Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060419c.jpg" width="353">
During March, the consumer price index (CPI-U) rose 0.4% following a 0.1% February up tick and matched Consensus expectations. The 0.3% rise in prices less food &amp; energy, however, was slightly firmer than expected.
Prices for core goods rose 0.3% (0.2% y/y) after a 0.1% February decline. Apparel prices reversed all of the prior month&#39;s drop with a 1.0% (-1.2% y/y) increase and household furnishings &amp; operation prices ticked up 0.1% (0.5% y/y) after no change during February. Medical care commodity prices rose 0.4% (4.1% y/y) while tobacco prices rose a strong 0.6% (4.5% y/y). New &amp; used motor vehicle prices fell 0.1% (+0.4% y/y).
Another 0.3% increase in core services prices reflected a second 0.4% (2.6% y/y) increase in shelter prices. Medical care services prices increased 0.4% (4.1% y/y) while school tuition &amp; fees posted a firm 0.5% (6.1% y/y) gain. Public transportation prices fell by 0.3% (+5.9% y/y), the third decline in the last four months.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060419d.jpg" width="353">
Energy prices during March reversed all of the prior month&#39;s decline with a 1.3% jump led by a 3.6% (17.0% y/y) spurt in gasoline prices, which have moved 10.7% higher so far during April. Natural gas &amp; electricity prices fell 1.1% (+17.8% y/y) for the third decline in the last four months and fuel oil prices ticked up 0.4% (17.9% y/y).
Food prices inched up another 0.1%, the gain held back by a 1.7% (+6.4% y/y) decline in fruits &amp; vegetables prices. Meat, fish &amp; poultry prices reversed all of the prior month&#39;s decline with a 0.3% (0.9% y/y) rise.
The chained CPI, which adjusts for shifts in the mix of consumer purchases, jumped 0.5% and less food &amp; energy prices rose a stronger 0.6%.
Minutes to the latest FOMC meeting can be found <a href="http://www.federalreserve.gov/FOMC/MINUTES/20060328.htm"> here</a>.
The Interaction of Labor Markets and Inflation: Micro Evidence from the International Wage Flexibility Project from the Federal Reserve Bank of San Francesco is available <a href="http://www.frbsf.org/economics/conferences/0603/ilmi.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> </th>
<th scope="col">Mar</th>
<th scope="col">Feb</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">Total&nbsp;</td>
<td>0.4%</td>
<td>0.1%</td>
<td>3.4%</td>
<td>3.4%</td>
<td>2.7%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.3%</td>
<td>0.1%</td>
<td>2.1%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.3%</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>0.5%</td>
<td>-0.9%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.3%</td>
<td>0.3%</td>
<td>2.8%</td>
<td>2.8%</td>
<td>2.8%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>1.3%</td>
<td>-1.2%</td>
<td>17.3%</td>
<td>16.9%</td>
<td>10.8%</td>
<td>12.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.6%</td>
<td>2.4%</td>
<td>3.4%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a> </td>
<td>0.5%</td>
<td>0.3%</td>
<td>3.0%</td>
<td>2.9%</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.6%</td>
<td>0.4%</td>
<td>2.0%</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.1%</td>
</tr>
</tbody>
</table>
Mortgage Applications Down Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 19, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060419a.jpg" width="353">
The total number of mortgage applications fell hard for the second consecutive week and posted a 1.7% drop. So far during April applications are 0.9% below the March average which fell 1.0% from February.
Purchase applications fell 2.5% w/w following the 4.7% drop to open the month but the April average so far is up 1.2% from March, which rose 0.2% versus February.
During the last ten years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance slipped 0.4% after a 6.6% slide the prior week and in April are 4.1% below the March average.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060419b.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage rose further to 6.78% while the rate on 15-year financing rose to 6.%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective rate on a 30-Year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
States Fight Predatory Lending in Different Ways from the Federal Reserve Bank of St. Louis can be found <a href="http://stlouisfed.org/publications/re/2006/a/pages/predatory_lending.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">04/14/06</th>
<th scope="col">04/07/06</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 class="odd">
<td class="firstcol">Total Market Index</td>
<td>569.6</td>
<td>579.4</td>
<td>-15.3%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>407.4</td>
<td>417.7</td>
<td>-12.7%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,526.1</td>
<td>1,532.4</td>
<td>-18.4%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
Slovenia: Labor Market Hesitation Follows Good Growth in 2005 
by <a href="/comment/Stone.html">Carol Stone</a> April 19, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060419e.jpg" width="353">
The labor market seems to be slowing just a bit in Slovenia, according to the monthly labor force survey reported today by the Statistical Office; after climbing from April 2005 through November, employment has been virtually flat since then through February. Even so, at 816,156, it stands 0.8% above a year ago, matching the growth pace for all of 2004, and close to that for the rest of Europe.
Unemployment continues stubbornly just above 10%, with January and February at 10.2%. This is low historically for the country, but as employment has apparently stopped increasing, unemployment has stopped decreasing. It bottomed out at exactly 10.0% in September.
Workers, meantime, appear to be doing &quot;all right&quot;. Their average wages, which were published yesterday, were SIT179.7 in February (SIT=Slovenian Tolars), after social security and income tax withholding. This marks a 2.7% real advance from February 2005, allowing for the 2.1% CPI inflation over the period. Real earnings in the rest of Europe were up just 0.4% in 2005, measured by wages and salaries for the EU-25 calculated by Eurostat.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060419f.jpg" width="353">
The average wage indicator hints at general gains in the Slovenian economy; GDP per capita real growth (in fixed 1995 prices) was 4.1% last year. According to the CIA World Factbook, Slovenia is the first transition economy to change from borrower to donor status at the World Bank, and its currency, presently pegged to the euro, is due to switch to the euro next year. All is not completely well, though, as the population has been almost completely flat since 1999; there was net out-migration during the break-up of Yugoslavia, then a modest recovery from 1999 to 2002, but almost no change since. And as we note here, the economy may be showing signs of plateauing after a nice run during 2005.
Country-source data on Slovenia are found in Haver&#39;s EMERGECW database. Since the country joined the European Union in 2004, data generated by Eurostat are also found in the EUROSTAT database. The CIA&#39;s helpful information on the general characteristics of the country are found <a href="http://www.cia.gov/cia/publications/factbook/geos/si.html">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGECW/@E7/@E7.HTM">Slovenia</a></th>
<th scope="col">Feb 2006</th>
<th scope="col">Jan 2006</th>
<th scope="col">Feb 2005</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">Employment (SA, Thous.)</td>
<td>816.2</td>
<td>816.6</td>
<td>809.6</td>
<td>813.1</td>
<td>807.5</td>
<td>801.4</td>
</tr>
<tr>
<td class="firstcol">% Change (Mo/Mo &amp; Yr/Yr)</td>
<td>-0.0</td>
<td>0.0</td>
<td>(yr/yr) 0.8</td>
<td>0.7</td>
<td>0.8</td>
<td>-0.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate (SA, %)</td>
<td>10.2</td>
<td>10.2</td>
<td>10.1</td>
<td>10.1</td>
<td>10.6</td>
<td>11.2</td>
</tr>
<tr>
<td class="firstcol">Average Net Wages &nbsp; (Thous. Tolars)</td>
<td>179.7</td>
<td>179.3</td>
<td>171.4</td>
<td>177.1</td>
<td>168.2</td>
<td>159.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&quot;Real&quot; % Change*&nbsp; &nbsp; (Mo/Mo &amp; Yr/Yr)</td>
<td>-0.2</td>
<td>2.0</td>
<td>(yr/yr) 2.7</td>
<td>2.7</td>
<td>2.1</td>
<td>1.8</td>
</tr>
</tbody>
</table>
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During March, the consumer price index (CPI-U) rose 0.4% following a 0.1% February up tick and matched Consensus expectations. The 0.3% rise in prices less food & energy, however, was slightly firmer than expected. Prices for core [...]

CPI Up An Expected 0.4% During March

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060418h.jpg" width="353">
The housing market in England and Wales is showing improvement. The RICS (Royal Institute of Chartered Surveyors) survey of the housing market shows that although the pace has slackened, house prices continue to rise and expectations of price increases are becoming stronger as can be seen in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060418i.jpg" width="353">
The RICS survey, which was released today is an excellent source of information on many aspects of the housing market in England and Wales. It is found in Haver&#39;s UK data base and in INTSRVYS-G10+ Country Surveys.
There are data on the average units sold and the average stock of units held per chartered surveyor and the relation of sales to stocks. The average units sold has improved and in March was 16.4% above the units sold in March 2005. Over the same period the stock of units held has declined by 5.9%. The second chart shows the year over year percentage change in the average units sold and the average stock of units per chartered surveyor. Although we do not have the absolute levels of sales and stocks of housing units, the rising trend of sales and declining trend of stocks suggests an improving supply and demand situation.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060418j.jpg" width="353">
The same sort of relative improvement in the housing market can be seen in the year to year difference in the percent balances of new buyer enquiries and the new offerings by sellers. (See the third chart.) The year to year difference in the percent balance of new buyer enquiries has been positive since early 2005, while the year to year difference in the percent balance on new offering by sellers has been negative.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/UK/@U4/@U409/@U409.HTM">England and Wales: RICS Survey</a></th>
<th scope="col">Mar 06</th>
<th scope="col">Feb 06</th>
<th scope="col">Mar 05</th>
<th scope="col">M/M % </th>
<th scope="col">Y/Y %</th>
<th scope="col">2004</th>
<th scope="col">2003&nbsp;</th>
<th scope="col">2002&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Units</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Average Stock per Surveyor</td>
<td>72.2</td>
<td>71.7</td>
<td>76.7</td>
<td>0.70</td>
<td>-5.87</td>
<td>75.8</td>
<td>64.1</td>
<td>70.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Sales per Surveyor</td>
<td>25.5</td>
<td>24.9</td>
<td>21.9</td>
<td>2.41</td>
<td>16.44</td>
<td>22.5</td>
<td>28.5</td>
<td>30.7</td>
</tr>
<tr>
<td class="firstcol">Percent Balance</td>
<td>Mar 06</td>
<td>Feb 06</td>
<td>Mar 05</td>
<td>M/M dif </td>
<td>Y/Y dif</td>
<td>2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr class="odd">
<td class="firstcol">Actual House Prices&nbsp;</td>
<td>11</td>
<td>10</td>
<td>-7</td>
<td>1</td>
<td>18</td>
<td>6</td>
<td>-12</td>
<td>-5</td>
</tr>
<tr>
<td class="firstcol">Expected House Prices</td>
<td>27</td>
<td>24&nbsp;</td>
<td>-28&nbsp;</td>
<td>3&nbsp;</td>
<td>55&nbsp;</td>
<td>-8&nbsp;</td>
<td>4&nbsp;</td>
<td>3&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Expected Sales next 3 months</td>
<td>28</td>
<td>24</td>
<td>24</td>
<td>4</td>
<td>4</td>
<td>28</td>
<td>19</td>
<td>18</td>
</tr>
<tr>
<td class="firstcol">Newly Agreed Sales</td>
<td>17</td>
<td>12</td>
<td>-7</td>
<td>5</td>
<td>24</td>
<td>2</td>
<td>-9</td>
<td>-2</td>
</tr>
<tr class="odd">
<td class="firstcol">New Buyer Enquiries</td>
<td>11</td>
<td>10</td>
<td>-7</td>
<td>1</td>
<td>18</td>
<td>6</td>
<td>-12</td>
<td>-5</td>
</tr>
<tr>
<td class="firstcol">New Stock</td>
<td>13</td>
<td>8</td>
<td>18</td>
<td>5</td>
<td>-5</td>
<td>11</td>
<td>10</td>
<td>8</td>
</tr>
</tbody>
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</body>
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The housing market in England and Wales is showing improvement. The RICS (Royal Institute of Chartered Surveyors) survey of the housing market shows that although the pace has slackened, house prices continue to rise and expectations [...]

English and Welsh Housing Market Shows Improvement

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060418g.jpg" width="353">
Chain store sales jumped another 1.1% last week, according to the International Council of Shopping Centers (ICSC)-UBS survey, on top of the 1.8% rise which opened April.
The gains raised sales so far in April 1.3% above the March average which rose 0.7% from February.
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.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060418f.jpg" width="353">
The leading indicator of chain store sales fell 0.3% (-0.2% y/y) after the prior week&#39;s 0.5% decline. The latest level was down 0.4% from the March average which rose 0.3% from 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.
Again the rise in store sales accompanied a jump in retail gasoline prices. The second consecutive ten cent w/w surge in gas to $2.78 per gallon (24.4% y/y) raised the April average to $2.69. In spot market trading yesterday gasoline prices easily crested two dollars and rose to $2.14.

<table border="0" cellspacing="0" width="100%">
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<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">04/15/06</th>
<th scope="col">04/08/06</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>475.6</td>
<td>470.6</td>
<td>4.0%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


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Chain store sales jumped another 1.1% last week, according to the International Council of Shopping Centers (ICSC)-UBS survey, on top of the 1.8% rise which opened April. The gains raised sales so far in April 1.3% above the March [...]

Chain Store Sales & Gasoline Prices Strong Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060418e.jpg" width="353">
The April level of the National Association of Home Builders&#39; (NAHB) Composite Housing Market Index fell 7.4% and the latest level is down 30.6% since the high last June. It also was the lowest level since November 2001.
During the last twenty years there has been an 82% correlation between the y/y change in the annual composite index and the change in single family housing starts and there has been a 75% correlation between the current sales index and new single family home sales.
The April index for current sales of single family homes dropped 8.5% (-26.0% y/y) and the index for sales in six months dropped 6.5% (-23.7% y/y).
An index of the traffic of prospective home buyers was at the lowest level since early 2003.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">&nbsp;April &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>50</td>
<td>54</td>
<td>67</td>
<td>67</td>
<td>68</td>
<td>64</td>
</tr>
</tbody>
</table>
</body>
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The April level of the National Association of Home Builders' (NAHB) Composite Housing Market Index fell 7.4% and the latest level is down 30.6% since the high last June. It also was the lowest level since November 2001. During the [...]

NAHB Housing Market Index Lowest Since Late 2001

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060418d.jpg" width="353">
Housing starts last month fell another 7.8% m/m to 1.960M units following the like decline during February that was little revised. The drop by far exceeded Consensus expectations for a decline to 2.04M starts.
Lower single-family starts led the weakness last month with a 12.0% drop to 1.591M, the lowest level in one year. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060418c.jpg" width="353">
Single family housing starts in the West were notably weak and registered a 19.4% (-5.6% y/y) decline to one of the lowest levels in the last two years. In the Midwest single family starts also fell sharply by 19.6% (-22.0% y/y). In the South fell hard for the second month, by 7.0%, but remained up 17.3% y/y while in Northeast starts slipped a moderate 2.7% (+4.4% y/y).
Multi family starts made up half of the prior month&#39;s decline with a 15.7% increase into the middle of the range of the last two and one half years.
Building permits fell for the second consecutive month and single family permits fell hard again, by 6.9% (-0.6% y/y) to the lowest level since late 2003.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">Mar</th>
<th scope="col">Feb</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">Total</td>
<td>1,960</td>
<td>2,126</td>
<td>6.9%</td>
<td>2,072</td>
<td>1,950</td>
<td>1,854</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,591</td>
<td>1,807</td>
<td>2.6%</td>
<td>1,716</td>
<td>1,604</td>
<td>1,505</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>369</td>
<td>319</td>
<td>30.4%</td>
<td>355</td>
<td>345</td>
<td>349</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,059</td>
<td>2,179</td>
<td>1.9%</td>
<td>2,122</td>
<td>2,058</td>
<td>1,8 88</td>
</tr>
</tbody>
</table>
</body>
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Housing starts last month fell another 7.8% m/m to 1.960M units following the like decline during February that was little revised. The drop by far exceeded Consensus expectations for a decline to 2.04M starts. Lower single-family [...]

Housing Starts Down More Than Expected

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060418a.jpg" width="353">
The finished goods producer price index for March rose a moderate 0.5% following the unrevised 1.4% decline one month earlier. Consensus expectations had been for a 0.4% gain.
Less food &amp; energy the PPI (core) also was moderate and increased 0.1%, half the expected rise. Durable consumer goods rose 0.1% (0.5% y/y) for the second consecutive month and nondurables prices continued weak due to declines in apparel prices &amp; textile house furnishings. Prices of all finished consumer goods less food &amp; energy rose 0.2% (1.9% y/y) for the second month and core consumer nondurable goods prices increased 0.2% (2.9% y/y), half the prior month&#39;s increase.
Capital equipment prices increased just 0.1% (1.4% y/y) for the second consecutive month.
Finished energy prices during March increased 1.8% (15.6% y/y) as gasoline prices jumped 9.1% (22.2% y/y) but home heating oil fell for the third straight month, down 3.6% (+15.2% y/y) along with natural gas prices which dipped another 0.5% (+22.3% y/y). Residential electric power costs fell 0.7% (+7.9% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060418b.jpg" width="353">
The Short-Term Energy and Summer Fuels Outlook from the US Energy Information Administration can be found <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html"> here</a>. Also available is the <a href="http://www.eia.doe.gov/emeu/steo/pub/4tab.html">U.S.</a><a href="http://www.eia.doe.gov/emeu/steo/pub/4tab.html"> Energy Prices: Base Case</a><a href="http://www.eia.doe.gov/emeu/steo/pub/4tab.html">.</a>
Intermediate goods prices fell for the second consecutive month. Core intermediate prices also were tame and rose just 0.1% following the 0.5% surge during February.
Crude goods prices dropped sharply again due to lower energy prices, which fell 4.5%. This month, however, crude oil prices have backed up with the price of WTI crude oil yesterday at $70.41 per barrel versus the March average of $62.90. Core crude prices were strong last month and rose 0.8% due to continued strength in prices for copper base scrap (57.6% y/y), aluminum scrap (25.5% y/y) and iron &amp; steel scrap (10.7% 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.

<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">Mar</th>
<th scope="col">Feb</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>0.5%</td>
<td>-1.4%</td>
<td>3.5%</td>
<td>4.9%</td>
<td>3.6%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.1%</td>
<td>0.3%</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>-0.1%</td>
<td>-0.3%</td>
<td>7.0%</td>
<td>8.0%</td>
<td>6.6%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.1%</td>
<td>0.5%</td>
<td>4.5%</td>
<td>5.5%</td>
<td>5.7%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-2.7%</td>
<td>-9.2%</td>
<td>4.9%</td>
<td>14.7%</td>
<td>17.5%</td>
<td>25.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.8%</td>
<td>3.3%</td>
<td>13.2%</td>
<td>4.8%</td>
<td>26.5%</td>
<td>12.4%</td>
</tr>
</tbody>
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The finished goods producer price index for March rose a moderate 0.5% following the unrevised 1.4% decline one month earlier. Consensus expectations had been for a 0.4% gain. Less food & energy the PPI (core) also was moderate and [...]

PPI Moderate, As Expected

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060417f.jpg" width="353">
The March decline in consumer confidence among Japanese households is, in all likelihood, a non event. Confidence among Japanese households of two or more persons on a non seasonally adjusted basis (the headline measure) fell from 49.8 in February to 47.9 in March.However, the monthly series, which has been in existence only since April 2004, has consistently shown a decline in the last month of each quarter as shown in the first chart. Seasonally adjusted data are available only on a quarterly basis and are based on the unadjusted quarterly data going back to the second quarter of 1982. On this basis, confidence in the first quarter of 2006 was 48.2, up from 47.9 in the fourth quarter of 2005.
<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060417g.jpg" width="353"> Confidence is measured by a diffusion index. Expected changes in confidence are rated as follows: better (1), slightly better (.75), the same (.50), slightly worse (.25) and worse (0). The index is a weighted average of the expected changes. The March value of the index at 47.9 implies that there are more households who are less confident that conditions will remain the same or become slightly worse than those who are confident that conditions will be the same or will improve.However, the level of the index is probably less important than its trend. During the entire time in which the index has been available it very rarely has been above the 50 level. This may or may not be an indication that Japanese households are always overly pessimistic. What is important is whether the households are becoming more or less confident. As the attached chart shows, the improvement in confidence that has taken place since the fourth quarter, 2001 low point of 33, has reached a point where it is now among the highest levels recorded. (In the attached chart, which includes the recent monthly data and the historical quarterly data, the latter have been smoothed by using the &quot;interpolate&quot; option under Tools.)

<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/JAPAN/@J8/@J806/@J806.HTM">Japan:</a></th>
<th scope="col">Mar 06</th>
<th scope="col">Feb 06</th>
<th scope="col">Jan 06</th>
<th scope="col">Dec 05</th>
<th scope="col">M/M %</th>
<th scope="col">2004</th>
<th scope="col">2003&nbsp;</th>
<th scope="col">2002&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Confidence (2 or more person households, nsa)</td>
<td>47.9</td>
<td>49.8</td>
<td>9.5</td>
<td>46.5</td>
<td>-3.82</td>
<td>47.3</td>
<td>45.6</td>
<td>37.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Q1 06</td>
<td>Q4 05</td>
<td>Q1 05</td>
<td>Q/Q %</td>
<td>Y/Y %</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Consumer Confidence (2 or more person households, sa)</td>
<td>48.2</td>
<td>42.9</td>
<td>45.5</td>
<td>12.3</td>
<td>5.9</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
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The March decline in consumer confidence among Japanese households is, in all likelihood, a non event. Confidence among Japanese households of two or more persons on a non seasonally adjusted basis (the headline measure) fell from [...]

Household Confidence in Japan Weakens, but Still High by Historical Standards

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Trade and fiscal policy uncertainty has exploded with the new administration

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

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

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

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Andrew Cates

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

250501Z1.jpg

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

250501Z2.jpg

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

250501Z3.jpg

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

250501Z4.jpg

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

250501Z5.jpg

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

250501Z6.jpg

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

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

Charts of the Week: Tariff Truce, Tenuous Trust

250501J5.jpg

250501K5.jpg

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

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

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

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

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

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

250501L5.jpg

250501M5.jpg

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

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

250501N.jpg

250501O.jpg

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

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

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

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

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

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

U.S. Construction Spending Unexpectedly Drops in March, the First M/M Fall Since September

Carol Stone, CBE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Economy in Brief: April 2006

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