Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118d.jpg" align="left" border="0" height="265" width="353">The Confederation of British
Industry survey shows
industrial trends continue to make progress and cut their declining
trends. Still the declining trends remain large and the degree of
progress is slow although this month&#8217;s gain in orders is one of the
sharpest. 
Total orders revived to -45 from -51 a still steep negative
reading but a substantial month-to-month gain in November. Export
orders, following the pattern of other EU countries, have made even
grater progress this month improving to -37 from -46.
Overall orders bottomed in the cycle at -59 in July and the
series has only clawed back to -45 by November. This month&#8217;s six point
gain month to month gain is twice the pace of the rise from the cycle
low (approx 3.5 per month). The surge in export orders this month is
even more impressive on that score since those orders had only been
rising by 3 points per month from their cycle low compared to this
month&#8217;s jump of nine points.
The outlook for the volume of output has improved rapidly from
its cycle low of -48 in March of this year. Its rapid increases came in
April, May and in August. In October the outlook index for volume
switched to a positive reading and this month it holds that same
reading of +4. Although the month to month improvement in the volume
outlook index has stagnated this month, the level of the reading
staying in positive territory still marks it as a good result.
The survey evidence is that British industry sees itself
improving and expects that to continue. Overall orders are showing
strong improving profiles and are being spurred substantially by export
orders. While orders have a long way to go to become a truly positive
reading, the outlook of the British industry survey respondents says
they expect it to get there. On balance the survey is a good result.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" colspan="11">UK
Industrial volume data CBI Survey</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reported:</td>
<td>Nov 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Aug 09</td>
<td>Jul 09</td>
<td>12MO Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-45</td>
<td>-51</td>
<td>-48</td>
<td>-54</td>
<td>-59</td>
<td>-51</td>
<td>21%</td>
<td>9</td>
<td>-59</td>
<td>68</td>
</tr>
<tr>
<td class="firstcol">Export Orders</td>
<td>-37</td>
<td>-46</td>
<td>-46</td>
<td>-48</td>
<td>-45</td>
<td>-43</td>
<td>27%</td>
<td>3</td>
<td>-52</td>
<td>55</td>
</tr>
<tr>
<td class="firstcol">Stocks:FinGds</td>
<td>20</td>
<td>10</td>
<td>13</td>
<td>13</td>
<td>20</td>
<td>23</td>
<td>67%</td>
<td>31</td>
<td>-2</td>
<td>33</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">Looking
ahead</td>
</tr>
<tr>
<td class="firstcol">Output Volume:Nxt 3M</td>
<td>4</td>
<td>4</td>
<td>-2</td>
<td>-5</td>
<td>-14</td>
<td>-28</td>
<td>68%</td>
<td>28</td>
<td>-48</td>
<td>76</td>
</tr>
<tr>
<td class="firstcol">Avg Prices 4 Nxt 3m</td>
<td>-5</td>
<td>-4</td>
<td>-10</td>
<td>-17</td>
<td>-6</td>
<td>-10</td>
<td>28%</td>
<td>34</td>
<td>-20</td>
<td>54</td>
</tr>
</tbody>
</table>
</body></html>

The Confederation of British Industry survey shows industrial trends continue to make progress and cut their declining trends. Still the declining trends remain large and the degree of progress is slow although this month’s gain in [...]

EMU Trade Balance Improves

Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118a.jpg" align="right" border="0" height="265" width="353">
Pricing
pressure continued under control last month. The overall October CPI
roughly matched Consensus expectations and rose 0.3%, despite energy
prices which rose m/m. Stripping out both energy &amp; food prices,
consumer prices increased 0.2% as they did during September. However,
the y/y increase in "core" prices picked up modestly to 1.7% from its
weakest since early-2004. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118b.jpg" align="right" border="0" height="265" width="353">
Energy prices continued their
recovery with a 1.5% m/m increase, bringing the three-month annual rate
of growth to 30.1%. Fuel oil prices surged 6.0% (-23.5% y/y) after
smaller gains during the prior two months while gasoline prices
increased another 1.6% (-17.9% y/y) following a 1.0% gain during
September. Finally, prices for natural gas &amp; electricity rose
0.9% (-7.2% y/y) after little change during the prior two months.Food
&amp; beverage prices continued weak last month with a 0.1% uptick.
So far this year, food prices have fallen an unprecedented 0.6%. Recent
weakness has been led by lower dairy prices (-8.2% y/y) and lower fruit
&amp; vegetable (-5.6% y/y) costs. Prices for meats, poultry, fish
&amp; eggs also fell 4.8% y/y while cereals &amp; bakery
product prices were off 0.6%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118c.jpg" align="right" border="0" height="265" width="353">
Inflation in the CPI less food &amp;
energy also remained moderate but, like the previous month, the 0.2%
October increase was slightly firmer than expected. Price gains
accelerated to a 2.0% annual rate since December of last year. That's
only slightly below the 2.3% rates of increase during the last two
years.Despite the weak economy, the acceleration in core price
inflation this year owes to faster increases in core goods
prices. Their 0.4% increase last month lifted the annualized
rate so far in 2009 to 3.2% from no change during the prior two years.
Higher tobacco prices continued to account for much of that
acceleration. In addition, there has been a firming of prices
elsewhere. Prices for new &amp; used motor vehicles have firmed
despite an aggressive marketing campaign, up 1.7% last month and at a
5.2% rate since December. They rose 0.3% last month and at a 35.0%
annual rate since December. That compares with price deflation during
the last two years. Though apparel prices ticked 0.4% lower last month
they've risen at an accelerated 2.3% rate this year. That follows price
declines which extends back to 1994. Continuing weak were prices for
household furnishings &amp; operation. They fell another 0.5%
leaving them down at a 1.0% rate so far this year. The U.S. recession
continued to hold back growth in core services prices.
Again, they ticked up just 0.1% last month and have risen at a 1.5%
annual rate so far this year, half that in 2008 and nearly the weakest
since 1983. Weakness in the housing market accounts for much of that
moderation. Last month, shelter prices were unchanged and they've risen
at a just a 0.6% annual rate so far in 2009. Owners equivalent rent of
primary residences, a measure not equivalent to other house price
measures, again slipped m/m and have risen at a 1.0% rate so far this
year versus a 2.5% 2008 increase. Elsewhere in services, public
transportation prices again were strong and rose 0.9% (-4.5%
y/y).&nbsp;Medical care services prices ticked up 0.2% but at a
3.4% rate this year. That compares to a 4.2% increase last year.
Finally, education costs have been firm and they're up at a 4.9% annual
rate this year after a 5.8% gain during 2008. However, recreation
prices are roughly unchanged this year after a 1.6% 2008 gain. The
chained CPI, which adjusts for shifts in consumption patterns, rose
0.1% during October while year-to-year prices fell 0.5%. Conversely,
chained prices less food and energy firmed last month by 0.3%, only the
second material gain in five months. The consumer price data is
available in Haver's USECON database while detailed
figures can be found in the CPIDATA database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<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">October</th>
<th scope="col">Oct. Y/Y&nbsp;</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>0.3</td>
<td>-0.2</td>
<td>0.2</td>
<td>0.4</td>
<td>3.8</td>
<td>2.9</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.2</td>
<td>1.7</td>
<td>0.2</td>
<td>0.1</td>
<td>2.3</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>0.4</td>
<td>2.3</td>
<td>0.3</td>
<td>-0.3</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Services less Energy</td>
<td>0.1</td>
<td>1.5</td>
<td>0.1</td>
<td>0.2</td>
<td>3.1</td>
<td>3.4</td>
<td>3.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Energy</td>
<td>1.5</td>
<td>-14.1</td>
<td>0.6</td>
<td>4.6</td>
<td>13.5</td>
<td>5.7</td>
<td>11.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>0.1</td>
<td>-0.3</td>
<td>-0.1</td>
<td>0.1</td>
<td>5.4</td>
<td>3.9</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained
CPI: Total (NSA)</a>&nbsp;</td>
<td>0.1</td>
<td>-0.5</td>
<td>0.1</td>
<td>0.2</td>
<td>3.3</td>
<td>2.5</td>
<td>2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food
&amp; Energy&nbsp;</td>
<td>0.3</td>
<td>1.3</td>
<td>0.2</td>
<td>0.1</td>
<td>2.0</td>
<td>2.0</td>
<td>2.2</td>
</tr>
</tbody>
</table>
</body></html>

Pricing pressure continued under control last month. The overall October CPI roughly matched Consensus expectations and rose 0.3%, despite energy prices which rose m/m. Stripping out both energy & food prices, consumer prices [...]

CPI Increases Remain Moderate

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118a.jpg" align="right" border="0" height="265" width="353">Pricing
pressure continued under control last month. The overall October CPI
roughly matched Consensus expectations and rose 0.3%, despite energy
prices which rose m/m. Stripping out both energy &amp; food prices,
consumer prices increased 0.2% as they did during September. However,
the y/y increase in "core" prices picked up modestly to 1.7% from its
weakest since early-2004. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118b.jpg" align="right" border="0" height="265" width="353">Energy
prices continued their
recovery with a 1.5% m/m increase, bringing the three-month annual rate
of growth to 30.1%. Fuel oil prices surged 6.0% (-23.5% y/y) after
smaller gains during the prior two months while gasoline prices
increased another 1.6% (-17.9% y/y) following a 1.0% gain during
September. Finally, prices for natural gas &amp; electricity rose
0.9% (-7.2% y/y) after little change during the prior two months.
Food
&amp; beverage prices continued weak last month with a 0.1% uptick.
So far this year, food prices have fallen an unprecedented 0.6%. Recent
weakness has been led by lower dairy prices (-8.2% y/y) and lower fruit
&amp; vegetable (-5.6% y/y) costs. Prices for meats, poultry, fish
&amp; eggs also fell 4.8% y/y while cereals &amp; bakery
product prices were off 0.6%.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118c.jpg" align="right" border="0" height="265" width="353">Inflation
in the CPI less food &amp;
energy also remained moderate but, like the previous month, the 0.2%
October increase was slightly firmer than expected. Price gains
accelerated to a 2.0% annual rate since December of last year. That's
only slightly below the 2.3% rates of increase during the last two
years.
Despite the weak economy, the acceleration in core price
inflation this year owes to faster increases in core goods
prices. Their 0.4% increase last month lifted the annualized
rate so far in 2009 to 3.2% from no change during the prior two years.
Higher tobacco prices continued to account for much of that
acceleration. In addition, there has been a firming of prices
elsewhere. Prices for new &amp; used motor vehicles have firmed
despite an aggressive marketing campaign, up 1.7% last month and at a
5.2% rate since December. They rose 0.3% last month and at a 35.0%
annual rate since December. That compares with price deflation during
the last two years. Though apparel prices ticked 0.4% lower last month
they've risen at an accelerated 2.3% rate this year. That follows price
declines which extends back to 1994. Continuing weak were prices for
household furnishings &amp; operation. They fell another 0.5%
leaving them down at a 1.0% rate so far this year. 
The U.S. recession
continued to hold back growth in core services prices.
Again, they ticked up just 0.1% last month and have risen at a 1.5%
annual rate so far this year, half that in 2008 and nearly the weakest
since 1983. Weakness in the housing market accounts for much of that
moderation. Last month, shelter prices were unchanged and they've risen
at a just a 0.6% annual rate so far in 2009. Owners equivalent rent of
primary residences, a measure not equivalent to other house price
measures, again slipped m/m and have risen at a 1.0% rate so far this
year versus a 2.5% 2008 increase. Elsewhere in services, public
transportation prices again were strong and rose 0.9% (-4.5%
y/y).&nbsp;Medical care services prices ticked up 0.2% but at a
3.4% rate this year. That compares to a 4.2% increase last year.
Finally, education costs have been firm and they're up at a 4.9% annual
rate this year after a 5.8% gain during 2008. However, recreation
prices are roughly unchanged this year after a 1.6% 2008 gain. 
The
chained CPI, which adjusts for shifts in consumption patterns, rose
0.1% during October while year-to-year prices fell 0.5%. Conversely,
chained prices less food and energy firmed last month by 0.3%, only the
second material gain in five months. 
 The consumer price data is
available in Haver's USECON database while detailed
figures can be found in the CPIDATA database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<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">October</th>
<th scope="col">Oct. Y/Y&nbsp;</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>0.3</td>
<td>-0.2</td>
<td>0.2</td>
<td>0.4</td>
<td>3.8</td>
<td>2.9</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.2</td>
<td>1.7</td>
<td>0.2</td>
<td>0.1</td>
<td>2.3</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>0.4</td>
<td>2.3</td>
<td>0.3</td>
<td>-0.3</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Services less Energy</td>
<td>0.1</td>
<td>1.5</td>
<td>0.1</td>
<td>0.2</td>
<td>3.1</td>
<td>3.4</td>
<td>3.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Energy</td>
<td>1.5</td>
<td>-14.1</td>
<td>0.6</td>
<td>4.6</td>
<td>13.5</td>
<td>5.7</td>
<td>11.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>0.1</td>
<td>-0.3</td>
<td>-0.1</td>
<td>0.1</td>
<td>5.4</td>
<td>3.9</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained
CPI: Total (NSA)</a>&nbsp;</td>
<td>0.1</td>
<td>-0.5</td>
<td>0.1</td>
<td>0.2</td>
<td>3.3</td>
<td>2.5</td>
<td>2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food
&amp; Energy&nbsp;</td>
<td>0.3</td>
<td>1.3</td>
<td>0.2</td>
<td>0.1</td>
<td>2.0</td>
<td>2.0</td>
<td>2.2</td>
</tr>
</tbody>
</table>
 EMU Trade Balance Improves 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 18, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118d.jpg" align="left" border="0" height="265" width="353">The Confederation of British
Industry survey shows
industrial trends continue to make progress and cut their declining
trends. Still the declining trends remain large and the degree of
progress is slow although this month&#8217;s gain in orders is one of the
sharpest. 
Total orders revived to -45 from -51 a still steep negative
reading but a substantial month-to-month gain in November. Export
orders, following the pattern of other EU countries, have made even
grater progress this month improving to -37 from -46.
Overall orders bottomed in the cycle at -59 in July and the
series has only clawed back to -45 by November. This month&#8217;s six point
gain month to month gain is twice the pace of the rise from the cycle
low (approx 3.5 per month). The surge in export orders this month is
even more impressive on that score since those orders had only been
rising by 3 points per month from their cycle low compared to this
month&#8217;s jump of nine points.
The outlook for the volume of output has improved rapidly from
its cycle low of -48 in March of this year. Its rapid increases came in
April, May and in August. In October the outlook index for volume
switched to a positive reading and this month it holds that same
reading of +4. Although the month to month improvement in the volume
outlook index has stagnated this month, the level of the reading
staying in positive territory still marks it as a good result.
The survey evidence is that British industry sees itself
improving and expects that to continue. Overall orders are showing
strong improving profiles and are being spurred substantially by export
orders. While orders have a long way to go to become a truly positive
reading, the outlook of the British industry survey respondents says
they expect it to get there. On balance the survey is a good result.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" colspan="11">UK
Industrial volume data CBI Survey</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reported:</td>
<td>Nov 
09</td>
<td>Oct 
09</td>
<td>Sep 
09</td>
<td>Aug 
09</td>
<td>Jul 
09</td>
<td>12MO 
Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-45</td>
<td>-51</td>
<td>-48</td>
<td>-54</td>
<td>-59</td>
<td>-51</td>
<td>21%</td>
<td>9</td>
<td>-59</td>
<td>68</td>
</tr>
<tr>
<td class="firstcol">Export Orders</td>
<td>-37</td>
<td>-46</td>
<td>-46</td>
<td>-48</td>
<td>-45</td>
<td>-43</td>
<td>27%</td>
<td>3</td>
<td>-52</td>
<td>55</td>
</tr>
<tr>
<td class="firstcol">Stocks:FinGds</td>
<td>20</td>
<td>10</td>
<td>13</td>
<td>13</td>
<td>20</td>
<td>23</td>
<td>67%</td>
<td>31</td>
<td>-2</td>
<td>33</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">Looking
ahead</td>
</tr>
<tr>
<td class="firstcol">Output Volume:Nxt 3M</td>
<td>4</td>
<td>4</td>
<td>-2</td>
<td>-5</td>
<td>-14</td>
<td>-28</td>
<td>68%</td>
<td>28</td>
<td>-48</td>
<td>76</td>
</tr>
<tr>
<td class="firstcol">Avg Prices 4 Nxt 3m</td>
<td>-5</td>
<td>-4</td>
<td>-10</td>
<td>-17</td>
<td>-6</td>
<td>-10</td>
<td>28%</td>
<td>34</td>
<td>-20</td>
<td>54</td>
</tr>
</tbody>
</table>

 U.S. Housing Starts Fall To Their
Lowest Level Since April 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 18, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118e.jpg" align="right" border="0" height="265" width="353">Housing
sector activity continued to moderate after increases this past spring.
Housing starts fell last month to 529,000 (AR) units versus 592,000
during September which was revised up slightly. The latest level was
the lowest since April and down nearly one-third y/y. More sobering was
that since the peak in January of 2006 starts have fallen by more than
three-quarters. In addition, October's figure fell well short of
Consensus expectations for 600,000 starts.
Loss of forward
momentum was evident in the decline in starts of single-family homes.
They fell 3.9% last month to 476,000 units (AR), reversed
all of the prior month's increase and were at the lowest level since
May. Despite these disappointments, however, single-family starts were
one-third higher than the February low. During the last ten years,
there has been an 84% correlation between the q/q change in
single-family starts and their contribution to quarterly GDP growth.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118f.jpg" align="right" border="0" height="265" width="353">A further
loss of momentum was evident in the multi-family sector where
starts starts fell by one-third m/m during October to the record low.
Starts of apartments, condominiums &amp; town houses were down
88.2% from the January 2006 peak.
Starts of single-family
units fell throughout the country last month. Single-family starts in
the Northeast fell 9.6% (-17.5% y/y) while starts in the South fell
7.3% (-4.9% y/y). In the Midwest starts declined 4.8% (-16.8% y/y) and
starts in the West fell 5.9% (-16.5% y/y) to their lowest level since
May.
 Building permits dropped 4.0%, the third decline in four
months,
but remained 10.8% above their record low reached in April. As with
starts, permits to build a single-family home have been relatively
strong. They fell just 0.2% last month and were down 4.0%
y/y.
The housing starts figures can be found in
Haver's USECON database.
How
Rigid Are Producer Prices? from the Federal Reserve Bank of
New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr407.pdf">here</a>.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Housing
Starts (000s, SAAR)</th>
<th scope="col">October</th>
<th scope="col">Oct. Y/Y</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>529</td>
<td>-30.7%</td>
<td>592</td>
<td>581</td>
<td>900</td>
<td>1,342</td>
<td>1,812</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>476</td>
<td>-10.9</td>
<td>511</td>
<td>481</td>
<td>616</td>
<td>1,036</td>
<td>1,474</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>53</td>
<td>-76.9</td>
<td>81</td>
<td>100</td>
<td>285</td>
<td>306</td>
<td>338</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>552</td>
<td>-24.3</td>
<td>575</td>
<td>580</td>
<td>895</td>
<td>1,392</td>
<td>1,844</td>
</tr>
</tbody>
</table>

 U.S. Home Builders&#8217; Index Recovery
Stuttering Again This Month 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 18, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118g.jpg" align="right" border="0" height="265" width="353">Since
the spring recovery, housing activity has been roughly flat according
to The National Association of Home Builders. They reported that its
November Composite Housing Market Index held stable with a downwardly
revised October reading. Though the index remained double the low of 8
this past January there's been little, if any, improvement during the
last several months. 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;. The figure is a
diffusion index, therefore, numerical results over 50 indicate a
predominance of &#8220;good&#8221; readings. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118h.jpg" align="right" border="0" height="265" width="353">
The present sales
index held stable at 17 which equaled the 3Q average. In the West the
index rose slightly and was sharply higher than one year ago. In the
South the index also held stable m/m (+41.7% y/y). In the Northeast the
index fell m/m but remained three-quarters higher than the year-ago
level.&nbsp;In the Midwest the index also fell m/m but remained
double last year. The sub-index of sales during the next six months
rose slightly m/m and offset most of the October decline.
·&nbsp;The Home Builders' Association also reported that traffic of
prospective buyers held stable with October at the lowest level since
July.&lt;/p&gt;&lt;p&gt;The Home Builders' Housing
Opportunity Index,
which is the share of homes sold that could be considered affordable to
a family earning the median income, fell slightly in the second
quarter. It had jumped earlier to a record high of 72.5% buoyed by
lower home prices, lower interest rates and higher income. (There is a
break in the series from 2002 to 2003.)
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091118i.jpg" align="right" border="0" height="265" width="353">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.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><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</th>
<th scope="col">September</th>
<th scope="col">&nbsp;November '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
<tr class="odd">
<td class="firstcol">Composite Housing Market Index
(All Good = 100)</td>
<td>17</td>
<td>17</td>
<td>19</td>
<td>9</td>
<td>16</td>
<td>27</td>
<td>42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales</td>
<td>17</td>
<td>17</td>
<td>18</td>
<td>9</td>
<td>16</td>
<td>27</td>
<td>45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales:
Next Six Months</td>
<td>28</td>
<td>26</td>
<td>29</td>
<td>18</td>
<td>25</td>
<td>37</td>
<td>51</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Traffic of
Prospective Buyers</td>
<td>13</td>
<td>13</td>
<td>17</td>
<td>7</td>
<td>14</td>
<td>21</td>
<td>30</td>
</tr>
</thead>
</table>

</body></html>

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117h.jpg" align="right" border="0" height="265" width="353">
The news
from Canada continues to raise doubts about the forecast of a 2% rise
in GDP in the third quarter made earlier by Mark Carney, Governor of
the Bank of Canada.&nbsp; Monthly GDP declined in July and August.
The continued strength of the C$ is affecting
exports.Today, data on sales, new and unfilled
orders and inventories were released for the manufacturing sector and
they were mixed.&nbsp; Manufacturing sales were lower than expected
but the pace of new orders and inventories was more
encouraging.&nbsp; New orders increased 8.3% in September after
having declined in July and August.&nbsp; Inventories continue to
decline and the inventory sales ratio is now down to 1.46 from it peak
of 1.63 in January of this year.&nbsp; The ratio is shown in the
first chart and is approaching what looks like a normal ratio of around
1.30.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117i.jpg" align="right" border="0" height="265" width="353">
While there may be some doubts about the
magnitude of the rise in Canada's third quarter GDP, there is no doubt
that the Canadian economy is at a turning point and will show some
growth in the third quarter.&nbsp; Most of the data relating to the
Canadian economy released recently has been erratic--a step forward,
then some retraction.&nbsp; Nevertheless, the forward momentum has
generally overcome the retraction.&nbsp;&nbsp; In addition to
manufacturing sales, the number of building permits authorized and
retail sales are good examples of such data and they are shown in the
second chart.&nbsp; Recent changes in both series are volatile, but
the trend for both is clearly positive. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
Manufacturing </th>
<th scope="col">Sep 09</th>
<th scope="col">Aug 09</th>
<th scope="col">Jul&nbsp; 09</th>
<th scope="col">Jun 09</th>
<th scope="col">May 09&nbsp;</th>
<th scope="col">Apr 09&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Shipments (M/M % Chg)</td>
<td>1.43%</td>
<td>-1.77%</td>
<td>5.17%</td>
<td>3.28%</td>
<td>-4.44%</td>
<td>-0.36%</td>
</tr>
<tr>
<td class="firstcol">New Orders (M/M % Chg)</td>
<td>8.26%</td>
<td>-1.20%</td>
<td>-5.68%</td>
<td>20.38%</td>
<td>-6.29%</td>
<td>-11.16%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders (M/M % Chg)</td>
<td>-0.57%</td>
<td>-5.06%</td>
<td>-5.26%</td>
<td>2.11%</td>
<td>-7.04%</td>
<td>-5.88%</td>
</tr>
<tr>
<td class="firstcol">Inventories (M/M Change in Mil.
C$)</td>
<td>-1166.909</td>
<td>-299.573</td>
<td>-1257.203</td>
<td>-160.873</td>
<td>-1117.464</td>
<td>-719.741</td>
</tr>
<tr class="odd">
<td class="firstcol">Inventories/Sales Ratio</td>
<td>1.46</td>
<td>1.50</td>
<td>1.49</td>
<td>1.59</td>
<td>1.62</td>
<td>1.55</td>
</tr>
</tbody>
</table>
</body></html>

The news from Canada continues to raise doubts about the forecast of a 2% rise in GDP in the third quarter made earlier by Mark Carney, Governor of the Bank of Canada. Monthly GDP declined in July and August. The continued strength of [...]

Canadian Manufacturing Data And Prospects For Q3 GDP

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117g.jpg" align="left" border="0" height="265" width="353">
The EMU trade surplus continued to grow as exports rebounded
strongly from a lackluster August that saw them fall by 4%. In
September exports are back up, and off to the races.
Exports contribute to growth overallEMU
exports now are off by 17.8% Yr/Yr, better than the 24.8% drop for
imports. To this point the larger relative drop in imports makes the
EMU trade sector a contributor to growth.
Exports are looking solid again Over recent
months the contribution of exports to growth is looking even stronger-
like a real force instead of a bit of subtle arithmetic. Over six
months exports are rising at an 8.3% pace and over 3-months the growth
rate is 25.6%. These metrics compare to import annual &#8216;growth&#8217; rates of
-8.5% over six months and of +3.4% over three months. Obviously
EMU-region domestic demand is lagging in its developing as imports are
still falling rapidly or barely heading higher depending on the period
for that calculation. Meanwhile EMU exports are exploiting demand
revival elsewhere.
Category-wide rebound in exportsAfter
seeing declines across most key categories in August exports showed
strong sharp category-wide improvements in September. Imports had a
less widespread drop in August but are experiencing some revival in
September as well.
D&#233;j&#225; vu all over again?EMU, like China and
like Japan, is seeing a revival of export led growth. While China is
being lauded for its huge domestic stimulus program at the end of the
day it is a net exporter, its surplus is growing, so it is getting
stimulus from overseas. Meanwhile the US trade deficit popped up in the
wake of surging oil imports and auto imports that came on the heels of
its cash for clunkers auto sector stimulus program. Even though the US
consumer is late to revive in this cycle foreigners have been quick to
glean whatever spoils there are in the US market. All this smacks of
business as usual. If the global economy is to be made safer, business
as usual will have to change its stripes. Europe, Japan and China if
they are to hold their exports focus will have to find markets other
than the US to exploit or it will be d&#233;j&#225; vu all over again, as that
sage Yogi Berra once said.

Ezone Trade Trends For Goods
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>3M</td>
<td>6M</td>
<td> 12M</td>
<td>12M Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance*</td>
<td>&#8364; 6,801</td>
<td>&#8364; 2,235</td>
<td>&#8364; (6,433)</td>
<td>&#8364; 2,976</td>
<td>&#8364;(3,092)</td>
<td>&#8364; 1,842</td>
</tr>
<tr>
<td colspan="7">Exports</td>
</tr>
<tr class="odd">
<td class="firstcol">All Exp</td>
<td>5.5%</td>
<td>-4.1%</td>
<td>25.6%</td>
<td>8.3%</td>
<td>-17.8%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food and Drinks</td>
<td>2.8%</td>
<td>-5.1%</td>
<td>3.9%</td>
<td>0.3%</td>
<td>-10.2%</td>
<td>11.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Raw materials</td>
<td>1.7%</td>
<td>-5.0%</td>
<td>12.6%</td>
<td>9.1%</td>
<td>-14.7%</td>
<td>2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other</td>
<td>5.8%</td>
<td>-4.0%</td>
<td>27.8%</td>
<td>9.0%</td>
<td>-18.5%</td>
<td>4.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG</td>
<td>2.6%</td>
<td>-6.4%</td>
<td>13.5%</td>
<td>-5.4%</td>
<td>-21.7%</td>
<td>1.6%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">IMPORTS</td>
</tr>
<tr class="odd">
<td class="firstcol">All IMP</td>
<td>1.1%</td>
<td>-1.0%</td>
<td>3.4%</td>
<td>-8.5%</td>
<td>-24.8%</td>
<td>9.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food and Drinks</td>
<td>1.2%</td>
<td>-2.6%</td>
<td>-1.5%</td>
<td>-17.1%</td>
<td>-10.7%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Raw materials</td>
<td>-1.2%</td>
<td>3.9%</td>
<td>19.8%</td>
<td>-7.4%</td>
<td>-39.4%</td>
<td>14.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other</td>
<td>1.2%</td>
<td>-1.0%</td>
<td>3.2%</td>
<td>-7.9%</td>
<td>-24.9%</td>
<td>10.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG</td>
<td>1.3%</td>
<td>-1.4%</td>
<td>3.3%</td>
<td>-12.7%</td>
<td>-20.4%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td colspan="7" class="firstcol">*Eur mlns; mo or period average</td>
</tr>
</tbody>
</table>
</body></html>

The EMU trade surplus continued to grow as exports rebounded strongly from a lackluster August that saw them fall by 4%. In September exports are back up, and off to the races. Exports contribute to growth overallEMU exports now are [...]

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117d.jpg" align="right" border="0" height="265" width="353">The
earlier
recovery in industrial production stalled last month after smart,
unrevised increases during the summer. The October reading of no change
in output also fell short of Consensus expectations for a 0.4% gain.
The weakening from earlier increases was widespread amongst sectors.
Output of consumer goods was unchanged after strong gains during the
prior three months. A 1.6% (-11.6% y/y) decline in motor vehicle output
led the weakening.&nbsp; Output of computers, video &amp; audio
equipment also sagged by 0.3% (-8.2% y/y) after three months of
increase.


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117e.jpg" align="right" border="0" height="265" width="353">Outside of
the auto &amp;
high-tech sectors production ticked 0.1% higher during October (-6.9%
y/y) following three months of firm gain. The uptick was led&nbsp;
by a 3.6% (-18.8% y/y) jump in primary metals output, a 1.3% (-15.6%
y/y) rise in textile mills production and a 1.4% (-5.5% y/y) rise in
paper output.&nbsp;Working the other way, however, were widespread
declines. Furniture &amp; appliance output continued to slide and
posted a 1.9% (-20.1% y/y) decline. Apparel output reversed two months
of increase with a 0.8% (-15.0% y/y) decline while petroleum &amp;
coal output fell 2.9% (-5.0% y/y). Output of business equipment fell
0.3% (-6.8% y/y) with a 0.9% (-12.4% y/y) drop in electrical equipment
output. Reflecting continued weakness in nonresidential building
activity, output of construction supplies fell 1.2% (-17.0% y/y), about
as it did in September.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117f.jpg" align="right" border="0" height="265" width="353">Despite
the weakening of output,
utilization of capacity ticked higher to 70.7%. The increase was caused
by an estimated 0.1% (-0.8% y/y) decline in industry capacity.
Utilization in the factory sector held steady at 67.9% though it was up
from the June low of 65.2%. Utilization in the primary metals are has
risen sharply to 56.9% with the rebound in output. There's also been a
rise in utilization in the machinery area but it's down most
elsewhere.
The industrial production data are available in
Haver's USECON database.
Policy
Challenges for the Federal Reserve is yesterday's speech by
Fed Vice-Chairman Donald L. Kohn and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/kohn20091116a.htm">here
</a>.How Will Unemployment Fare
Following the Recession? from the Federal Reserve Bank
of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/pdf/09q3knotek.pdf">here</a>.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">INDUSTRIAL
PRODUCTION (SA,%)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Output</td>
<td>0.0</td>
<td>0.7</td>
<td>1.2</td>
<td>-7.2</td>
<td>-2.2</td>
<td>1.5</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;Manufacturing</td>
<td>-0.1</td>
<td>0.7</td>
<td>1.5</td>
<td>-7.9</td>
<td>-3.2</td>
<td>1.4</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Consumer Goods</td>
<td>0.0</td>
<td>1.3</td>
<td>1.6</td>
<td>-2.9</td>
<td>-2.6</td>
<td>0.9</td>
<td>0.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Business Equipment</td>
<td>-0.3</td>
<td>-0.4</td>
<td>1.1</td>
<td>-6.8</td>
<td>-1.1</td>
<td>2.7</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Construction Supplies</td>
<td>-1.2</td>
<td>-1.1</td>
<td>0.7</td>
<td>-17.0</td>
<td>-6.3</td>
<td>-2.0</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>1.6</td>
<td>-0.2</td>
<td>0.8</td>
<td>-2.1</td>
<td>0.3</td>
<td>3.4</td>
<td>-0.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>70.7</td>
<td>70.5</td>
<td>70.0</td>
<td>75.4 (Oct. '08)</td>
<td>77.5</td>
<td>80.6</td>
<td>80.9</td>
</tr>
</tbody>
</table>

</body></html>

The earlier recovery in industrial production stalled last month after smart, unrevised increases during the summer. The October reading of no change in output also fell short of Consensus expectations for a 0.4% gain. The weakening [...]

Factory Production Unchanged As Gains Of Prior Three Months Stall

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117a.jpg" align="right" border="0" height="265" width="353">Inflationary
pressures continued to be diffused last month by the weak economy, but
they increased for those who eat or drive a car. The PPI for finished
goods rose 0.3% during October following declines during two of the
prior three months. The increase fell somewhat short of Consensus
expectations for a 0.5% rise. Though the PPI continued to decline
versus the year-ago level, the 1.9% drop is a moderation from the 6.4%
y/y decline back in July. Much of that moderation is due to notably
sharp price declines during last year's fourth quarter.
The increase
in overall producer prices last month was led by a 1.6% (-2.5% y/y)
rise in food &amp; beverage prices which reflected the third
monthly surge (NSA) in fruit &amp; vegetable prices (15.2% y/y), a
one-quarter spike in fresh &amp; dry vegetable prices (-6.7% y/y)
and higher dairy product prices (-11.3% y/y).&nbsp; A 1.6% increase
in finished energy prices added to that monthly pressure, though prices
still were down 9.4% y/y. Here again, however, the y/y comparisons are
similar to those for food &amp; beverage prices. Though prices
remained 9.4% lower than last year, the twelve-month comparison has
moderated from -29.6% this past July as monthly price declines during
last year's fourth quarter were notably sharp. Despite m/m increases,
gasoline prices remained down 12.5% y/y, fuel oil prices were off by
one-third and natural gas prices were 20.1% lower. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117b.jpg" align="right" border="0" height="265" width="353">Excluding
food
&amp; energy prices the PPI fell 0.6% during October. Not only was
the decline the third in the last four months, the 0.7% y/y increase
was the weakest since early-2004. The m/m decline in the core PPI
contrasted with expectations for a 0.1% increase. The PPI for finished
consumer goods less food &amp; energy fell 0.5% yet gained 1.1%
y/y. That was the weakest annual increase since July 2007. Finished
durables prices cratered by 1.2% (0.0% y/y), and prices of core
finished consumer nondurable goods rose a modest 0.2%. The 2.0% y/y
increase was down from 5.9% as of last November. Capital equipment
prices also reflected economic weakness and fell 0.7%, the third
decline in the last four months. That pulled the y/y increase down to
0.1% after a 4.3% rise as of last December.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091117c.jpg" align="right" border="0" height="265" width="353">Prices for
intermediate
goods rose 0.3% due to higher energy prices. The increase contrasted,
however, with a 0.2% decline in core prices. These were led by declines
in textile, chemical &amp; lumber prices. Intermediate food prices
fell 0.2% (-8.4% y/y).&nbsp; The crude materials PPI increased a
sizable 5.4% due to the increase in energy prices though they still
remained down by nearly one-quarter from last October. In contrast,
core prices showed strength and increased for the seventh straight
month reflecting the steady rise in commodity prices.
The producer
price data is available in Haver's USECON database.
More detailed data is in the PPI and in the PPIR
databases.
 Short-Term Headline-Core Inflation Dynamics
from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/research/economic_quarterly/2009/summer/pdf/mehra.pdf">here</a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><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" style="color: rgb(0, 0, 0);">Producer Price Index</a>(%)</th>
<th scope="col"> October</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col"> Y/Y</th>
<th scope="col"> 2008</th>
<th scope="col"> 2007</th>
<th scope="col"> 2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"> Finished Goods</td>
<td>0.3</td>
<td>-0.6</td>
<td>1.7</td>
<td>-1.9</td>
<td>6.4</td>
<td>3.9</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.6</td>
<td>-0.1</td>
<td>0.2</td>
<td>0.7</td>
<td>3.4</td>
<td>2.0</td>
<td>1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.3</td>
<td>0.2</td>
<td>1.8</td>
<td>-7.5</td>
<td>10.5</td>
<td>4.0</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.2</td>
<td>0.9</td>
<td>0.6</td>
<td>-5.6</td>
<td>7.4</td>
<td>2.8</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>5.4</td>
<td>-2.1</td>
<td>3.8</td>
<td>-13.9</td>
<td>21.4</td>
<td>11.9</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.5</td>
<td>3.6</td>
<td>6.0</td>
<td>&nbsp;-1.5</td>
<td>14.8</td>
<td>15.6</td>
<td>20.8</td>
</tr>
</tbody>
</table>

</body></html>

Inflationary pressures continued to be diffused last month by the weak economy, but they increased for those who eat or drive a car. The PPI for finished goods rose 0.3% during October following declines during two of the prior three [...]

U.S. PPI Increases 0.3% Fueled By Food & Energy Prices

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

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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.

250501H20.jpg

250501I20.jpg

- 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

250501J5.jpg

250501K5.jpg

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

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

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

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

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

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

250501L5.jpg

250501M5.jpg

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

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

250501N.jpg

250501O.jpg

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

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

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

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

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

250501P.jpg

250501Q.jpg

- 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

250501A8.jpg

250501B8.jpg

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.

250501C8.jpg

250501D8.jpg

- 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 2009

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EMU Trade Balance Improves

CPI Increases Remain Moderate

CPI Increases Remain Moderate

Canadian Manufacturing Data And Prospects For Q3 GDP

EMU Trade Balance Improves

Factory Production Unchanged As Gains Of Prior Three Months Stall

U.S. PPI Increases 0.3% Fueled By Food & Energy Prices

U.S. PPI Increases 0.3% Fueled By Food & Energy Prices