was triple [...]

Producer Prices Surge, Core Strong

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.

<iframe style="border-radius:12px" src="https://open.spotify.com/embed/episode/3PzXXKrkHcwtOLipohEdnB?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Tariff Truce, Tenuous Trust

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.

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

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

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

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

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

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

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

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

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: November 2004

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