Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321c.jpg" width="353">
Chain store sales slipped 0.1% lower last week after the prior period&#39;s 0.1% up tick, according to the International Council of Shopping Centers (ICSC)-UBS survey.
The average level of sales so far in March is 1.4% ahead of the February average which rose 1.1% from January.
During the last ten years there has been a 47% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The leading indicator of chain store sales slipped 0.3% and in March is a scant 0.1% ahead of February.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">03/18/06</th>
<th scope="col">03/11/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>470.0</td>
<td>470.5</td>
<td>3.4%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


</html>

Chain store sales slipped 0.1% lower last week after the prior period's 0.1% up tick, according to the International Council of Shopping Centers (ICSC)-UBS survey. The average level of sales so far in March is 1.4% ahead of the [...]

Chain Store Sales Flat

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321a.jpg" width="353">
The Producer Price Index for Finished Goods fell 1.4% last month. It was the largest decline in the index since April 2003 and easily outpaced Consensus expectations for a 0.3% decline.
Producer prices less food &amp; energy (core), however, rose 0.3% and were stronger than expectations for a 0.1% increase. The gain was boosted by strength in floor coverings (9.4% y/y), mobile homes (4.9% y/y), construction machinery (6.6% y/y), power transformers (9.7% y/y), heavy motor trucks (4.1% y/y) and civilian aircraft (4.3% y/y).
Prices of all finished consumer goods less food &amp; energy rose 0.2% (1.8% y/y) and core consumer nondurable goods prices increased 0.4% (2.8% y/y). Capital equipment prices increased a modest 0.1% (1.5% y/y), held back by another decline in electronic computer prices (-22.6% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321b.jpg" width="353">
Finished energy prices slumped 4.7% (+16.9% y/y) during February as gasoline prices dropped 11.0% (+18.4% y/y). Home heating oil also fell by 1.1% (+29.0% y/y) along with natural gas prices which fell 4.1% (+25.6% y/y). Residential electric power costs were unchanged after a 3.0% January rise (8.8% y/y).
Intermediate goods prices eased 0.3% after the 1.2% January surge although core intermediate prices continued strong with a 0.5% advance.
Crude goods prices dropped sharply as crude energy prices tumbled 16.2% (+26.0% y/y). In March, the volatility in crude oil prices has left the average about even with last month. Core crude prices rose a sharp 3.3% on the strength of high prices for copper base scrap (59.4% y/y), aluminum scrap (30.3% y/y) and iron &amp; steel scrap (3.9% y/y). During the last thirty years &quot;core&quot; crude prices have been a fair indicator of industrial sector activity with a 48% correlation between the six month change in core crude prices and the change in factory sector industrial production.
Reflections on the Yield Curve and Monetary Policy, remarks by Federal Reserve Board Chairman Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/BoardDocs/speeches/2006/20060320/default.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-1.4%</td>
<td>0.2%</td>
<td>3.8%</td>
<td>4.9%</td>
<td>3.6%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.3%</td>
<td>0.4%</td>
<td>1.7%</td>
<td>2.4%</td>
<td>1.5%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-0.3%</td>
<td>1.2%</td>
<td>8.2%</td>
<td>8.0%</td>
<td>6.6%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.5%</td>
<td>1.0%</td>
<td>4.8%</td>
<td>5.5%</td>
<td>5.7%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-9.2%</td>
<td>-0.5%</td>
<td>12.8%</td>
<td>14.6%</td>
<td>17.5%</td>
<td>25.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>3.3%</td>
<td>-0.1%</td>
<td>11.9%</td>
<td>4.9%</td>
<td>26.5%</td>
<td>12.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Producer Price Index for Finished Goods fell 1.4% last month. It was the largest decline in the index since April 2003 and easily outpaced Consensus expectations for a 0.3% decline. Producer prices less food & energy (core), [...]

Producer Price Index Down, Core Prices Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321a.jpg" width="353">
The Producer Price Index for Finished Goods fell 1.4% last month. It was the largest decline in the index since April 2003 and easily outpaced Consensus expectations for a 0.3% decline.
Producer prices less food &amp; energy (core), however, rose 0.3% and were stronger than expectations for a 0.1% increase. The gain was boosted by strength in floor coverings (9.4% y/y), mobile homes (4.9% y/y), construction machinery (6.6% y/y), power transformers (9.7% y/y), heavy motor trucks (4.1% y/y) and civilian aircraft (4.3% y/y).
Prices of all finished consumer goods less food &amp; energy rose 0.2% (1.8% y/y) and core consumer nondurable goods prices increased 0.4% (2.8% y/y). Capital equipment prices increased a modest 0.1% (1.5% y/y), held back by another decline in electronic computer prices (-22.6% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321b.jpg" width="353">
Finished energy prices slumped 4.7% (+16.9% y/y) during February as gasoline prices dropped 11.0% (+18.4% y/y). Home heating oil also fell by 1.1% (+29.0% y/y) along with natural gas prices which fell 4.1% (+25.6% y/y). Residential electric power costs were unchanged after a 3.0% January rise (8.8% y/y).
Intermediate goods prices eased 0.3% after the 1.2% January surge although core intermediate prices continued strong with a 0.5% advance.
Crude goods prices dropped sharply as crude energy prices tumbled 16.2% (+26.0% y/y). In March, the volatility in crude oil prices has left the average about even with last month. Core crude prices rose a sharp 3.3% on the strength of high prices for copper base scrap (59.4% y/y), aluminum scrap (30.3% y/y) and iron &amp; steel scrap (3.9% y/y). During the last thirty years &quot;core&quot; crude prices have been a fair indicator of industrial sector activity with a 48% correlation between the six month change in core crude prices and the change in factory sector industrial production.
Reflections on the Yield Curve and Monetary Policy, remarks by Federal Reserve Board Chairman Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/BoardDocs/speeches/2006/20060320/default.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-1.4%</td>
<td>0.2%</td>
<td>3.8%</td>
<td>4.9%</td>
<td>3.6%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.3%</td>
<td>0.4%</td>
<td>1.7%</td>
<td>2.4%</td>
<td>1.5%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-0.3%</td>
<td>1.2%</td>
<td>8.2%</td>
<td>8.0%</td>
<td>6.6%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.5%</td>
<td>1.0%</td>
<td>4.8%</td>
<td>5.5%</td>
<td>5.7%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-9.2%</td>
<td>-0.5%</td>
<td>12.8%</td>
<td>14.6%</td>
<td>17.5%</td>
<td>25.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>3.3%</td>
<td>-0.1%</td>
<td>11.9%</td>
<td>4.9%</td>
<td>26.5%</td>
<td>12.4%</td>
</tr>
</tbody>
</table>
Chain Store Sales Flat 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 21, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321c.jpg" width="353">
Chain store sales slipped 0.1% lower last week after the prior period&#39;s 0.1% up tick, according to the International Council of Shopping Centers (ICSC)-UBS survey.
The average level of sales so far in March is 1.4% ahead of the February average which rose 1.1% from January.
During the last ten years there has been a 47% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The leading indicator of chain store sales slipped 0.3% and in March is a scant 0.1% ahead of February.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">03/18/06</th>
<th scope="col">03/11/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>470.0</td>
<td>470.5</td>
<td>3.4%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
 Early Indicators Pointing to Good First Quarter for Finland 
by <a href="/comment/Curley.html">Louise Curley</a> March 21, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321d.jpg" width="353">
Indicators released today are pointing to an increase in the rate of growth of Finland&#39;s GDP in the first quarter from the 0.91% rate of the fourth quarter of 2005. The trend of the monthly total production series, which is a good indicator of Finland&#39;s Gross Domestic Product increased 0.18% in January from December and 2.61% from January, 2005. The first chart plots the monthly index of total production with the quarterly values of real GDP to show the leading characteristic of the monthly series. To show that the total production index is a good indicator of GDP, we have aggregated the monthly series quarterly and compared it with the quarterly GDP data as shown in the second chart. The correlation between the two series is .99.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321e.jpg" width="353">
Another sign of increased activity in the first quarter is the rising trend of employment. In Finland, many series, the total production series noted above and some of the labor force data, are reported on seasonally adjusted basis. Instead of computing seasonally adjusted data, Finland computes trends of the unadjusted data. The third chart shows the trend and seasonally unadjusted data for employment. The trend continues to rise in January and February.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060321f.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/NORDIC/@NF/@NF.HTM">Finland</a></th>
<th scope="col">Jan 06</th>
<th scope="col">Dec 05</th>
<th scope="col">Jan 05</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2005&nbsp; </th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">TOTAL PRODUCTION (2000=100)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Seasonally Unadjusted</td>
<td>108.6</td>
<td>115.7</td>
<td>105.1</td>
<td>-6.14</td>
<td>3.33</td>
<td>111.9</td>
<td>109.6</td>
<td>105.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Trend</td>
<td>113.8</td>
<td>113.6</td>
<td>110.9</td>
<td>0.18</td>
<td>2.61</td>
<td>112.1</td>
<td>109.2</td>
<td>105.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;</td>
<td>Feb 06</td>
<td>Jan 06</td>
<td>Feb 05</td>
<td>M/M %</td>
<td>Y/Y %</td>
<td>2005&nbsp; </td>
<td>2004&nbsp;</td>
<td>2003&nbsp;&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">EMPLOYMENT (000)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Seasonally Unadjusted</td>
<td>&nbsp;2395</td>
<td>2353&nbsp;</td>
<td>2348&nbsp;</td>
<td>1.78&nbsp;</td>
<td>2.00&nbsp;</td>
<td>2401&nbsp;</td>
<td>2365&nbsp;</td>
<td>2365&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Trend</td>
<td>2436</td>
<td>2433</td>
<td>2385</td>
<td>0.12</td>
<td>2.14</td>
<td>2401</td>
<td>2364</td>
<td>2366</td>
</tr>
</tbody>
</table>


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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060320c.jpg" width="353">
Producer prices in Germany rose 0.7% in February. Prices of intermediate goods were up 0.56%, those of investment goods fell 0.10% and prices of consumer goods were unchanged. The rise was due almost entirely to continued rising energy costs. As the first chart shows, energy price increases have greatly exceeded those of the index excluding construction and energy since early 2005, widening the gap between the two series
The rise in February was larger than expected and is likely to increase inflation concerns of the European Central Bank (ECB). The ECB has already raised its key interest rate from 2%, which had been in place since June 2003, to 2.25% last December and again in March to 2.5%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060320d.jpg" width="353">
While the ECB focuses on the consumer price index, it is mindful of the potential impact that rising producer prices may have on consumer prices. The second chart shows the course of consumer and producer prices over the past five years.The rise in producer prices over the past year has been bigger and more persistent than previous rises and is, therefore, more likely to have a significant impact on consumer prices.
Even if energy prices should stabilize or decline, these second-round effects of the high energy prices could soon begin to affect consumer prices particularly as the economy continues to show signs of increased activity. Early this month, February new orders, both foreign and domestic were reported to have increased and last week, Manpower reported that German employers intended to increase employment in the first two quarters of this year.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/@D4/@D45/@D45.HTM">German Producer&nbsp; Price Index (2000=100)</a></th>
<th scope="col">Feb 06</th>
<th scope="col">Jan 06</th>
<th scope="col">Feb 05</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2005&nbsp; </th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total ex construction</td>
<td>114.9</td>
<td>114.1</td>
<td>108.5</td>
<td>0.70</td>
<td>5.89</td>
<td>110.7</td>
<td>105.8</td>
<td>104.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Intermediate goods&nbsp;</td>
<td>108.2</td>
<td>107.6</td>
<td>106.4</td>
<td>0.56</td>
<td>1.69</td>
<td>106.5</td>
<td>103.2</td>
<td>100.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Investment goods</td>
<td>103.3</td>
<td>103.4</td>
<td>102.9</td>
<td>-0.10</td>
<td>0.39</td>
<td>103.0</td>
<td>102.1</td>
<td>101.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer goods</td>
<td>107.7</td>
<td>107.7</td>
<td>106.4</td>
<td>0.00</td>
<td>1.22</td>
<td>106.9</td>
<td>105.2</td>
<td>104.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Energy</td>
<td>148.8</td>
<td>145.8</td>
<td>121.2</td>
<td>2.06</td>
<td>22.77</td>
<td>131.5</td>
<td>115.4</td>
<td>112.6</td>
</tr>
<tr>
<td class="firstcol">Total ex construction &amp; energy&nbsp;</td>
<td>106.7&nbsp;</td>
<td>106.4</td>
<td>105.5</td>
<td>0.28&nbsp;</td>
<td>1.14&nbsp;</td>
<td>105.5&nbsp;</td>
<td>103.5&nbsp;</td>
<td>102.0&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Consumer Price Index</td>
<td>109.4</td>
<td>109.2</td>
<td>107.1</td>
<td>0.18</td>
<td>2.15</td>
<td>108.3</td>
<td>106.2</td>
<td>104.5</td>
</tr>
</tbody>
</table>
</body>
</html>

Producer prices in Germany rose 0.7% in February. Prices of intermediate goods were up 0.56%, those of investment goods fell 0.10% and prices of consumer goods were unchanged. The rise was due almost entirely to continued rising [...]

Inflation at the Producer Level Heats up in Germany

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060320a.jpg" width="353">
The weekly leading index of the US economy published by the Economic Cycle Research Institute (ECRI) slipped 0.1% last week. The decline was the fifth in the last six weeks and lowered the index&#39;s six month growth rate to 3.0% from an early February high of 5.1%.
During the last ten years there has been a 53% correlation between the change in the weekly leading index and US real GDP growth during the following quarter. The correlation has risen to 71% during the last five years.
The very recent deceleration in the leaders&#39; growth follows improvement early this year. That slowdown mirrors the pattern of slightly slower growth in the leading series from the Conference Board and the OECD.
Visit the <a href="http://www.businesscycle.com/">Economic Cycle Research Institute</a> for analysis of US and international business cycles.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Economic Cycle Research Institute&nbsp;</th>
<th scope="col">3/10/06</th>
<th scope="col">12/30/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Weekly Leading Index</td>
<td>136.8</td>
<td>135.7</td>
<td>0.8%</td>
<td>134.5</td>
<td>132.6</td>
<td>124.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; 6 Month Growth Rate</td>
<td>3.0%</td>
<td>3.1%</td>
<td>&nbsp;</td>
<td>1.9%</td>
<td>4.2%</td>
<td>6.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

The weekly leading index of the US economy published by the Economic Cycle Research Institute (ECRI) slipped 0.1% last week. The decline was the fifth in the last six weeks and lowered the index's six month growth rate to 3.0% from an [...]

ECRI Leading Index: Momentum Strength Diminished

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060320b.jpg" width="353">
The Composite Index of Leading Economic Indicators fell 0.2% last month following four months of increase, reported the Conference Board. The decline about matched Consensus expectations for a 0.3% drop but it was accompanied by a revision to January which halved that month&#39;s gain to 0.5% from the 1.1% surge estimated initially.
During the last ten years there has been a 43% correlation between the six-month change in the leading indicators and quarterly growth in real GDP.
The breadth of one month gain amongst the 10 components of the leading index fell to 50% in February from 70% in January although over six months the breadth of gain in the leaders surged back to 90%.
Higher initial claims for unemployment insurance, easier vendor performance, lower consumer expectations and lower building permits made large negative contributions to last month&#39;s decline in the leading index.
The minimal 0.01 percentage point positive contribution from the spread between yields on the 10 year Treasury Note and the Fed funds rate was the was the second in two months. The method of calculating the contribution to the index from the interest rate yield spread has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators rose 0.3% following an unchanged reading for January, initially reported at +0.2%. All of the four component series rose both last month and during the last six months. During the last ten years there has been a 64% correlation between the change in the coincident indicators and real GDP.
The lagging indicators rose just 0.1% following a downwardly revised 0.5% January gain. Over the last six months, three quarters of the series&#39; components rose. The ratio of coincident to lagging indicators, a measure of actual economic performance versus excess, reversed most of the prior month&#39;s decline.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">6 Month Chg., AR</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.2%</td>
<td>0.5%</td>
<td>4.7%</td>
<td>2.3%</td>
<td>7.4%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.3%</td>
<td>0.0%</td>
<td>2.0%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.1%</td>
<td>0.5%</td>
<td>3.7%</td>
<td>3.5%</td>
<td>0.0%</td>
<td>-0.0%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Composite Index of Leading Economic Indicators fell 0.2% last month following four months of increase, reported the Conference Board. The decline about matched Consensus expectations for a 0.3% drop but it was accompanied by a [...]

Leading Economic Indicators Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060320b.jpg" width="353">
The Composite Index of Leading Economic Indicators fell 0.2% last month following four months of increase, reported the Conference Board. The decline about matched Consensus expectations for a 0.3% drop but it was accompanied by a revision to January which halved that month&#39;s gain to 0.5% from the 1.1% surge estimated initially.
During the last ten years there has been a 43% correlation between the six-month change in the leading indicators and quarterly growth in real GDP.
The breadth of one month gain amongst the 10 components of the leading index fell to 50% in February from 70% in January although over six months the breadth of gain in the leaders surged back to 90%.
Higher initial claims for unemployment insurance, easier vendor performance, lower consumer expectations and lower building permits made large negative contributions to last month&#39;s decline in the leading index.
The minimal 0.01 percentage point positive contribution from the spread between yields on the 10 year Treasury Note and the Fed funds rate was the was the second in two months. The method of calculating the contribution to the index from the interest rate yield spread has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators rose 0.3% following an unchanged reading for January, initially reported at +0.2%. All of the four component series rose both last month and during the last six months. During the last ten years there has been a 64% correlation between the change in the coincident indicators and real GDP.
The lagging indicators rose just 0.1% following a downwardly revised 0.5% January gain. Over the last six months, three quarters of the series&#39; components rose. The ratio of coincident to lagging indicators, a measure of actual economic performance versus excess, reversed most of the prior month&#39;s decline.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">6 Month Chg., AR</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.2%</td>
<td>0.5%</td>
<td>4.7%</td>
<td>2.3%</td>
<td>7.4%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.3%</td>
<td>0.0%</td>
<td>2.0%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.1%</td>
<td>0.5%</td>
<td>3.7%</td>
<td>3.5%</td>
<td>0.0%</td>
<td>-0.0%</td>
</tr>
</tbody>
</table>
ECRI Leading Index: Momentum Strength Diminished 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 20, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060320a.jpg" width="353">
The weekly leading index of the US economy published by the Economic Cycle Research Institute (ECRI) slipped 0.1% last week. The decline was the fifth in the last six weeks and lowered the index&#39;s six month growth rate to 3.0% from an early February high of 5.1%.
During the last ten years there has been a 53% correlation between the change in the weekly leading index and US real GDP growth during the following quarter. The correlation has risen to 71% during the last five years.
The very recent deceleration in the leaders&#39; growth follows improvement early this year. That slowdown mirrors the pattern of slightly slower growth in the leading series from the Conference Board and the OECD.
Visit the <a href="http://www.businesscycle.com/">Economic Cycle Research Institute</a> for analysis of US and international business cycles.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Economic Cycle Research Institute&nbsp;</th>
<th scope="col">3/10/06</th>
<th scope="col">12/30/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Weekly Leading Index</td>
<td>136.8</td>
<td>135.7</td>
<td>0.8%</td>
<td>134.5</td>
<td>132.6</td>
<td>124.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; 6 Month Growth Rate</td>
<td>3.0%</td>
<td>3.1%</td>
<td>&nbsp;</td>
<td>1.9%</td>
<td>4.2%</td>
<td>6.7%</td>
</tr>
</tbody>
</table>
 Inflation at the Producer Level Heats up in Germany 
by <a href="/comment/Curley.html">Louise Curley</a> March 20, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060320c.jpg" width="353">
Producer prices in Germany rose 0.7% in February. Prices of intermediate goods were up 0.56%, those of investment goods fell 0.10% and prices of consumer goods were unchanged. The rise was due almost entirely to continued rising energy costs. As the first chart shows, energy price increases have greatly exceeded those of the index excluding construction and energy since early 2005, widening the gap between the two series
The rise in February was larger than expected and is likely to increase inflation concerns of the European Central Bank (ECB). The ECB has already raised its key interest rate from 2%, which had been in place since June 2003, to 2.25% last December and again in March to 2.5%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060320d.jpg" width="353">
While the ECB focuses on the consumer price index, it is mindful of the potential impact that rising producer prices may have on consumer prices. The second chart shows the course of consumer and producer prices over the past five years.The rise in producer prices over the past year has been bigger and more persistent than previous rises and is, therefore, more likely to have a significant impact on consumer prices.
Even if energy prices should stabilize or decline, these second-round effects of the high energy prices could soon begin to affect consumer prices particularly as the economy continues to show signs of increased activity. Early this month, February new orders, both foreign and domestic were reported to have increased and last week, Manpower reported that German employers intended to increase employment in the first two quarters of this year.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/@D4/@D45/@D45.HTM">German Producer&nbsp; Price Index (2000=100)</a></th>
<th scope="col">Feb 06</th>
<th scope="col">Jan 06</th>
<th scope="col">Feb 05</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2005&nbsp; </th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total ex construction</td>
<td>114.9</td>
<td>114.1</td>
<td>108.5</td>
<td>0.70</td>
<td>5.89</td>
<td>110.7</td>
<td>105.8</td>
<td>104.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Intermediate goods&nbsp;</td>
<td>108.2</td>
<td>107.6</td>
<td>106.4</td>
<td>0.56</td>
<td>1.69</td>
<td>106.5</td>
<td>103.2</td>
<td>100.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Investment goods</td>
<td>103.3</td>
<td>103.4</td>
<td>102.9</td>
<td>-0.10</td>
<td>0.39</td>
<td>103.0</td>
<td>102.1</td>
<td>101.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer goods</td>
<td>107.7</td>
<td>107.7</td>
<td>106.4</td>
<td>0.00</td>
<td>1.22</td>
<td>106.9</td>
<td>105.2</td>
<td>104.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Energy</td>
<td>148.8</td>
<td>145.8</td>
<td>121.2</td>
<td>2.06</td>
<td>22.77</td>
<td>131.5</td>
<td>115.4</td>
<td>112.6</td>
</tr>
<tr>
<td class="firstcol">Total ex construction &amp; energy&nbsp;</td>
<td>106.7&nbsp;</td>
<td>106.4</td>
<td>105.5</td>
<td>0.28&nbsp;</td>
<td>1.14&nbsp;</td>
<td>105.5&nbsp;</td>
<td>103.5&nbsp;</td>
<td>102.0&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Consumer Price Index</td>
<td>109.4</td>
<td>109.2</td>
<td>107.1</td>
<td>0.18</td>
<td>2.15</td>
<td>108.3</td>
<td>106.2</td>
<td>104.5</td>
</tr>
</tbody>
</table>
</body>
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Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060317c.jpg" width="353">
This morning, the Bureau of Labor Statistics published January employment and unemployment data for US metropolitan areas. These are contained in Haver&#39;s EMPLR database. The database includes labor force, employment, unemployment and unemployment rates for states, Census regions, metro areas and smaller municipalities. The data for states and some of the metro areas are available seasonally adjusted, but the data shown here for 8 selected large US metro areas are all not seasonally adjusted.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060317d.jpg" width="353">
We spoke yesterday and the day before about labor market conditions in Europe and commented that such conditions can vary widely, even in neighboring regions there. The same is true here, as seen in the differences between Los Angeles and San Francisco. The economies of these two West Coast cities surely have differing characters, and this appears in the employment trends and the level of the unemployment rates. Employment growth in LA has generally been stronger, but the unemployment rate in San Francisco tends to be lower.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060317e.jpg" width="353">
Denver, with a fairly consistent growth trend over the past several years nevertheless has an unemployment rate slightly higher than the national average, at least in the latest month. We are pleasantly surprised by the good growth in our own locale, New York City, over the past two years, a nice cyclical rebound after the 2001 recession and the developments associated with 9/11.
Such major non-economic events can have a pointed economic impact, of course. Hurricane Katrina was devastating to the economy of New Orleans, and these figures show how dramatic that has been. Employment in the New Orleans-Metairie-Kenner MSA is off by nearly 200,000 from a year ago. The unemployment rate there is more than 50% higher than for the nation as a whole. Notably, though, employment has edged upward in the last three months. The increase totals only 2,900, but it&#39;s certainly a step in the right direction for that city.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060317f.jpg" width="353">
Finally, Houston may be a beneficiary of migration out of New Orleans. Even though the September &quot;reference week&quot; for labor market data was very soon after the storm, that month showed a marked and unusual increase in the Houston area labor force. Compared with the total drop in New Orleans, this 24,700 increase is just a fraction, but September has often been a month when the Houston labor force declines, implying that a special factor was in play. A boost to employment in Houston seems to have come just in January, when the normal post-Christmas drop in the number employed did not take place, but instead held just about steady with December. In the previous 16 years of data, the smallest decrease in January was 14,000.
It is often said that &quot;all politics is local&quot;. The widely varying developments in labor markets reported this week in both entire adjoining countries and individual US cities suggest that much of economics must be local too. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
Jan 2006
<th scope="col">Mo/Mo % Chg</th>
<th scope="col">Jan 2005</th>
<th scope="col">Yr/Yr % Chg</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>Number Employed</td>
</tr>
<tr>
<td class="firstcol">Total US</td>
<td>5.1</td>
<td>141,481</td>
<td>-1.0</td>
<td>138,682</td>
<td>2.0</td>
<td>1.8</td>
<td>1.1</td>
<td>0.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Los Angeles</td>
<td>4.9</td>
<td>6,117</td>
<td>-2.9</td>
<td>6,032</td>
<td>1.4</td>
<td>2.9</td>
<td>1.4</td>
<td>0.5</td>
</tr>
<tr>
<td class="firstcol">San Francisco</td>
<td>4.4</td>
<td>2,078</td>
<td>-3.1</td>
<td>2,067</td>
<td>0.5</td>
<td>2.2</td>
<td>-0.3</td>
<td>-2.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Denver</td>
<td>5.3</td>
<td>1,238</td>
<td>-0.3</td>
<td>1,222</td>
<td>1.3</td>
<td>1.2</td>
<td>2.1</td>
<td>1.6</td>
</tr>
<tr>
<td class="firstcol">Houston</td>
<td>5.6</td>
<td>2,512</td>
<td>-0.0</td>
<td>2,422</td>
<td>3.7</td>
<td>2.4</td>
<td>1.4</td>
<td>0.9</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orleans</td>
<td>7.8</td>
<td>394</td>
<td>0.2</td>
<td>582</td>
<td>-32.4</td>
<td>-9.6</td>
<td>1.5</td>
<td>0.2</td>
</tr>
<tr>
<td class="firstcol">Chicago</td>
<td>5.6</td>
<td>4,466</td>
<td>-0.2</td>
<td>4,440</td>
<td>0.6</td>
<td>0.8</td>
<td>1.2</td>
<td>-0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Boston</td>
<td>4.7</td>
<td>2,317</td>
<td>-1.4</td>
<td>2,311</td>
<td>0.2</td>
<td>0.1</td>
<td>0.0</td>
<td>-1.3</td>
</tr>
<tr>
<td class="firstcol">New York</td>
<td>5.1</td>
<td>8,742</td>
<td>-0.5</td>
<td>8,570</td>
<td>2.0</td>
<td>1.6</td>
<td>1.3</td>
<td>-0.2</td>
</tr>
</tbody>
</table>
</body>
</html>

This morning, the Bureau of Labor Statistics published January employment and unemployment data for US metropolitan areas. These are contained in Haver's EMPLR database. The database includes labor force, employment, unemployment and [...]

"All Economics Is Local": Labor Markets in US Cities

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

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

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

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Andrew Cates

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

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

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

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

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

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

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

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Charts of the Week: Tariff Truce, Tenuous Trust

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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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Economy in Brief: March 2006

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