Tom Moeller

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WTI crude oil prices declined 9.0% last week to an average $61.11 per
barrel (-37.1% y/y) from $67.18 during the prior period. Yesterday prices fell
further to $55.91. Prices were 48.0% lower than their June peak of $107.52. The
seasonally adjusted price generated by Haver declined to $64.65 per barrel last
week. Brent crude oil prices fell to $63.93 last week (-41.5% y/y) and were $60.22
yesterday.

The price for a gallon of regular gasoline continued downward last
week to an average $2.55 (-21.1% y/y) versus $2.68 during the prior week. The
4.7% weekly decline was the quickest since prices hit their peak in 2011. Prices
were down 30.1% versus an interim peak of $3.65 reached this past June. Haver
Analytics constructs factors adjusting for the seasonal variation in pump
prices. The seasonally adjusted price declined to $2.83 per gallon.

Natural gas prices declined last week to $3.59 per mmbtu (-16.6% y/y)
but ticked up to $3.66 yesterday.

The demand for all petroleum products gained 1.1% y/y in the week
ended December 5 but gasoline demand rose 3.9% y/y, spurred by lower prices.
Inventories of crude oil and petroleum products increased 2.1% y/y but gasoline
inventories declined a lessened 1.1% y/y.

The energy price data are reported by the U.S. Department of Energy and can
be found in Haver's WEEKLY database. The daily figures are in DAILY
and the petroleum demand and inventory figures are in OILWKLY.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Weekly Energy Prices</th>
 <th scope="col" >12/15/14</th>
 <th scope="col" >12/08/14</th>
 <th scope="col" >12/01/14</th>
 <th scope="col" >Y/Y%</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Retail Gasoline ($ per Gallon, Regular)</td>
 <td >2.55</td>
 <td >2.68</td>
 <td >2.78</td>
 <td >-21.1</td>
 <td >3.51</td>
 <td >3.62</td>
 <td >3.52</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Light Sweet Crude Oil, WTI ($ per bbl.,
 WSJ)</td>
 <td >61.11</td>
 <td >67.18</td>
 <td >72.36</td>
 <td >-37.1</td>
 <td >97.95</td>
 <td >94.20</td>
 <td >95.14</td>
 </tr>
 <tr>
 <td class="firstcol" >Natural Gas ($/mmbtu, LA, WSJ)</td>
 <td >3.59</td>
 <td >3.65</td>
 <td >4.17</td>
 <td >-6.6</td>
 <td >3.73</td>
 <td >2.75</td>
 <td >3.99</td>
</tr>
 </tbody>
 </table>
 
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WTI crude oil prices declined 9.0% last week to an average $61.11 per barrel (-37.1% y/y) from $67.18 during the prior period. Yesterday prices fell further to $55.91. Prices were 48.0% lower than their June peak of $107.52. The [...]

U.S. Crude Oil and Gasoline Price Declines Continue

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Housing starts during November declined 1.6% to 1.028 million (AR, +7.5% y/y)
from 1.045 million in October, revised from 1.009 million. The latest figure
roughly matched expectations for 1.025 million starts in the Action Economics
Forecast Survey.

Starts in the single-family sector declined 5.4% to 677,000 units (-6.3% y/y)
following October's 8.0% rise to 716,000. Starts in the multi-family sector
increased 6.7% (-9.4% y/y) to 351,000 following a 9.9% decline to 329,000.

Regionally, starts rose 28.1% in the West (29.9% y/y) to 278,000 and in the 
Midwest rose 14.4% to 183,000 (-15.3% y/y). In the Northeast starts increased 
8.7% (21.6% y/y) to 113,000 but starts were down 19.5% to 454,000 in the South (-23.9% y/y).

Permits to build new homes declined 5.2% to 1.035 million (-5.0% y/y) and
reversed October's increase. Multi-family permits fell 11.0% to 396,000 (-3.7%
y/y) while single-family permits eased 1.2% to 639,000 (-5.9% y/y).

The housing starts figures can be found in Haver's USECON database.
The expectations figure is contained in the AS1REPNA database.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Housing Starts (000s, SAAR)</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Nov Y/Y %</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >1,028</td>
 <td >1,045</td>
 <td >1,028</td>
 <td >7.5</td>
 <td >930</td>
 <td >784</td>
 <td >612</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Single-Family</td>
 <td >677</td>
 <td >716</td>
 <td >663</td>
 <td >-6.3</td>
 <td >621</td>
 <td >537</td>
 <td >434</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Multi-Family</td>
 <td >351</td>
 <td >329</td>
 <td >365</td>
 <td >-9.4</td>
 <td >309</td>
 <td >247</td>
 <td >178</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colspan="8" >Starts By Region</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Northeast</td>
 <td >113</td>
 <td >104</td>
 <td >109</td>
 <td >21.6</td>
 <td >96</td>
 <td >80</td>
 <td >68</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Midwest</td>
 <td >183</td>
 <td >160</td>
 <td >173</td>
 <td >-15.3</td>
 <td >149</td>
 <td >128</td>
 <td >103</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;South</td>
 <td >454</td>
 <td >564</td>
 <td >503</td>
 <td >-23.9</td>
 <td >467</td>
 <td >400</td>
 <td >309</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;West</td>
 <td >278</td>
 <td >217</td>
 <td >243</td>
 <td >29.9</td>
 <td >217</td>
 <td >175</td>
 <td >132</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Building Permits</td>
 <td >1,035</td>
 <td >1,092</td>
 <td >1,031</td>
 <td >-5.0</td>
 <td >990</td>
 <td >829</td>
 <td >624</td>
 </tr>
 </tbody>
 </table>
 
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Housing starts during November declined 1.6% to 1.028 million (AR, +7.5% y/y) from 1.045 million in October, revised from 1.009 million. The latest figure roughly matched expectations for 1.025 million starts in the Action Economics [...]

U.S. Housing Starts & Building Permits Ease

Robert Brusca

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The overall EMU flash PMI rose to 51.7 in December from 51.1 in November. The EMU moving averages for 12-months to 6-months to 3-months show a steady deterioration for the total EMU PMI and the EMU manufacturing PMI. The EMU services measure has only a technical deviation from this same deteriorating progression.

Germany shows the same deteriorating progression in its moving averages for its total PMI, the manufacturing PMI and the service sector PMI. However, the German manufacturing PMI did bounce higher this month to 51.2 from 49.5 in November.

France shows continued deterioration. Its overall manufacturing and services PMIs get progressively weaker from 12-months to 6-months to 3-months. Yet, France shows an uptick in its overall PMI in December led by a bounce in its services sector. 

The main message from these metrics is that the EMU and its two main economies are still on a deteriorating path. The slight rebound for France in December still leaves it in a contractionary phase. As for the month-to-month rise in the EMU PMI, we will have to see if it holds up on revision- these are the flash readings. As of mid-December geopolitical events are still going haywire. Overnight Russia has just hiked its interest rates hugely to try to stabilize the plunging ruble. Weak oil prices will help consumer countries eventually, but they are falling so fast that they are also responsible for market chaos right now.

The queue percentile standings for the EMU, France and Germany show that all the sectors are weak. Of the three sets of readings totaling nine PMI metrics overall, only the EMU services sector has a standing above its 50% mark (above its historic median). Germany has been weaker only 31% of the time and its services sector has been weaker only 22% of the time. France has been weaker 44% of the time and its manufacturing sector has been weaker only 38% of the time. The EMU is relatively stronger than its two largest members. It has been weaker overall only 49% of the time; its manufacturing sector has been weaker 49% of the time and its services sector has been weaker 53% of the time. The queue percentile readings are snapshots of where the current readings stand in their historic pantheon of values. Apart from that, we have already established that momentum is still working lower. And no PMI reading is even near `firm' let alone `strong.'

The PMI readings for December are a disappointment. Today China also reported a manufacturing reading that showed contraction for that economy. The U.S. has been one of the few bright spots in the global economy although in a different report, the German ZEW reading showed its second straight improvement in December. However, the ZEW reading stands only in its 36th percentile, not too different a placement from the overall PMI standings, just with a touch more upward momentum. So `on the other hand', there is no `other hand.' Economic conditions in Europe are weakening and global geopolitical conditions are increasingly strained.


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The overall EMU flash PMI rose to 51.7 in December from 51.1 in November. The EMU moving averages for 12-months to 6-months to 3-months show a steady deterioration for the total EMU PMI and the EMU manufacturing PMI. The EMU services [...]

EMU PMI-The Sum Is Stronger Than Its Two Largest Parts; EMU Up; France & Germany Down

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Industrial production jumped 1.3% last month (5.2% y/y) following a 0.1%
uptick, revised from -0.1%. Manufacturing sector production surged 1.1% (4.7%
y/y) following an upwardly revised 0.4% rise, last month reported as 0.2%.
Three-month growth in overall production surged to 9.5% (AR). A 0.7% gain in
total production was expected in the Action Economics Forecast Survey.
Consumer goods production increased 2.5% (4.1% y/y) fueled by a 5.1% rise
(7.7% y/y) in motor vehicles &amp; parts which followed a 0.4% dip. Production
of machinery gained 1.0% (8.2% y/y) after a 2.9% rise and electrical machinery
output jumped 0.8% (2.9% y/y) and made up a 0.5% decline. Computer production
rose 0.5% (5.5% y/y) following a 0.9% increase while furniture production
remained unchanged (7.8% y/y) after a 0.4% rise. In the nondurable goods sector,
apparel production jumped 2.3% (2.9% y/y) after no change and chemical
production gained 0.9% (5.4% y/y) after a 0.7% rise. Textile production
increased 0.8% (2.8% y/y), about the same as in October, and petroleum output
improved 2.1% (4.5% y/y) after a 0.2% rise. Business equipment production rose
1.2% (6.5% y/y) following a 0.9% gain. Output of transit equipment increased
1.6% (5.8% y/y) after a 1.1% decline.&nbsp;
Within the special aggregate series, high technology industries posted a 1.1%
production gain (7.1% y/y) following a 0.7% increase. It was helped by a 2.6% rise
(0.4% y/y) in computers &amp;
office equipment after a 0.6% drop. Factory sector production
excluding the high-tech sector rose 1.1% (4.7% y/y) following a 0.4% increase. Manufacturing production
excluding both high-tech and autos improved 0.8% (4.5% y/y) after a 0.5% gain.
The capacity utilization rate increased to 80.1%, the high since 80.5% averaged in 2007. In the factory sector, the capacity utilization rate
jumped to an expansion high of 79.2. Total industry capacity rose an improved
3.1% y/y while factory sector capacity increased 2.2% y/y.
Industrial production and capacity data are included in Haver's USECON
database, with additional detail in the IP database. The expectations
figure is in the AS1REPNA database.
Measuring and Financing Infrastructure Investments from the Federal
Reserve Bank of Chicago can be found here <a href="https://www.chicagofed.org/publications/chicago-fed-letter/2015/331">https://www.chicagofed.org/publications/chicago-fed-letter/2015/331</a>
<table class="centered" border="0" cellspacing="0" width="1871">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="929">Industrial Production (SA, %
 Change)</th>
 <th scope="col" align="center" width="134">Nov</th>
 <th scope="col" align="center" width="134">Oct</th>
 <th scope="col" align="center" width="134">Sep</th>
 <th scope="col" align="center" width="134">Nov Y/Y</th>
 <th scope="col" align="center" width="134">2013</th>
 <th scope="col" align="center" width="134">2012</th>
 <th scope="col" align="center" width="134">2011</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="929">Total Output</td>
 <td align="center" width="134">1.3</td>
 <td align="center" width="134">0.1</td>
 <td align="center" width="134">0.9</td>
 <td align="center" width="134">5.2</td>
 <td align="center" width="134">2.9</td>
 <td align="center" width="134">3.8</td>
 <td align="center" width="134">3.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="929">Manufacturing</td>
 <td align="center" width="134">1.1</td>
 <td align="center" width="134">0.4</td>
 <td align="center" width="134">0.4</td>
 <td align="center" width="134">4.7</td>
 <td align="center" width="134">2.7</td>
 <td align="center" width="134">4.1</td>
 <td align="center" width="134">3.3</td>
 </tr>
 <tr>
 <td class="firstcol" width="929">&nbsp;&nbsp;Consumer Goods</td>
 <td align="center" width="134">2.5</td>
 <td align="center" width="134">0.0</td>
 <td align="center" width="134">0.8</td>
 <td align="center" width="134">4.1</td>
 <td align="center" width="134">2.4</td>
 <td align="center" width="134">1.7</td>
 <td align="center" width="134">1.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="929">&nbsp;&nbsp;Business Equipment</td>
 <td align="center" width="134">1.2</td>
 <td align="center" width="134">0.9</td>
 <td align="center" width="134">-0.3</td>
 <td align="center" width="134">6.5</td>
 <td align="center" width="134">3.6</td>
 <td align="center" width="134">7.5</td>
 <td align="center" width="134">5.6</td>
 </tr>
 <tr>
 <td class="firstcol" width="929">&nbsp;&nbsp;Construction Supplies</td>
 <td align="center" width="134">0.6</td>
 <td align="center" width="134">0.2</td>
 <td align="center" width="134">0.6</td>
 <td align="center" width="134">4.7</td>
 <td align="center" width="134">4.2</td>
 <td align="center" width="134">4.6</td>
 <td align="center" width="134">3.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="929">Materials</td>
 <td align="center" width="134">0.8</td>
 <td align="center" width="134">0.0</td>
 <td align="center" width="134">1.1</td>
 <td align="center" width="134">6.1</td>
 <td align="center" width="134">3.2</td>
 <td align="center" width="134">4.5</td>
 <td align="center" width="134">4.7</td>
 </tr>
 <tr>
 <td class="firstcol" width="929">Utilities</td>
 <td align="center" width="134">5.1</td>
 <td align="center" width="134">-0.8</td>
 <td align="center" width="134">4.3</td>
 <td align="center" width="134">1.8</td>
 <td align="center" width="134">2.1</td>
 <td align="center" width="134">-2.1</td>
 <td align="center" width="134">-0.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="929">Capacity Utilization (%)</td>
 <td align="center" width="134">80.1</td>
 <td align="center" width="134">79.3</td>
 <td align="center" width="134">79.5</td>
 <td align="center" width="134">78.5</td>
 <td align="center" width="134">78.0</td>
 <td align="center" width="134">77.3</td>
 <td align="center" width="134">76.3</td>
 </tr>
 <tr>
 <td class="firstcol" width="929">&nbsp;Manufacturing</td>
 <td align="center" width="134">78.4</td>
 <td align="center" width="134">77.6</td>
 <td align="center" width="134">77.4</td>
 <td align="center" width="134">76.4</td>
 <td align="center" width="134">76.1</td>
 <td align="center" width="134">75.5</td>
 <td align="center" width="134">73.9</td>
 </tr>
 </tbody>
</table>

&nbsp;
U.S. Home Builders Index Slips 
by <a href="http://haver.com/comment/Moeller.html">Tom Moeller</a>&nbsp;&nbsp;December
15, 2014
The Composite Housing Market Index from the National Association of Home
Builders-Wells Fargo slipped to 57 this month and was unchanged y/y. The figure
fell short of 59 expected in the Informa
Global Markets Survey.
The index of single-family home sales edged down to 61 (-3.2% y/y) and
remained below the expansion high of 63 reached twelve months ago. The index of expected sales during the next six
months also slipped to 65 (+4.8% y/y). The
NAHB figures are seasonally adjusted.
Realtors reported that their traffic index held steady at 45, up 4.7% y/y.
Housing market activity slipped in most of the country. In the
Northeast the index fell 9.8% m/m (+15,0% y/y). The
index reading for the South fell 6.5% and was down 3.3% y/y). In the Midwest the
reading fell 3.6% (-11.5% y/y) but in the West
The NAHB has compiled the Housing Market Index since 1985. It reflects
survey questions asking builders to rate market conditions as &quot;good,&quot;
&quot;fair,&quot; &quot;poor&quot; or &quot;very high&quot; to &quot;very
low.&quot; The figure is thus a diffusion index with numerical results over 50
indicating a predominance of &quot;good&quot; readings. 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 are included in Haver's SURVEYS
database. The expectations figure is available in Haver's MMSAMER database.
<table class="centered" border="0" cellspacing="0" width="1871">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="1098">National Association of Home
 Builders</th>
 <th scope="col" width="109">Dec</th>
 <th scope="col" width="110">Nov</th>
 <th scope="col" width="110">Oct</th>
 <th scope="col" width="110">Dec'13</th>
 <th scope="col" width="110">2014</th>
 <th scope="col" width="110">2013</th>
 <th scope="col" width="110">2012</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="1098">Composite Housing Market Index, SA (All
 Good=100)</td>
 <td align="center" width="109">57</td>
 <td align="center" width="110">58</td>
 <td align="center" width="110">54</td>
 <td align="center" width="110">57</td>
 <td align="center" width="110">52</td>
 <td align="center" width="110">51</td>
 <td align="center" width="110">34</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1098">&nbsp;Single-Family Sales: Present</td>
 <td align="center" width="109">61</td>
 <td align="center" width="110">62</td>
 <td align="center" width="110">57</td>
 <td align="center" width="110">63</td>
 <td align="center" width="110">56</td>
 <td align="center" width="110">55</td>
 <td align="center" width="110">36</td>
 </tr>
 <tr>
 <td class="firstcol" width="1098">&nbsp;Single-Family Sales: Next Six
 Months</td>
 <td align="center" width="109">65</td>
 <td align="center" width="110">66</td>
 <td align="center" width="110">64</td>
 <td align="center" width="110">62</td>
 <td align="center" width="110">61</td>
 <td align="center" width="110">58</td>
 <td align="center" width="110">41</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1098">&nbsp;Traffic of Prospective Buyers</td>
 <td align="center" width="109">45</td>
 <td align="center" width="110">45</td>
 <td align="center" width="110">41</td>
 <td align="center" width="110">43</td>
 <td align="center" width="110">39</td>
 <td align="center" width="110">39</td>
 <td align="center" width="110">27</td>
 </tr>
 </tbody>
</table>


&nbsp;
Empire State Factory Sector Index Turns Negative 
by <a href="http://haver.com/comment/Moeller.html">Tom Moeller</a>&nbsp;&nbsp;December
15, 2014
The Federal Reserve Bank of New York reported that its Empire State
Factory Index of General Business Conditions declined to -3.58 during December
from an unrevised 10.16 in November. The figure indicated a declining level of
activity for the first time since January of last year. Despite the
deterioration, the reading for all of 2014 at 11.90 was its best yearly figure
since 2010. December fell short of expectations for 12.0 in the Action Economics
Forecast Survey.
Based on these figures, Haver Analytics calculates a seasonally adjusted
index that is compatible to the ISM series. The adjusted figure fell to 48.0,
also indicating a decline in business activity and the weakest reading in
twelve months. A rising level of activity is indicated by a figure above 50. Since
inception in 2001, the business conditions index has had a 68% correlation with
the quarterly change in real GDP.
Each of the component series deteriorated this month. The employment reading,
however, remained positive at 8.33 versus 8.51 in November. During the last ten
years there has been a 71% correlation between the index level and the m/m
change in factory sector payrolls. The new orders figure fell to -1.97, although
it's been negative twice before this year. The shipments reading of -0.22 was
its first negative since June of last year and was off from 27.08 just three
months ago. Unfilled orders plunged to -23.96, their lowest in a year. The
delivery times figure (-14.58) indicated the quickest delivery speeds since just
after the recession.&nbsp;&nbsp;&nbsp; 
The prices paid index was little changed at 10.42, the lowest level since
July 2012. A much higher 9 percent of respondents reported paying lower prices,
the most since 2009. Twenty percent realized increased prices, down from the
2011 high of 70%. During the last ten years, there has been a 70% correlation
between the index and the 3-month change in the intermediate goods PPI.
Looking ahead, the Empire State index of expected business conditions in
six months declined to 38.58, the lowest level since July. Component
declines were broad-based except inventories, which rose sharply, and prices
paid which were fairly steady. Capital expenditures fell sharply to the lowest
level since July.
The Empire State figures are diffusion indexes which are calculated by
subtracting the percent of respondents reporting poorer business conditions from
those reporting improvement. Thus, they have a good correlation with growth in
the series covered. The data is available in Haver's SURVEYS database.
The ISM-adjusted headline index is calculated by Haver Analytics. The series
date back only to 2001. The Consensus expectation figure can be found in Haver's
AS1REPNA database.
<table class="centered" border="0" cellspacing="0" width="1871">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="1002">Empire State Manufacturing
 Survey</th>
 <th scope="col" width="123">Dec</th>
 <th scope="col" width="123">Nov</th>
 <th scope="col" width="123">Oct</th>
 <th scope="col" width="124">Dec'13</th>
 <th scope="col" width="124">2014</th>
 <th scope="col" width="124">2013</th>
 <th scope="col" width="124">2012</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="1002">General Business Conditions (ISM
 Adjusted)</td>
 <td align="center" width="123">48.0</td>
 <td align="center" width="123">52.0</td>
 <td align="center" width="123">50.6</td>
 <td align="center" width="124">49.3</td>
 <td align="center" width="124">52.4</td>
 <td align="center" width="124">50.0</td>
 <td align="center" width="124">51.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1002">General Business Conditions (Diffusion
 Index, %)</td>
 <td align="center" width="123">-3.58</td>
 <td align="center" width="123">10.16</td>
 <td align="center" width="123">6.17</td>
 <td align="center" width="124">0.83</td>
 <td align="center" width="124">11.90</td>
 <td align="center" width="124">3.82</td>
 <td align="center" width="124">4.29</td>
 </tr>
 <tr>
 <td class="firstcol" width="1002">&nbsp;New Orders</td>
 <td align="center" width="123">-1.97</td>
 <td align="center" width="123">9.14</td>
 <td align="center" width="123">-1.73</td>
 <td align="center" width="124">-3.46</td>
 <td align="center" width="124">7.93</td>
 <td align="center" width="124">1.13</td>
 <td align="center" width="124">1.47</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1002">&nbsp;Shipments</td>
 <td align="center" width="123">-0.22</td>
 <td align="center" width="123">11.83</td>
 <td align="center" width="123">1.12</td>
 <td align="center" width="124">1.46</td>
 <td align="center" width="124">12.03</td>
 <td align="center" width="124">4.49</td>
 <td align="center" width="124">11.22</td>
 </tr>
 <tr>
 <td class="firstcol" width="1002">&nbsp;Unfilled Orders</td>
 <td align="center" width="123">-23.96</td>
 <td align="center" width="123">-7.45</td>
 <td align="center" width="123">-4.55</td>
 <td align="center" width="124">-17.11</td>
 <td align="center" width="124">-9.03</td>
 <td align="center" width="124">-8.74</td>
 <td align="center" width="124">-8.83</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1002">&nbsp;Delivery Time</td>
 <td align="center" width="123">-14.58</td>
 <td align="center" width="123">-9.57</td>
 <td align="center" width="123">-5.68</td>
 <td align="center" width="124">-3.95</td>
 <td align="center" width="124">-5.17</td>
 <td align="center" width="124">-3.52</td>
 <td align="center" width="124">-0.30</td>
 </tr>
 <tr>
 <td class="firstcol" width="1002">&nbsp;Inventories</td>
 <td align="center" width="123">-11.46</td>
 <td align="center" width="123">0.00</td>
 <td align="center" width="123">2.27</td>
 <td align="center" width="124">-1.32</td>
 <td align="center" width="124">-1.80</td>
 <td align="center" width="124">-5.73</td>
 <td align="center" width="124">-2.91</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1002">&nbsp;Number of Employees</td>
 <td align="center" width="123">8.33</td>
 <td align="center" width="123">8.51</td>
 <td align="center" width="123">10.23</td>
 <td align="center" width="124">0.00</td>
 <td align="center" width="124">10.85</td>
 <td align="center" width="124">3.73</td>
 <td align="center" width="124">8.62</td>
 </tr>
 <tr>
 <td class="firstcol" width="1002">&nbsp;Prices Paid</td>
 <td align="center" width="123">10.42</td>
 <td align="center" width="123">10.64</td>
 <td align="center" width="123">11.36</td>
 <td align="center" width="124">17.11</td>
 <td align="center" width="124">20.90</td>
 <td align="center" width="124">21.53</td>
 <td align="center" width="124">24.71</td>
 </tr>
 </tbody>
</table>


</body>

</html>

Industrial production jumped 1.3% last month (5.2% y/y) following a 0.1% uptick, revised from -0.1%. Manufacturing sector production surged 1.1% (4.7% y/y) following an upwardly revised 0.4% rise, last month reported as 0.2%. Three- [...]

U.S. Industrial Production Surges by Most Since May 2010

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The Composite Housing Market Index from the National Association of Home
Builders-Wells Fargo slipped to 57 this month and was unchanged y/y. Despite the
m/m decline, the 2014 figure rose 2.5% after a nearly one-half increase in 2013. 
During the last ten years there has been an 82% correlation between the y/y % change 
in the home builders index and the y/y % change in single-family housing starts. 
The latest figure fell short of 59 expected in the Informa Global Markets Survey.

The index of single-family home sales edged lower to 61 (-3.2% y/y) and remained below 
the expansion high of 63 reached twelve months ago. The index of expected sales during the next six
months also slipped to 65 (+4.8% y/y). The NAHB figures are seasonally adjusted.

Realtors reported that their traffic index held steady at 45, up 4.7% y/y.

Housing market activity slipped in most of the country. In the
Northeast the index fell 9.8% m/m (+15.0% y/y). The
index reading for the South fell 6.5% and was down 3.3% y/y. In the Midwest the
reading fell 3.6% (-11.5% y/y) but in the West the index was up nearly
one-quarter m/m (21.3% y/y).

The NAHB has compiled the Housing Market Index since 1985. It reflects
survey questions asking builders to rate market conditions as &quot;good,&quot;
&quot;fair,&quot; &quot;poor&quot; or &quot;very high&quot; to &quot;very
low.&quot; The figure is thus a diffusion index with numerical results over 50
indicating a predominance of &quot;good&quot; readings. 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 are included in Haver's SURVEYS
database. The expectations figure is available in Haver's MMSAMER database.

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 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >National Association of Home
 Builders</th>
 <th scope="col" >Dec</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Dec'13</th>
 <th scope="col" >2014</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Composite Housing Market Index, SA (All
 Good=100)</td>
 <td >57</td>
 <td >58</td>
 <td >54</td>
 <td >57</td>
 <td >52</td>
 <td >51</td>
 <td >34</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Single-Family Sales: Present</td>
 <td >61</td>
 <td >62</td>
 <td >57</td>
 <td >63</td>
 <td >56</td>
 <td >55</td>
 <td >36</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Single-Family Sales: Next Six
 Months</td>
 <td >65</td>
 <td >66</td>
 <td >64</td>
 <td >62</td>
 <td >61</td>
 <td >58</td>
 <td >41</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Traffic of Prospective Buyers</td>
 <td >45</td>
 <td >45</td>
 <td >41</td>
 <td >43</td>
 <td >39</td>
 <td >39</td>
 <td >27</td>
 </tr>
 </tbody>
 </table>
 
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The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo slipped to 57 this month and was unchanged y/y. Despite the m/m decline, the 2014 figure rose 2.5% after a nearly one-half increase in 2013. [...]

U.S. Home Builders Index Slips M/M; 2014 Edges Higher

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Industrial production jumped 1.3% last month (5.2% y/y) following a 0.1%
uptick, revised from -0.1%. Manufacturing sector production surged 1.1% (4.7%
y/y) following an upwardly revised 0.4% rise, last month reported as 0.2%.
Three-month growth in overall production surged to 9.5% (AR). A 0.7% gain in
total production was expected in the Action Economics Forecast Survey.

Consumer goods production increased 2.5% (4.1% y/y) fueled by a 5.1% rise
(7.7% y/y) in motor vehicles &amp; parts which followed a 0.4% dip. Production
of machinery gained 1.0% (8.2% y/y) after a 2.9% rise and electrical machinery
output jumped 0.8% (2.9% y/y), making up a 0.5% decline. Computer production
rose 0.5% (5.5% y/y) following a 0.9% increase while furniture production
remained unchanged (7.8% y/y) after a 0.4% rise. In the nondurable goods sector,
apparel production jumped 2.3% (2.9% y/y) after no change and chemical
production gained 0.9% (5.4% y/y) after a 0.7% rise. Textile production
increased 0.8% (2.8% y/y), about the same as in October, and petroleum output
improved 2.1% (4.5% y/y) after a 0.2% rise. Business equipment production rose
1.2% (6.5% y/y) following a 0.9% gain. Output of transit equipment increased
1.6% (5.8% y/y) after a 1.1% decline.

Within the special aggregate series, high technology industries posted a 1.1%
production gain (7.1% y/y) following a 0.7% increase. It was helped by a 2.6% rise
(0.4% y/y) in computers &amp; office equipment after a 0.6% drop. Factory sector production
excluding the high-tech sector rose 1.1% (4.7% y/y) following a 0.4% increase. Manufacturing production
excluding both high-tech and autos improved 0.8% (4.5% y/y) after a 0.5% gain.

The capacity utilization rate increased to 80.1%, the high since 80.5% averaged 
in 2007. In the factory sector, the capacity utilization rate
jumped to an expansion high of 79.2. Total industry capacity rose an improved
3.1% y/y while factory sector capacity increased 2.2% y/y.

Industrial production and capacity data are included in Haver's USECON
database, with additional detail in the IP database. The expectations
figure is in the AS1REPNA database.

Measuring and Financing Infrastructure Investments from the Federal
Reserve Bank of Chicago can be found <a href="https://www.chicagofed.org/publications/chicago-fed-letter/2015/331">here</a>.

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 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Industrial Production (SA, %
 Change)</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Nov Y/Y</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total Output</td>
 <td >1.3</td>
 <td >0.1</td>
 <td >0.9</td>
 <td >5.2</td>
 <td >2.9</td>
 <td >3.8</td>
 <td >3.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Manufacturing</td>
 <td >1.1</td>
 <td >0.4</td>
 <td >0.4</td>
 <td >4.7</td>
 <td >2.7</td>
 <td >4.1</td>
 <td >3.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Consumer Goods</td>
 <td >2.5</td>
 <td >0.0</td>
 <td >0.8</td>
 <td >4.1</td>
 <td >2.4</td>
 <td >1.7</td>
 <td >1.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Business Equipment</td>
 <td >1.2</td>
 <td >0.9</td>
 <td >-0.3</td>
 <td >6.5</td>
 <td >3.6</td>
 <td >7.5</td>
 <td >5.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Construction Supplies</td>
 <td >0.6</td>
 <td >0.2</td>
 <td >0.6</td>
 <td >4.7</td>
 <td >4.2</td>
 <td >4.6</td>
 <td >3.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Materials</td>
 <td >0.8</td>
 <td >0.0</td>
 <td >1.1</td>
 <td >6.1</td>
 <td >3.2</td>
 <td >4.5</td>
 <td >4.7</td>
 </tr>
 <tr>
 <td class="firstcol" >Utilities</td>
 <td >5.1</td>
 <td >-0.8</td>
 <td >4.3</td>
 <td >1.8</td>
 <td >2.1</td>
 <td >-2.1</td>
 <td >-0.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Capacity Utilization (%)</td>
 <td >80.1</td>
 <td >79.3</td>
 <td >79.5</td>
 <td >78.5</td>
 <td >78.0</td>
 <td >77.3</td>
 <td >76.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Manufacturing</td>
 <td >78.4</td>
 <td >77.6</td>
 <td >77.4</td>
 <td >76.4</td>
 <td >76.1</td>
 <td >75.5</td>
 <td >73.9</td>
 </tr>
 </tbody>
 </table>
 
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U.K. industrial orders moved up to a diffusion reading of 5 in December from 3 in November in the CBI survey of the U.K. industrial sector. While a small-seeming positive number, this reading stands in the 93rd percentile of its historic queue; it is higher only 7% of the time. Exports orders continue their string of improvements, increasing to a level of -13 in December from -17 in November. But the export reading is relatively modest as it only stands in the 61st percentile of its historic queue. Clearly the U.K. economy is doing well, but its export prospects are not a driving force for its economy. The difference between total orders and export orders is an indication of how weak Europe compared to the U.K. since the U.K. does the bulk of its trading with the continent. 

The outlook for the next three months shows a reading of 16, a step up from November. That metric has crept up, but it is still well below its September value of 27 and August vale of 31. Still, the outlook reading sits in the 74th percentile of its historic queue, a reasonably firm reading. 

Output prices for the next three months jumped to a reading of 7 from -1. The 7 reading is the strongest since April 2014 but still has only the 64th percentile standing. It is interesting that the prices-expected metric has been able to rise in a period when oil and commodity prices are falling and global inflation is generally tempered or falling.

On balance, the U.K. industrial survey paints a firm picture of the U.K. industrial sector. The chart shows that the overall industrial orders reading is generally improving and stands at a relatively strong historic reading. The overall orders reading continues to push higher even in the face of considerably weaker foreign orders. And despite weak foreign orders, the outlook has perked up further as of December. One view of this is that the U.K. is surging against the tide of euro-weakness and will be forced back to a weaker growth posture by the overwhelming weakness in Europe. At the moment, that is my preferred understanding of the situation because I doubt that the U.K. has enough strength to help pull Europe up into a higher growth orbit. And because I think Europe's weakness is going to linger for some time.


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U.K. industrial orders moved up to a diffusion reading of 5 in December from 3 in November in the CBI survey of the U.K. industrial sector. While a small-seeming positive number, this reading stands in the 93rd percentile of its [...]

UK Overall Orders Look Solid Even As Export Orders Fade

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The Federal Reserve Bank of New York reported that its Empire State
Factory Index of General Business Conditions declined to -3.58 during December
from an unrevised 10.16 in November. The figure indicated a declining level of
activity for the first time since January of last year. Despite the
deterioration, the reading for all of 2014 at 11.90 was its best yearly figure
since 2010. December fell short of expectations for 12.0 in the Action Economics
Forecast Survey.

Based on these figures, Haver Analytics calculates a seasonally adjusted
index that is compatible to the ISM series. The adjusted figure fell to 48.0,
also indicating a decline in business activity and the weakest reading in
twelve months. A rising level of activity is indicated by a figure above 50. Since
inception in 2001, the business conditions index has had a 68% correlation with
the quarterly change in real GDP.

Each of the component series deteriorated this month. The employment reading,
however, remained positive at 8.33 versus 8.51 in November. During the last ten
years there has been a 71% correlation between the index level and the m/m
change in factory sector payrolls. The new orders figure fell to -1.97, although
it's been negative twice before this year. The shipments reading of -0.22 was
its first negative since June of last year and was off from 27.08 just three
months ago. Unfilled orders plunged to -23.96, their lowest in a year. The
delivery times figure (-14.58) indicated the quickest delivery speeds since just
after the recession.

The prices paid index was little changed at 10.42, the lowest level since
July 2012. A much higher 9 percent of respondents reported paying lower prices,
the most since 2009. Twenty percent realized increased prices, down from the
2011 high of 70%. During the last ten years, there has been a 70% correlation
between the index and the 3-month change in the intermediate goods PPI.

Looking ahead, the Empire State index of expected business conditions in
six months declined to 38.58, the lowest level since July. Component
declines were broad-based except inventories, which rose sharply, and prices
paid which were fairly steady. Capital expenditures fell sharply to the lowest
level since July.

The Empire State figures are diffusion indexes which are calculated by
subtracting the percent of respondents reporting poorer business conditions from
those reporting improvement. Thus, they have a good correlation with growth in
the series covered. The data is available in Haver's SURVEYS database.
The ISM-adjusted headline index is calculated by Haver Analytics. The series
date back only to 2001. The Consensus expectation figure can be found in Haver's
AS1REPNA database.

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 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Empire State Manufacturing
 Survey</th>
 <th scope="col" >Dec</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Dec'13</th>
 <th scope="col" >2014</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >General Business Conditions (ISM
 Adjusted)</td>
 <td >48.0</td>
 <td >52.0</td>
 <td >50.6</td>
 <td >49.3</td>
 <td >52.4</td>
 <td >50.0</td>
 <td >51.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >General Business Conditions (Diffusion
 Index, %)</td>
 <td >-3.58</td>
 <td >10.16</td>
 <td >6.17</td>
 <td >0.83</td>
 <td >11.90</td>
 <td >3.82</td>
 <td >4.29</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;New Orders</td>
 <td >-1.97</td>
 <td >9.14</td>
 <td >-1.73</td>
 <td >-3.46</td>
 <td >7.93</td>
 <td >1.13</td>
 <td >1.47</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Shipments</td>
 <td >-0.22</td>
 <td >11.83</td>
 <td >1.12</td>
 <td >1.46</td>
 <td >12.03</td>
 <td >4.49</td>
 <td >11.22</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Unfilled Orders</td>
 <td >-23.96</td>
 <td >-7.45</td>
 <td >-4.55</td>
 <td >-17.11</td>
 <td >-9.03</td>
 <td >-8.74</td>
 <td >-8.83</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Delivery Time</td>
 <td >-14.58</td>
 <td >-9.57</td>
 <td >-5.68</td>
 <td >-3.95</td>
 <td >-5.17</td>
 <td >-3.52</td>
 <td >-0.30</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Inventories</td>
 <td >-11.46</td>
 <td >0.00</td>
 <td >2.27</td>
 <td >-1.32</td>
 <td >-1.80</td>
 <td >-5.73</td>
 <td >-2.91</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Number of Employees</td>
 <td >8.33</td>
 <td >8.51</td>
 <td >10.23</td>
 <td >0.00</td>
 <td >10.85</td>
 <td >3.73</td>
 <td >8.62</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Prices Paid</td>
 <td >10.42</td>
 <td >10.64</td>
 <td >11.36</td>
 <td >17.11</td>
 <td >20.90</td>
 <td >21.53</td>
 <td >24.71</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

The Federal Reserve Bank of New York reported that its Empire State Factory Index of General Business Conditions declined to -3.58 during December from an unrevised 10.16 in November. The figure indicated a declining level of activity [...]

Empire State Factory Sector Index Turns Negative

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.

250501Z5.jpg

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

250501Z6.jpg

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

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Charts of the Week: Tariff Truce, Tenuous Trust

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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: December 2014

Jump to:

U.S. Crude Oil and Gasoline Price Declines Continue

U.S. Housing Starts & Building Permits Ease

EMU PMI-The Sum Is Stronger Than Its Two Largest Parts; EMU Up; France & Germany Down

U.S. Industrial Production Surges by Most Since May 2010

U.S. Home Builders Index Slips M/M; 2014 Edges Higher

U.S. Industrial Production Surges by Most Since May 2010

UK Overall Orders Look Solid Even As Export Orders Fade

Empire State Factory Sector Index Turns Negative