Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118g.jpg" align="right" border="0" height="265" width="353">
The
United Kingdom released inflation numbers today.&nbsp; The
acceleration in inflation in the previous months came to a halt in
October.&nbsp; The official measure, the year- to- year percent
change in the consumer price index, fell to 4.5% in October from 5.2%
in September.&nbsp; &nbsp;The core index, which excludes
energy, food, alcoholic beverages and tobacco, fell to 1.9% in October
from 2.2%.&nbsp; The year- to- year change in the retail price
index, which until 2003 was the official measure of inflation, fell to
4.2% in October from 5.00% in September. The three measures of
inflation are shown in the first chart.&nbsp;Except for
the last two months, the inflation rate as measured by the CPI has been
lower than that measured by the RPI largely because of the exclusion in
the former and inclusion in the latter of mortgage interest payments
and other housing related costs.&nbsp; Until June of this year the
exclusion of these items tended to lower the CPI inflation rate, but
since then it has added to it, as can be seen in the second
chart.The declines in the various measures of inflation were
due largely to the declines in the prices of food and oil that affected
the indexes directly and declines in the prices of&nbsp; base
metals that affected the indexes indirectly.&nbsp; The declines are
likely to continue, if not intensify, as world demand continues to
fall.&nbsp; Longer term, however, the current fiscal and monetary
policies being pursued by the developed and developing nations should
help to avoid deflation such as engulfed the globe in the thirties. (
If, indeed, they do not lead eventually to a resurgence of
inflation.)&nbsp; As an illustration of the course of inflation and
deflation in the twenties and thirties of the last century, we use the
changes in the consumer price index for the United States, the series,
PCUN67, found in the Haver Analytics' USECON&nbsp;
data base.&nbsp; &nbsp;&nbsp;
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118i.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118h.jpg" border="0" height="265" width="312">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">UNITED
KINGDOM INFLATION RATES&nbsp;</th>
<th scope="col">Oct 08</th>
<th scope="col">Sep&nbsp; 08&nbsp;</th>
<th scope="col">Oct&nbsp; 07&nbsp;</th>
<th scope="col">M/M Chg</th>
<th scope="col">Y/Y&nbsp; &nbsp;Chg</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">Consumer Price Index
(Y/Y % Chg)</td>
<td>4.5</td>
<td>5.2</td>
<td>2.0</td>
<td>-0.7</td>
<td>2.5</td>
<td>2.32</td>
<td>2.33</td>
<td>2.05</td>
</tr>
<tr>
<td class="firstcol">Core CPI Index (Y/Y %
Chg)</td>
<td>1.9</td>
<td>2.2</td>
<td>1.5</td>
<td>-0.3</td>
<td>0.4</td>
<td>1.69</td>
<td>1.30</td>
<td>1.51</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Price
Index&nbsp; (Y/Y % Chg)</td>
<td>4.2</td>
<td>5.0</td>
<td>4.2</td>
<td>-0.8</td>
<td>0.0</td>
<td>4.27</td>
<td>3.19</td>
<td>2.83</td>
</tr>
</tbody>
</table>
</body></html>

The United Kingdom released inflation numbers today. The acceleration in inflation in the previous months came to a halt in October. The official measure, the year- to- year percent change in the consumer price index, fell to 4.5% in [...]

Inflation in the U.K. Declines in October

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118f.jpg" width="353">
According to the International Council of Shopping Centers-Goldman Sachs Index, a 0.3% uptick in chain store sales last week made up a piece of the prior week&#39;s 1.0% decline. Nevertheless, sales ticked down 0.1% from the year-ago level.
The latest weekly increase left sales so far in November down 0.6% from October. During all of October sales fell 1.0% from September following that month&#39;s 1.9% drop. The level of sales during the latest week remained near the lowest since December of last year.
During the last ten years there has been a 59% 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 weekly leading indicator of chain store sales from ICSC-Goldman Sachs ticked up 0.1% but was still down 5.7% from the year-ago level and it was at it&#39;s lowest level since 1996.
The chain store sales figures are available in Haver&#39;s SURVEYW database.

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<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">11/15/08</th>
<th scope="col">11/08/08</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>478.5</td>
<td>477.2</td>
<td>-0.1%</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-Goldman Sachs Index, a 0.3% uptick in chain store sales last week made up a piece of the prior week's 1.0% decline. Nevertheless, sales ticked down 0.1% from the year-ago level.

U.S. Chain Store Sales Fell Versus Last Year

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118d.jpg">
Falling by another fifteen cents w/w to $2.07 per gallon, the retail price for a gallon of regular gasoline was at its lowest level since early 2005 according to the U.S. Department of Energy survey. Prices have now fallen $2.04 per gallon, or by more than one-half, since their peak early this past July. The latest decline was accompanied by a drop in the average price for all grades of gasoline to $2.13 per gallon.
Yesterday, the spot market price for a gallon of regular gasoline fell eight cents from last week&#39;s average to $1.24. In futures trading the November contract closed down further at $1.17 per gallon.
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database. Daily prices are in the DAILY database.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118e.jpg">
The U.S. Department of Energy reported that the demand for gasoline fell by 2.9% y/y. The rate of decline has bottomed out recently but the decline is still the fastest since late-1995 (the latest four weeks versus the same four weeks last year). The demand for all petroleum products also has softened, falling 6.6% y/y.
These DOE figures are available in Haver&#39;s OILWKLY database.
The price for a barrel of West Texas Intermediate crude oil fell further last week to an average $58.64 per barrel, down 60% since the peak in July of $145.66. In futures trading yesterday, the two-month price for crude oil was even lower at $54.95 per barrel.
Last week, prices for natural gas reversed the prior week&#39;s gain and ticked down to $6.65 per mmbtu (-7.4% y/y). The average price this month was nearly one-half below the high for natural gas prices in early-July of $13.19/mmbtu.
Signs of a Reprieve from the Federal Reserve Bank of Dallas can be found <a href="http://dallasfed.org/research/energy/en0803.cfm">here</a>.
Monetary Policy Transparency and Private Sector Forecasts: Evidence from Survey Data from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/3q08Sellon.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">11/17/08</th>
<th scope="col">11/10/08</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>2.07</td>
<td>2.22</td>
<td>-33.1%</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>58.64</td>
<td>64.31</td>
<td>-37.4%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
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Falling by another fifteen cents w/w to $2.07 per gallon, the retail price for a gallon of regular gasoline was at its lowest level since early 2005 according to the U.S. Department of Energy survey. Prices have now fallen $2.04 per [...]

U.S. Gasoline Prices Continued Lower

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118a.jpg" width="353">
U.S. finished producer prices during October matched Consensus expectations and fell 2.8% following their 0.4% drop during September.
A 12.8% decline in energy prices (+5.5% y/y) was due to a 24.9% plunge in gasoline prices, but gasoline prices were still up 3.2% y/y. Additionally, home heating oil prices fell by 9.6% (+24.2% y/y). Natural gas prices fell for the third consecutive month but, again, a 5.9% gain left them still up 10.4% y/y. Residential electric power costs slipped 0.5% (+5.8% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118b.jpg" width="353">
Less food &amp; energy, prices rose 0.4% for the second consecutive month and that compared to a Consensus expectation for a 0.1% uptick. Core pricing indeed has firmed. The y/y gain in the core PPI of 4.4% was the strongest since late-1989. Prices of core finished consumer goods rose 0.3% last month and that was enough to lift the y/y gain to 4.6%, its strongest since 1989. Durable consumer goods prices rose 0.4% (3.0% y/y) on the strength of higher furniture prices which increased 5.4% y/y after a 1.3% gain last year. Additionally, appliance prices firmed and posted a 2.9% y/y rise following the 1.1% increase during 2007. Core nondurable goods prices also strengthened and rose 0.3% last month. Their 5.8% y/y gain was the fastest since early 1999. Prices for capital equipment also firmed. A 0.5% rise during October was the second in a row and it raised the y/y rise to 4.4%, the strongest since 1989.
Finished consumer food prices reversed their September gain and fell 0.2%. However, they still have been strong. Rising 6.6% y/y food prices about matched last year&#39;s gain which was up from a 0.7% uptick during 2006. Meat prices have been firm as have been bakery product prices. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118c.jpg" width="353">
Intermediate goods prices fell 3.9% as energy prices dropped. However, excluding food &amp; energy a 1.7% m/m fall still left these prices up 9.7% y/y which remained near the strongest since 1980.
The crude materials PPI crashed 18.6% (-1.4% y/y) due to a 24.9% drop in energy prices (-1.7% y/y). Crude food prices fell 11.1% and that was enough to lower the y/y gain to -1.3% y/y. Less food &amp; energy crude prices fell 17.0% and that pushed the y/y gain into negative territory for the first time since 2005.
This morning&#39;s testimony by Fed Chairman Ben S. Bernanke is available <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20081118a.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a> (%)</th>
<th scope="col">October</th>
<th scope="col">September</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 class="odd">
<td class="firstcol">Finished Goods</td>
<td>-2.8</td>
<td>-0.4</td>
<td>5.1</td>
<td>3.9</td>
<td>3.0</td>
<td>&nbsp;4.9&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.4</td>
<td>0.4</td>
<td>4.4</td>
<td>1.9</td>
<td>1.5</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-3.9</td>
<td>-1.2</td>
<td>15.3</td>
<td>4.1</td>
<td>6.4</td>
<td>&nbsp;8.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-1.7</td>
<td>-0.3</td>
<td>9.7</td>
<td>2.8</td>
<td>6.0</td>
<td>&nbsp;5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-18.6</td>
<td>-7.9</td>
<td>-1.4</td>
<td>12.1</td>
<td>1.4</td>
<td>14.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-17.0</td>
<td>-9.4</td>
<td>&nbsp;-3.1</td>
<td>15.6</td>
<td>20.8</td>
<td>4.9</td>
</tr>
</tbody>
</table>
</body>
</html>

U.S. finished producer prices during October matched Consensus expectations and fell 2.8% following their 0.4% drop during September. A 12.8% decline in energy prices (+5.5% y/y) was due to a 24.9% plunge in gasoline prices, but [...]

U.S. PPI Fell Again, Core Pricing Power Strong Again

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118a.jpg" align="left" border="0" height="265" width="353">
U.S. finished producer prices during October matched Consensus
expectations and fell 2.8% following their 0.4% drop during September.
A 12.8% decline in energy prices (+5.5% y/y) was due to a
24.9% plunge in gasoline prices, but gasoline prices were still up 3.2%
y/y. Additionally, home heating oil prices fell by 9.6% (+24.2% y/y).
Natural gas prices fell for the third consecutive month but, again, a
5.9% gain left them still up 10.4% y/y. Residential electric power
costs slipped 0.5% (+5.8% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118b.jpg" align="right" border="0" height="265" width="353">
Less food &amp; energy, prices rose 0.4% for the second
consecutive month and that compared to a Consensus expectation for a
0.1% uptick. Core pricing indeed has firmed. The y/y gain in the core
PPI of 4.4% was the strongest since late-1989. Prices of core finished
consumer goods rose 0.3% last month and that was enough to lift the y/y
gain to 4.6%, its strongest since 1989. Durable consumer goods prices
rose 0.4% (3.0% y/y) on the strength of higher furniture prices which
increased 5.4% y/y after a 1.3% gain last year. Additionally, appliance
prices firmed and posted a 2.9% y/y rise following the 1.1% increase
during 2007. Core nondurable goods prices also strengthened and rose
0.3% last month. Their 5.8% y/y gain was the fastest since early 1999.
Prices for capital equipment also firmed. A 0.5% rise during October
was the second in a row and it raised the y/y rise to 4.4%, the
strongest since 1989.
Finished consumer food prices reversed their September gain
and fell 0.2%. However, they still have been strong. Rising 6.6% y/y
food prices about matched last year's gain which was up from a 0.7%
uptick during 2006. Meat prices have been firm as have been bakery
product prices. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118c.jpg" align="left" border="0" height="265" width="353">
Intermediate goods prices fell 3.9% as energy prices dropped.
However, excluding food &amp; energy a 1.7% m/m fall still left
these prices up 9.7% y/y which remained near the strongest
since 1980.
The crude materials PPI crashed 18.6% (-1.4% y/y) due to a
24.9% drop in energy prices (-1.7% y/y). Crude food prices fell 11.1%
and that was enough to lower the y/y gain to -1.3% y/y. Less food
&amp; energy crude prices fell 17.0% and that pushed the y/y gain
into negative territory for the first time since 2005.
This morning's testimony by Fed Chairman Ben S. Bernanke is
available <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20081118a.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer
Price Index</a> (%)</th>
<th scope="col">October</th>
<th scope="col">September</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 class="odd">
<td class="firstcol">Finished Goods</td>
<td>-2.8</td>
<td>-0.4</td>
<td>5.1</td>
<td>3.9</td>
<td>3.0</td>
<td>&nbsp;4.9&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.4</td>
<td>0.4</td>
<td>4.4</td>
<td>1.9</td>
<td>1.5</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-3.9</td>
<td>-1.2</td>
<td>15.3</td>
<td>4.1</td>
<td>6.4</td>
<td>&nbsp;8.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-1.7</td>
<td>-0.3</td>
<td>9.7</td>
<td>2.8</td>
<td>6.0</td>
<td>&nbsp;5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-18.6</td>
<td>-7.9</td>
<td>-1.4</td>
<td>12.1</td>
<td>1.4</td>
<td>14.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-17.0</td>
<td>-9.4</td>
<td>&nbsp;-3.1</td>
<td>15.6</td>
<td>20.8</td>
<td>4.9</td>
</tr>
</tbody>
</table>
U.S. Gasoline Prices Continued
Lower 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 18, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118d.jpg" align="left" border="0">
Falling by another fifteen cents w/w to $2.07 per gallon, the
retail price for a gallon of regular gasoline was at its
lowest level since early 2005 according to the U.S.
Department of Energy survey. Prices have now fallen $2.04 per gallon,
or by more than one-half, since their peak early this past July. The
latest decline was accompanied by a drop in the average price for all
grades of gasoline to $2.13 per gallon.
Yesterday, the spot market price for a gallon of regular
gasoline fell eight cents from last week's average to $1.24. In futures
trading the November contract closed down further at $1.17 per gallon.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118d.jpg" align="right" border="0">
Weekly gasoline prices can be found in Haver's WEEKLY
database. Daily prices are in the DAILY
database.
The U.S. Department of Energy reported that the demand
for gasoline fell by 2.9% y/y. The rate of decline has
bottomed out recently but the decline is still the fastest since
late-1995 (the latest four weeks versus the same four weeks last year).
The demand for all petroleum products also has softened, falling 6.6%
y/y.
These DOE figures are available in Haver's OILWKLY
database.
The price for a barrel of West Texas Intermediate crude oil
fell further last week to an average $58.64 per barrel, down 60% since
the peak in July of $145.66. In futures trading yesterday, the
two-month price for crude oil was even lower at $54.95 per barrel.
Last week, prices for natural gas reversed the prior week's
gain and ticked down to $6.65 per mmbtu (-7.4% y/y). The average price
this month was nearly one-half below the high for natural gas prices in
early-July of $13.19/mmbtu.
Signs of a Reprieve from the Federal
Reserve Bank of Dallas can be found <a href="http://dallasfed.org/research/energy/en0803.cfm">here</a>.
Monetary Policy Transparency and Private Sector
Forecasts: Evidence from Survey Data from the Federal
Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/3q08Sellon.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">11/17/08</th>
<th scope="col">11/10/08</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>2.07</td>
<td>2.22</td>
<td>-33.1%</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>58.64</td>
<td>64.31</td>
<td>-37.4%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
U.S. Chain Store Sales Fell Versus
Last Year 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 18, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118f.jpg" align="left" border="0" height="265" width="353">
According to the International Council of Shopping
Centers-Goldman Sachs Index, a 0.3% uptick in chain store sales last
week made up a piece of the prior week's 1.0% decline. Nevertheless,
sales ticked down 0.1% from the year-ago level.

The latest weekly increase left sales so far in November
down 0.6% from October. During all of October sales fell 1.0% from
September following that month's 1.9% drop. The level of sales during
the latest week remained near the lowest since December of last year.


During the last ten years there has been a 59% 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 weekly leading indicator of chain store sales from
ICSC-Goldman Sachs ticked up 0.1% but was still down 5.7% from the
year-ago level and it was at it's lowest level since 1996.
The chain store sales figures are available in Haver'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">11/15/08</th>
<th scope="col">11/08/08</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>478.5</td>
<td>477.2</td>
<td>-0.1%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
U.S. Home Builders&#8217; Survey Lower
Still 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 18, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118j.jpg" align="left" border="0" height="265" width="353">
The November Housing Market Index (HMI) from the National
Association of Home Builders plumbed a new record low. At a single
level of 9 nearly halved the old record low of 14 reached just last
month. The index is compiled from survey questions asking builders to
rate market conditions as &#8220;good&#8221;, &#8220;fair&#8221;, &#8220;poor&#8221; or &#8220;very high&#8221; to
&#8220;very low&#8221;. Numerical equivalent results over
50 indicate a predominance of &#8220;good&#8221; readings.
Since 1990, the year-to-year change in this index has had a
correlation of 72% with the year-to-year percentage change in new
single-family home sales. As a result, the latest HMI index at best
indicates a bottoming of the housing market's troubles.
The Home Builders Association indicated that its sub-index of
present sales conditions also fell to a record low of 8. That was down
from last year's average level of 27 and 2006's average of 45.
Builders&#8217; expectations for sales six months was relatively
strong an held steady at a level of 19. The
&#8220;traffic of prospective buyers, however, fell to a new low index
reading of 7.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118k.jpg" align="right" border="0" height="265" width="353">
Each of the country's regions showed deterioration in the
index as conditions in each region fell to a new low.
Not only are builders disturbed by the market for new homes,
but the appraisal of conditions for remodeling a home also reached a
record low during the third quarter.
The current market condition for remodeling of a home also is
deemed poor.
The NAHB has compiled the Housing Market Index since 1985.
The weights assigned to the individual index components
are .5920 for single family detached sales, present time; .1358 for
single family detached sales, next six months; and .2722 for traffic of
prospective buyers. The results, along with other housing and
remodeling indexes from NAHB Economics, are included in Haver&#8217;s SURVEYS
database.
Mortgage Innovation, Mortgage Choice, and Housing
Decisions from the Federal Reserve Bank of St. Louis can be
found <a href="http://research.stlouisfed.org/publications/review/08/11/Chambers.pdf">here</a>.
Changing the Rule: State Mortgage Foreclosure
Moratoria During the Great Depression is available <a href="http://research.stlouisfed.org/publications/review/08/11/Wheelock.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/@S4/@S4.HTM">Nat'l
Association of Home Builders</a></th>
<th scope="col">November</th>
<th scope="col">October
&nbsp;</th>
<th scope="col">November '07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>9</td>
<td>14</td>
<td>19</td>
<td>27</td>
<td>42</td>
<td>67</td>
</tr>
</tbody>
</table>
Inflation in the U.K. Declines inOctober 
by <a href="/comment/Curley.html">Louise
Curley</a> November 18, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118g.jpg" align="right" border="0" height="265" width="353">
The
United Kingdom released inflation numbers today.&nbsp; The
acceleration in inflation in the previous months came to a halt in
October.&nbsp; The official measure, the year- to- year percent
change in the consumer price index, fell to 4.5% in October from 5.2%
in September.&nbsp; &nbsp;The core index, which excludes
energy, food, alcoholic beverages and tobacco, fell to 1.9% in October
from 2.2%.&nbsp; The year- to- year change in the retail price
index, which until 2003 was the official measure of inflation, fell to
4.2% in October from 5.00% in September. The three measures of
inflation are shown in the first chart.&nbsp;
Except for
the last two months, the inflation rate as measured by the CPI has been
lower than that measured by the RPI largely because of the exclusion in
the former and inclusion in the latter of mortgage interest payments
and other housing related costs.&nbsp; Until June of this year the
exclusion of these items tended to lower the CPI inflation rate, but
since then it has added to it, as can be seen in the second
chart.
The declines in the various measures of inflation were
due largely to the declines in the prices of food and oil that affected
the indexes directly and declines in the prices of&nbsp; base
metals that affected the indexes indirectly.&nbsp; The declines are
likely to continue, if not intensify, as world demand continues to
fall.&nbsp; Longer term, however, the current fiscal and monetary
policies being pursued by the developed and developing nations should
help to avoid deflation such as engulfed the globe in the thirties. (
If, indeed, they do not lead eventually to a resurgence of
inflation.)&nbsp; As an illustration of the course of inflation and
deflation in the twenties and thirties of the last century, we use the
changes in the consumer price index for the United States, the series,
PCUN67, found in the Haver Analytics' USECON&nbsp;
data base.&nbsp; &nbsp;&nbsp;
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118i.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081118h.jpg" border="0" height="265" width="312">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">UNITED
KINGDOM INFLATION RATES&nbsp;</th>
<th scope="col">Oct 08</th>
<th scope="col">Sep&nbsp; 08&nbsp;</th>
<th scope="col">Oct&nbsp; 07&nbsp;</th>
<th scope="col">M/M Chg</th>
<th scope="col">Y/Y&nbsp; &nbsp;Chg</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">Consumer Price Index
(Y/Y % Chg)</td>
<td>4.5</td>
<td>5.2</td>
<td>2.0</td>
<td>-0.7</td>
<td>2.5</td>
<td>2.32</td>
<td>2.33</td>
<td>2.05</td>
</tr>
<tr>
<td class="firstcol">Core CPI Index (Y/Y %
Chg)</td>
<td>1.9</td>
<td>2.2</td>
<td>1.5</td>
<td>-0.3</td>
<td>0.4</td>
<td>1.69</td>
<td>1.30</td>
<td>1.51</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Price
Index&nbsp; (Y/Y % Chg)</td>
<td>4.2</td>
<td>5.0</td>
<td>4.2</td>
<td>-0.8</td>
<td>0.0</td>
<td>4.27</td>
<td>3.19</td>
<td>2.83</td>
</tr>
</tbody>
</table>

</body></html>

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081117i.jpg" align="left" border="0" height="265" width="353">
The Bank of France Industry Sentiment Index is pointing much
lower. At 77.14 it has fallen in October from 86.08 the month before.
This compares to its 12-month average of 97. The index is weaker than
this level only about 2 percent of the time. The latest production and
production outlook indices are at bottom-scraping levels. Foreign
orders and new industry orders are both at their
lowest level since 1987. The hiring outlook is worse only about 20% of
the time.
It is no wonder that, armed with this survey result, French
Finance Minister Christine Lagarde warned on the outlook. All of Europe
is crumbling under the strain.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col">Bank of France Monthly INDUSTRY Survey: SUMMARY </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>12 MO</td>
<td>Since Jan-87</td>
<td>Percentile</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>Oct-08</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>AVERAGE</td>
<td>Average</td>
<td>rank/range</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">Production-Latest Month</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total Industry</td>
<td>-23.53</td>
<td>-20.09</td>
<td>8.2</td>
<td>-2</td>
<td>7</td>
<td>0.06</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">Production Outlook</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total Industry</td>
<td>-18</td>
<td>-9</td>
<td>0</td>
<td>4</td>
<td>15</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">Demand</td>
</tr>
<tr class="grey2">
<td class="firstcol">Overall Order Books</td>
<td>-22.61</td>
<td>-6.61</td>
<td>-2.17</td>
<td>10</td>
<td>4</td>
<td>22.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Foreign Orders</td>
<td>-33.2</td>
<td>-28.65</td>
<td>-5.85</td>
<td>-3</td>
<td>8</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">New Orders</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total Industry</td>
<td>-35.36</td>
<td>-32.17</td>
<td>-1.49</td>
<td>-3</td>
<td>8</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">Stocks: Finished Goods</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total Industry</td>
<td>3.62</td>
<td>0.35</td>
<td>1.26</td>
<td>0</td>
<td>-2</td>
<td>80.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Capacity Utilization</td>
<td>77.87</td>
<td>79.9</td>
<td>80.47</td>
<td>82</td>
<td>83</td>
<td>3.4%</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">Hiring</td>
</tr>
<tr class="grey2">
<td class="firstcol">Latest Month</td>
<td>-12.12</td>
<td>-6.62</td>
<td>-2.27</td>
<td>-3</td>
<td>-1</td>
<td>20.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Outlook</td>
<td>-16.19</td>
<td>-9.93</td>
<td>-4.2</td>
<td>-5</td>
<td>-4</td>
<td>22.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Industry Sentiment
Index</td>
<td>77.14</td>
<td>86.07</td>
<td>92.92</td>
<td>97</td>
<td>102</td>
<td>2.3%</td>
</tr>
</tbody>
</table>
</body></html>

The Bank of France Industry Sentiment Index is pointing much lower. At 77.14 it has fallen in October from 86.08 the month before. This compares to its 12-month average of 97. The index is weaker than this level only about 2 percent [...]

French Prospects Drop Sharply

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081117e.jpg" align="right" border="0" height="265" width="353">
The Euro Areatrade balance in September was -5,742 million
euros virtually unchanged fromthe -5,705 million euros in August. It
was, however, 8,549 million euros below the trade surplus of 2,807
million euros in September 2007. Since December 2007, the trade balance
in the Euro Area has, more often than not, been negative. The largest
deficit of 6,387 million euros was recorded in July of this year, as
can be seen in the first chart.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081117f.jpg" align="right" border="0" height="265" width="353">
Both high oil prices and a rising euro led to the
deterioration in the trade balance. High oil prices accounted for much
of the increasing trade deficits with Russia and OPEC earlier this
year. With the recent decline in the price of oil, the trade balance
with OPEC has become less negative. The trade balances with Russia and
OPEC are shown in the second chart.
The rising euro has dampened exports to and encouraged imports
from trading partners, leading to smaller surpluses or larger deficits.
For example, the Euro Area's trade surplus with the United States has
fallen sharply over the last year and a half, as shown in the third
chart. 
 

The price of oil and the value of the euro declined
dramatically in recent months as the global financial crisis spread to
more countries and intensified. The daily price of oil and the daily
value of the euro are shown in the fourth chart. While the decline in
the price of oil should reduce the Euro Area's imports, the effect of
the decline in the euro is less predictable. Although it should be good
for exports, falling world demand could outweigh the positive effects
of the lower euro. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081117g.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081117h.jpg" border="0" height="265" width="312">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">EURO
AREA 15 &nbsp;TRADE BALANCES</th>
<th scope="col">Sep 08</th>
<th scope="col">Aug&nbsp; 08&nbsp;</th>
<th scope="col">Sep&nbsp; 07</th>
<th scope="col">M/M&nbsp; chg&nbsp;</th>
<th scope="col">Y/Y&nbsp; chg&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">TOTAL</td>
<td>-5742</td>
<td>-5705</td>
<td>2807</td>
<td>-36</td>
<td>-8549</td>
<td>20384</td>
<td>-13049</td>
<td>10744</td>
</tr>
<tr>
<td class="firstcol">With United States</td>
<td>4197</td>
<td>4160</td>
<td>5098</td>
<td>37</td>
<td>-901</td>
<td>63525</td>
<td>73914</td>
<td>65239</td>
</tr>
<tr class="odd">
<td class="firstcol">With Russia</td>
<td>-3729</td>
<td>-3429</td>
<td>-1891</td>
<td>-299</td>
<td>-1837</td>
<td>-30843</td>
<td>-40429</td>
<td>-32676</td>
</tr>
<tr>
<td class="firstcol">With OPEC</td>
<td>-5235</td>
<td>-6226</td>
<td>-2286</td>
<td>981</td>
<td>-2949</td>
<td>-33532</td>
<td>-48010</td>
<td>-36611</td>
</tr>
</tbody>
</table>

</body></html>

The Euro Areatrade balance in September was -5,742 million euros virtually unchanged fromthe -5,705 million euros in August. It was, however, 8,549 million euros below the trade surplus of 2,807 million euros in September 2007. Since [...]

Euro Area's September Trade Deficit of 5.7 Billion Euros Shows Little Change from August

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081117c.jpg" width="353">
The November Empire State Index of manufacturing actor activity as reported by the Federal Reserve Bank of New York fell to -25.43 which, for the series&#39; short eight year history, was a record low. The decline was just modest versus the October level but it was down sharply from an average of -3.19 during the third quarter. A November reading of -26.1 for had been the Consensus expectation.
The figure is a diffusion index. Since the series&#39; inception in 2001 there has been a 58% correlation between its&#39; level and the three-month change in U.S. factory sector industrial production.
The index of pricing pressure also fell fell sharply to 20.48. The ten point decline from October was to the lowest level since December of 2003. Since inception in 2001 there has been an 81% correlation between the index of prices paid and the three-month change in the core intermediate materials PPI.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081117d.jpg" width="353">
The indexes for new orders, shipments and unfilled orders each fell but the delivery times component ticked higher.
The employment index also fell during November dropping sharply to its lowest level since late 2001, negative for the fifth consecutive month. In the history of the NY employment index, there has been an 86% correlation between it and the three-month growth in overall factory sector employment.
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
The Empire State index of expected business conditions in six months fell to 13.02 which was its lowest since 2001. The subseries for shipments and employment jumped and the pricing series fell to its lowest level in twelve months.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">November &#39;07&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index, %)&nbsp;&nbsp;</td>
<td>-25.43</td>
<td>-24.62</td>
<td>24.05</td>
<td>17.23</td>
<td>20.24</td>
<td>15.53</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>20.48</td>
<td>31.71</td>
<td>47.37</td>
<td>35.64</td>
<td>41.88</td>
<td>44.74</td>
</tr>
</tbody>
</table>


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The November Empire State Index of manufacturing actor activity as reported by the Federal Reserve Bank of New York fell to -25.43 which, for the series' short eight year history, was a record low. The decline was just modest versus [...]

U.S. Empire State Index Negative Again; Prices Paid The Weakest Since 2003

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.

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**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.

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**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.

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**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.

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**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.

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

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

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Charts of the Week: Tariff Truce, Tenuous Trust

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

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

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

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

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

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

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

U.S. Light Vehicle Sales Fall in April

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

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

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

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

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

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

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

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

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

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

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

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

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

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

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%.

Economy in Brief: November 2008

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Inflation in the U.K. Declines in October

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U.S. PPI Fell Again, Core Pricing Power Strong Again

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French Prospects Drop Sharply

Euro Area's September Trade Deficit of 5.7 Billion Euros Shows Little Change from August

U.S. Empire State Index Negative Again; Prices Paid The Weakest Since 2003