Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090518d.jpg" align="right" border="0">While
faint signs of recovery have begun to appear in various
parts of the world, few have appeared in Eastern Europe and this
remains the case with today's reports from Eastern Europe that include
industrial production in Russia and the Ukraine, the labor force in
Slovenia and construction in Hungary.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090518e.jpg" align="right" border="0">
Russia reported that industrial production in April declined
16.8% from April, 2008, greater than the 13.7% year to year decline of
March. This was the sixth consecutive decline and the largest recorded
since the Federal Statistical Service revised its methodology in 2003.
Production in manufacturing has shown similar trends but the declines
have been significantly bigger. In April, manufacturing production was
25.3% below April 2008.
The decline in production in Ukraine has been steeper than
that in Russia and in April was 33.5% below April of 2008, compared
with a shortfall of 30.8% in March. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090518f.jpg" align="right" border="0">
The first chart shows industrial
production in Russia and Ukraine.
The monthly decline in employment in Slovenia is slowing up.
It was 4,635 in March, compared with 5,056 in February and 9,187 in
January, but the unemployment rate continues to climb and was 8.4% in
March. Slovenia's level of employment and the unemployment rate are
shown in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">EASTERN
EUROPE</th>
<th scope="col">Apr 09</th>
<th scope="col">Mar &nbsp; 09</th>
<th scope="col">Feb 09</th>
<th scope="col">Jan 09&nbsp;</th>
<th scope="col">Y/Y Chg</th>
<th scope="col">Y/Y&nbsp; Chg&nbsp;</th>
<th scope="col">Y/Y&nbsp; Chg</th>
<th scope="col"> Y/Y&nbsp; Chg </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>Apr 09</td>
<td>Mar &nbsp; 09</td>
<td>Feb 09</td>
<td>Jan 09&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Russia&nbsp; IP 2005=100</td>
<td>100.1</td>
<td>102.4</td>
<td>102.5</td>
<td>97.4</td>
<td>-16.8%</td>
<td>-13.7%</td>
<td>-13.2%</td>
<td>-16.0%</td>
</tr>
<tr class="even">
<td class="firstcol">Ukraine IP2005=100</td>
<td>80.4</td>
<td>84.5</td>
<td>78.0</td>
<td>73.9</td>
<td>-33.5%</td>
<td>-30.8%</td>
<td>-31.4%</td>
<td>-31.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Hungary Construction
Exp&nbsp; Bil of Forints</td>
<td>--</td>
<td>179.7</td>
<td>164.1</td>
<td>142.1</td>
<td>--</td>
<td>8.6%</td>
<td>-1.2%</td>
<td>-9.4%</td>
</tr>
<tr class="even">
<td class="firstcol">Slovenia Unemp Rate (%)</td>
<td>--</td>
<td>8.4</td>
<td>8.0</td>
<td>7.5</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Slovenia Employ Persons</td>
<td>--</td>
<td>865,459</td>
<td>870,094</td>
<td>875,150</td>
<td>--</td>
<td>-4635*</td>
<td>-5056*</td>
<td>-9187*</td>
</tr>
<tr>
<td colspan="9" class="firstcol">* month to
month change</td>
</tr>
</tbody>
</table>
</body></html>

While faint signs of recovery have begun to appear in various parts of the world, few have appeared in Eastern Europe and this remains the case with today's reports from Eastern Europe that include industrial production in Russia and [...]

News From Eastern Europe Still Mainly Negative

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090518c.jpg" align="left" border="0">
Japan&#8217;s consumer confidence index is up for the fourth month
running. It is now a monthly reading - that accounts for the history of
dots on the chart which represent unconnected quarterly observations
ahead of the adoption of monthly surveys. The current reading for the
index is in the bottom third to quarter of its historic range, a low
position, but well off from its worst in this cycle. Notably, over the
last three months there have been sharp improvements in the overall
livelihood assessment. Income growth, Employment, Willingness to buy
durables, and Value of assets responses, all have risen over that
period. Of these, income growth is still the lowest in its range
standing in the bottom 11th- to 15th percentile depending on the period
for that calculation. Employment and value of assets responses lie just
below the boundary for the lower range quartile. Willingness to buy
durable goods is, however, much stronger in its range and is closer to
the midpoint at the 45th range percentile. 
 

Clearly there has been improvement in the Japanese consumer&#8217;s
assessment of the economy. Just as clearly the current readings on the
consumer&#8217;s feeling about the economy are poor. For now after such a
lengthy period of deterioration what is notable is the ongoing
improvement in these measures and quite a notable step of improvement
across the various responses. However bad off things are in Japan, they
are perceived to be getting better. Importantly these assessments are
not so beleaguered for spending any more. 
 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Japan
Consumer Confidence
</th>
<th scope="col">Percentile</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3"> monthly</td>
<td colspan="3"> Change over</td>
<td colspan="2">of range*</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Feb-09</td>
<td>3-mos</td>
<td>6-mos</td>
<td>12-Mos</td>
<td>Since 2004</td>
<td>Since 1988</td>
</tr>
<tr class="odd">
<td class="firstcol">Overall Livelihood</td>
<td>33.8</td>
<td>31.1</td>
<td>29.4</td>
<td>4.6</td>
<td>4.2</td>
<td>0.8</td>
<td>28.6</td>
<td>26.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Income growth</td>
<td>33.4</td>
<td>32.0</td>
<td>31.1</td>
<td>2.0</td>
<td>-1.1</td>
<td>-4.1</td>
<td>15.1</td>
<td>11.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment</td>
<td>23.3</td>
<td>18.3</td>
<td>14.9</td>
<td>9.1</td>
<td>-1.5</td>
<td>-12.7</td>
<td>22.2</td>
<td>22.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Willing to buy Durable Goods</td>
<td>39.0</td>
<td>34.2</td>
<td>31.4</td>
<td>8.4</td>
<td>10.2</td>
<td>4.8</td>
<td>45.9</td>
<td>45.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Value of Assets</td>
<td>32.2</td>
<td>28.8</td>
<td>28.7</td>
<td>4.1</td>
<td>3.2</td>
<td>-4.1</td>
<td>22.4</td>
<td>22.4</td>
</tr>
<tr>
<td colspan="9" class="firstcol">For
two-person households; *
Percentiles since Mar 2004 when series became monthly or full period</td>
</tr>
</tbody>
</table>
</body></html>

Japan’s consumer confidence index is up for the fourth month running. It is now a monthly reading - that accounts for the history of dots on the chart which represent unconnected quarterly observations ahead of the adoption of monthly [...]

Japan's Consumer Confidence Is Up For The Fourth Month In A Row

Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090518a.jpg" align="left" border="0">
The pressure is diminishing in the U.S. housing market according to
the National Association of Home Builders. Their May index of sales
rose to 16, its highest level since last September and up from an
upwardly revised April level. The index is compiled from survey
questions asking builders to rate market conditions as &#8220;good&#8221;, &#8220;fair&#8221;,
&#8220;poor&#8221; or &#8220;very high&#8221; to &#8220;very low&#8221;. Numerical results over 50 indicate a predominance of &#8220;good&#8221; readings. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090518b.jpg" align="right" border="0">
The Home Builders Association indicated that its sub-index of
present sales rose to a reading of 14 from the upwardly revised April
figure. The latest improvement lifted the index to just below last
year's average level of 16.Since 1990, the year-to-year change in this
index has had an 80% correlation with the year-to-year percentage
change in new single-family home sales.
The index of builders&#8217; expectations for home sales in six months also rose to its highest since September. However, the &#8220;traffic" of prospective buyers was unchanged from April but still up from the record lows of this past Winter.
Index readings in each of the country's regions have improved from the recent lows.
Individuals' assessment of conditions for remodeling also have
improved. The conditions for major and minor alterations rose in the
first quarter to the highest level in nearly one year and expectations
rose as well.
During the fourth quarter the Home Builders' Housing Opportunity
Index, which is the share of homes sold that could be considered
affordable to a family earning the median income, rose even higher to
its highest level since early 2002. It was up by nearly one half from
the 2006 low due to lower home prices, lower interest rates and higher
income. (There is a break in the series from 2002 to 2003.)
The NAHB has compiled the Housing Market Index since 1985. The
weights assigned to the individual index components are .5920 for
single family detached sales, present time; .1358 for single family
detached sales, next six months; and .2722 for traffic of prospective
buyers. The results, along with other housing and remodeling indexes
from NAHB Economics, are included in Haver&#8217;s SURVEYS database.
The Role of Information in the Rise in Consumer Bankruptcies from the Federal Reserve Bank of Richmond is available <a href="http://http://www.richmondfed.org/publications/research/working_papers/2009/pdf/wp09-4.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat'l Association of Home Builders</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">&nbsp;May '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Housing Market Index (All Good = 100)</td>
<td>16</td>
<td>14</td>
<td>19</td>
<td>16</td>
<td>27</td>
<td>42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales</td>
<td>14</td>
<td>12</td>
<td>17</td>
<td>16</td>
<td>27</td>
<td>45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales: Next Six Months</td>
<td>27</td>
<td>24</td>
<td>28</td>
<td>25</td>
<td>37</td>
<td>51</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Traffic of Prospective Buyers</td>
<td>13</td>
<td>13</td>
<td>18</td>
<td>14</td>
<td>21</td>
<td>30</td>
</tr>
</tbody>
</table>
</body></html>

The pressure is diminishing in the U.S. housing market according to the National Association of Home Builders. Their May index of sales rose to 16, its highest level since last September and up from an upwardly revised April level. [...]

U.S. Home Builders' Index Increases Again

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090518a.jpg" align="left" border="0">
The pressure is diminishing in the U.S. housing market
according to the National Association of Home Builders. Their May index
of sales rose to 16, its highest level since last September and up from
an upwardly revised April level. The index is compiled from survey
questions asking builders to rate market conditions as &#8220;good&#8221;, &#8220;fair&#8221;,
&#8220;poor&#8221; or &#8220;very high&#8221; to &#8220;very low&#8221;. Numerical
results over 50 indicate a predominance of &#8220;good&#8221; readings. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090518b.jpg" align="right" border="0">
The Home Builders Association indicated that its sub-index of
present sales rose to a reading of 14 from the upwardly revised April
figure. The latest improvement lifted the index to just below last
year's average level of 16.Since 1990, the year-to-year change in this
index has had an 80% correlation with the year-to-year percentage
change in new single-family home sales.
The index of builders&#8217; expectations for home sales in six
months also rose to its highest since September. However, the
&#8220;traffic" of prospective buyers was unchanged from April but still up
from the record lows of this past Winter.
Index readings in each of the country's regions have improved
from the recent lows.
Individuals' assessment of conditions for remodeling also have
improved. The conditions for major and minor alterations rose in the
first quarter to the highest level in nearly one year and expectations
rose as well.
During the fourth quarter the Home Builders' Housing
Opportunity Index, which is the share of homes sold that could be
considered affordable to a family earning the median income, rose even
higher to its highest level since early 2002. It was up by nearly one
half from the 2006 low due to lower home prices, lower interest rates
and higher income. (There is a break in the series from 2002 to 2003.)
The NAHB has compiled the Housing Market Index
since 1985. The weights assigned to the
individual index components are .5920 for single family detached sales,
present time; .1358 for single family detached sales, next six months;
and .2722 for traffic of prospective buyers. The results, along with
other housing and remodeling indexes from NAHB Economics, are included
in Haver&#8217;s SURVEYS database.
The Role of Information in the Rise in Consumer
Bankruptcies from the Federal Reserve Bank of Richmond is
available <a href="http://http://www.richmondfed.org/publications/research/working_papers/2009/pdf/wp09-4.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat'l
Association of Home Builders</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">&nbsp;May '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Housing Market Index
(All Good = 100)</td>
<td>16</td>
<td>14</td>
<td>19</td>
<td>16</td>
<td>27</td>
<td>42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales</td>
<td>14</td>
<td>12</td>
<td>17</td>
<td>16</td>
<td>27</td>
<td>45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales:
Next Six Months</td>
<td>27</td>
<td>24</td>
<td>28</td>
<td>25</td>
<td>37</td>
<td>51</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Traffic of
Prospective Buyers</td>
<td>13</td>
<td>13</td>
<td>18</td>
<td>14</td>
<td>21</td>
<td>30</td>
</tr>
</tbody>
</table>
Japan's Consumer Confidence Is
UpFor The Fourth Month In A Row 
by <a href="/comment/Brusca.html">Robert
Brusca</a> May 18, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090518c.jpg" align="left" border="0">
Japan&#8217;s consumer confidence index is up for the fourth month
running. It is now a monthly reading - that accounts for the history of
dots on the chart which represent unconnected quarterly observations
ahead of the adoption of monthly surveys. The current reading for the
index is in the bottom third to quarter of its historic range, a low
position, but well off from its worst in this cycle. Notably, over the
last three months there have been sharp improvements in the overall
livelihood assessment. Income growth, Employment, Willingness to buy
durables, and Value of assets responses, all have risen over that
period. Of these, income growth is still the lowest in its range
standing in the bottom 11th- to 15th percentile depending on the period
for that calculation. Employment and value of assets responses lie just
below the boundary for the lower range quartile. Willingness to buy
durable goods is, however, much stronger in its range and is closer to
the midpoint at the 45th range percentile. 
 

Clearly there has been improvement in the Japanese consumer&#8217;s
assessment of the economy. Just as clearly the current readings on the
consumer&#8217;s feeling about the economy are poor. For now after such a
lengthy period of deterioration what is notable is the ongoing
improvement in these measures and quite a notable step of improvement
across the various responses. However bad off things are in Japan, they
are perceived to be getting better. Importantly these assessments are
not so beleaguered for spending any more. 
 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Japan
Consumer Confidence
</th>
<th scope="col">Percentile</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3"> monthly</td>
<td colspan="3"> Change over</td>
<td colspan="2">of range*</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Feb-09</td>
<td>3-mos</td>
<td>6-mos</td>
<td>12-Mos</td>
<td>Since 2004</td>
<td>Since 1988</td>
</tr>
<tr class="odd">
<td class="firstcol">Overall Livelihood</td>
<td>33.8</td>
<td>31.1</td>
<td>29.4</td>
<td>4.6</td>
<td>4.2</td>
<td>0.8</td>
<td>28.6</td>
<td>26.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Income growth</td>
<td>33.4</td>
<td>32.0</td>
<td>31.1</td>
<td>2.0</td>
<td>-1.1</td>
<td>-4.1</td>
<td>15.1</td>
<td>11.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment</td>
<td>23.3</td>
<td>18.3</td>
<td>14.9</td>
<td>9.1</td>
<td>-1.5</td>
<td>-12.7</td>
<td>22.2</td>
<td>22.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Willing to buy Durable Goods</td>
<td>39.0</td>
<td>34.2</td>
<td>31.4</td>
<td>8.4</td>
<td>10.2</td>
<td>4.8</td>
<td>45.9</td>
<td>45.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Value of Assets</td>
<td>32.2</td>
<td>28.8</td>
<td>28.7</td>
<td>4.1</td>
<td>3.2</td>
<td>-4.1</td>
<td>22.4</td>
<td>22.4</td>
</tr>
<tr>
<td colspan="9" class="firstcol">For
two-person households; *
Percentiles since Mar 2004 when series became monthly or full period</td>
</tr>
</tbody>
</table>
News From Eastern Europe StillMainly Negative 
by <a href="/comment/Curley.html">Louise
Curley</a> May 18, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090518d.jpg" align="right" border="0">While
faint signs of recovery have begun to appear in various
parts of the world, few have appeared in Eastern Europe and this
remains the case with today's reports from Eastern Europe that include
industrial production in Russia and the Ukraine, the labor force in
Slovenia and construction in Hungary.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090518e.jpg" align="right" border="0">
Russia reported that industrial production in April declined
16.8% from April, 2008, greater than the 13.7% year to year decline of
March. This was the sixth consecutive decline and the largest recorded
since the Federal Statistical Service revised its methodology in 2003.
Production in manufacturing has shown similar trends but the declines
have been significantly bigger. In April, manufacturing production was
25.3% below April 2008.
The decline in production in Ukraine has been steeper than
that in Russia and in April was 33.5% below April of 2008, compared
with a shortfall of 30.8% in March. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090518f.jpg" align="right" border="0">
The first chart shows industrial
production in Russia and Ukraine.
The monthly decline in employment in Slovenia is slowing up.
It was 4,635 in March, compared with 5,056 in February and 9,187 in
January, but the unemployment rate continues to climb and was 8.4% in
March. Slovenia's level of employment and the unemployment rate are
shown in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">EASTERN
EUROPE</th>
<th scope="col">Apr 09</th>
<th scope="col">Mar &nbsp; 09</th>
<th scope="col">Feb 09</th>
<th scope="col">Jan 09&nbsp;</th>
<th scope="col">Y/Y Chg</th>
<th scope="col">Y/Y&nbsp; Chg&nbsp;</th>
<th scope="col">Y/Y&nbsp; Chg</th>
<th scope="col"> Y/Y&nbsp; Chg </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>Apr 09</td>
<td>Mar &nbsp; 09</td>
<td>Feb 09</td>
<td>Jan 09&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Russia&nbsp; IP 2005=100</td>
<td>100.1</td>
<td>102.4</td>
<td>102.5</td>
<td>97.4</td>
<td>-16.8%</td>
<td>-13.7%</td>
<td>-13.2%</td>
<td>-16.0%</td>
</tr>
<tr class="even">
<td class="firstcol">Ukraine IP2005=100</td>
<td>80.4</td>
<td>84.5</td>
<td>78.0</td>
<td>73.9</td>
<td>-33.5%</td>
<td>-30.8%</td>
<td>-31.4%</td>
<td>-31.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Hungary Construction
Exp&nbsp; Bil of Forints</td>
<td>--</td>
<td>179.7</td>
<td>164.1</td>
<td>142.1</td>
<td>--</td>
<td>8.6%</td>
<td>-1.2%</td>
<td>-9.4%</td>
</tr>
<tr class="even">
<td class="firstcol">Slovenia Unemp Rate (%)</td>
<td>--</td>
<td>8.4</td>
<td>8.0</td>
<td>7.5</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Slovenia Employ Persons</td>
<td>--</td>
<td>865,459</td>
<td>870,094</td>
<td>875,150</td>
<td>--</td>
<td>-4635*</td>
<td>-5056*</td>
<td>-9187*</td>
</tr>
<tr>
<td colspan="9" class="firstcol">* month to
month change</td>
</tr>
</tbody>
</table>
</body></html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090515e.jpg" width="353">
Improved consumer spirits regarding the outlook raised the University of Michigan&#39;s early-May reading of consumer sentiment to the highest level since September of last year. The gain in the index to a level of 67.9 exceeded Consensus expectations for a reading of 66.0.
The expectations component of consumer sentiment, which had been improving, jumped another 9.4% to its highest level since late-2007. The gain was fueled by improved expectations for business conditions during the next year which jumped also to the highest level since 2007. Expected conditions during the next year surged by a similar degree. Unlike last month, however, the higher stock market failed to lift the expected change in personal finances which deteriorated moderately.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090515f.jpg" width="353">
The opinion of government policy, which may eventually influence economic expectations, jumped sharply to the highest level since 2002. Thirty-three percent of respondents thought that a good job was being done by government, up from the four- percent low of last December, while a much reduced 23 percent of respondents thought that a poor job was being done.
The current economic conditions index stuttered, but just slightly, as the reading for current personal finances fell. The drop was offset, however, by an improved read of current conditions for buying large household goods to the highest level since last August.
Inflation expectations for the next year fell to 2.9% versus a reading which was as high as 7.0% last May.
The University of Michigan survey data is not seasonally adjusted. The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database with details in the proprietary UMSCA database.
Raising the credit bar, or getting clubbed by it? from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/pubs/fedgaz/09-01/cover.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Mid-May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">May y/y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>67.9</td>
<td>65.1</td>
<td>57.3</td>
<td>13.5%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>66.2</td>
<td>68.3</td>
<td>63.3</td>
<td>-9.7</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>69.0</td>
<td>63.1</td>
<td>53.5</td>
<td>35.0</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>
</body>
</html>

Improved consumer spirits regarding the outlook raised the University of Michigan's early-May reading of consumer sentiment to the highest level since September of last year. The gain in the index to a level of 67.9 exceeded Consensus [...]

Michigan Consumer Sentiment Up On Improved Expectations With Heightened Hopes For Gov't Policy

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090515g.jpg">
The severity of the downturn in industrial output eased last month, according to the industrial production figures published by the Federal Reserve. Output, which includes mining and utilities, declined an expected and moderate 0.5%, which was by far the smallest decline of this recession. The drop followed declines between one and four percent during the prior several months. Declines in the factory sector alone have eased as well. The 0.3% April shortfall was the smallest since February and compares to monthly declines between one and three percent during this recession.
Output of consumer goods overall was unchanged last month and the year-to-date rate of decline eased to 7.3%. Last month, production of autos actually increased, though it&#39;s down at a 44.4% rate this year. Conversely, furniture output posted a 2.8% decline last month and it&#39;s down at a 23.7% rate so far this year as consumers continue to shy away from purchases of large durable goods. Apparel output fell 1.3% and the three-month rate of -17.3% is half that of its worst. Even the pace of the decline in the production of business equipment seems to have eased with a 0.5% decline, though the three-month rate was near its worst at -23.6%. The downturn in the housing market continued to lower output of construction supplies. It fell 1.1% and the three-month rate of decline eased to a &quot;modest&quot; 23.4%. <img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090515h.jpg">
Even in the high-tech sector the rate of decline in output slowed. Here, industrial production fell 0.8% last month and at a reduced 13.5% rate during the last four. Less high tech, overall industrial production fell a reduced 0.4% last month and the annual rate of change eased to -15.3%.
O.K., so the slowing pace of output declines is largely in autos and the high-tech sector. But outside of these two sectors, output moderated to a 0.5% decline last month, less than one-third the March drop. The three-month rate of decline was still near its worst at a -13.4% annual rate.
Excess capacity grew even further last month. Capacity utilization fell to 69.1%, a record low for the series which dates to 1966. Utilization in the factory sector dropped even harder to 65.7% from a peak near 80% back in 2007. The latest rate was a record low since WW II.
The industrial production data are available in Haver&#39;s USECON database.
Ties that Bind: Bilateral Trade&#39;s Role in Synchronizing Business Cycles from the Federal Reserve Bank of Dallas is available <a href="http://dallasfed.org/research/eclett/2009/el0901.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">INDUSTRIAL PRODUCTION (SA, %)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Output </td>
<td>-0.5</td>
<td>-1.7</td>
<td>-12.5</td>
<td>-2.2</td>
<td>1.5</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Manufacturing</td>
<td>-0.3</td>
<td>-2.1</td>
<td>-14.5</td>
<td>-3.2</td>
<td>1.4</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Consumer Goods</td>
<td>0.0</td>
<td>-0.3</td>
<td>-6.6</td>
<td>-2.6</td>
<td>0.9</td>
<td>0.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Business Equipment</td>
<td>-0.5</td>
<td>-2.9</td>
<td>-13.9</td>
<td>-1.1</td>
<td>2.7</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Construction Supplies</td>
<td>-1.1</td>
<td>-2.8</td>
<td>-20.0</td>
<td>-6.3</td>
<td>-2.0</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>0.5</td>
<td>1.8</td>
<td>-3.2</td>
<td>0.3</td>
<td>3.4</td>
<td>-0.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>69.1</td>
<td>69.4</td>
<td>79.2 (April &#39;08)</td>
<td>77.6</td>
<td>80.6</td>
<td>80.9</td>
</tr>
</tbody>
</table>
</body>
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The severity of the downturn in industrial output eased last month, according to the industrial production figures published by the Federal Reserve. Output, which includes mining and utilities, declined an expected and moderate 0.5%, [...]

U.S. Factory Production Shortfall Eases

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090515d.jpg" align="left" border="0">
The EMU region&#8217;s sharp drop in GDP has turned out to be worse
than expected for the region as well as for most countries. Germany is
showing the deepest GDP drop since 1970. The drop that The Netherlands
is experiencing is the sharpest drop in GDP since the end of WWII.
Greece is the sole county in this table with positive growth yr/yr. 
 

GDP continues to decelerate across Europe. We knew these GDP
reports would be weak after viewing the weakness in industrial output
ahead of the release of this GDP report. Germany&#8217;s Q1 decline is so
large it is not looking for much if any further decline in GDP for the
rest of the year. 
 

The Swedish Finance Minister Anders Borg has said that Europe
may be in need of some further stimulus. Of course Europe also labors
under the constraint of the Maastricht rules that restrict fiscal
deficits and cap ratios of government debt to GDP. Not only does Europe
lack a central fiscal authority comparable to its central bank, but the
fragmented nature of fiscal responsibility makes it hard for Europe to
be involved in fiscal stimulus in a coordinated way. Instead of a
central fiscal authority the Maastricht rules stand in to restrict
individual nations from going overboard with fiscal policy actions that
could create too many government liabilities that might undermine the
value of the euro. Of course recessions naturally put pressure on
Maastricht rules since growth slows or declines, pushing tax revenues
down at a time that social safety new spending rises. Countries that
have room under the Maastricht ratios can engage in fiscal stimulus in
times like theses, but often it is the high debt countries that are in
greater need of the stimulus and must risk running afoul of the rules
if they act. 
 

This down turn has exposed problems in the Euro Area. The Euro
Area is asymmetric. Its Central Bank has a mandate for price stability
only. Meanwhile there is no fiscal authority to step in when things get
tough. In this cycle the ECB actually joined in on an coordinated
international rate cut with its inflation rate well over ceiling on the
basis of a forecast that inflation would drop (of course the spot oil
price had dropped sharply and that was not a very risky forecast at the
time). Still it was an action that seemed to violate the rule if not
the spirit of having and inflation ceiling. Europe has not been able to
confront the problem that only the ECB can move fast in a crisis yet
its mandate is price stability. 
 

After seeing these GDP reports markets did not react very
strongly. The weakness in GDP was expected. The degree of weakness has
turned out to be a bit worse than expected. It sill is not clear what
steps Europe will take next and if more fiscal stimulus will be part of
the approach or not. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">Euro Area and Main G-10 Country GDP Results </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Quarter over quarter-SAAR</td>
<td colspan="4">Year/Year</td>
</tr>
<tr class="grey3">
<td class="firstcol">GDP</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>Q3-08</td>
<td>Q1-09</td>
<td>Q4-08</td>
<td>Q3-08</td>
<td>Q2-08</td>
</tr>
<tr class="grey2">
<td class="firstcol">EMU-15</td>
<td>-9.6%</td>
<td>-6.3%</td>
<td>-1.0%</td>
<td>-4.6%</td>
<td>-1.5%</td>
<td>0.6%</td>
<td>1.4%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Austria</td>
<td>-8.5%</td>
<td>-2.6%</td>
<td>-1.3%</td>
<td>-4.6%</td>
<td>0.3%</td>
<td>1.8%</td>
<td>2.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol">France</td>
<td>-4.7%</td>
<td>-5.7%</td>
<td>-0.7%</td>
<td>-3.2%</td>
<td>-1.7%</td>
<td>0.1%</td>
<td>1.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Germany</td>
<td>-14.4%</td>
<td>-8.6%</td>
<td>-2.1%</td>
<td>-6.9%</td>
<td>-1.8%</td>
<td>0.8%</td>
<td>2.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Greece</td>
<td>-4.6%</td>
<td>1.2%</td>
<td>1.5%</td>
<td>0.3%</td>
<td>2.4%</td>
<td>2.7%</td>
<td>3.4%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Italy</td>
<td>-9.4%</td>
<td>-8.3%</td>
<td>-3.2%</td>
<td>-5.9%</td>
<td>-3.0%</td>
<td>-1.3%</td>
<td>-0.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol">The Netherlands</td>
<td>-10.7%</td>
<td>-4.7%</td>
<td>-1.8%</td>
<td>-4.5%</td>
<td>-0.8%</td>
<td>1.8%</td>
<td>3.4%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Portugal</td>
<td>-5.9%</td>
<td>-6.2%</td>
<td>-0.8%</td>
<td>-3.0%</td>
<td>-1.8%</td>
<td>0.4%</td>
<td>0.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Spain</td>
<td>-7.0%</td>
<td>-3.8%</td>
<td>-1.2%</td>
<td>-2.9%</td>
<td>-0.7%</td>
<td>0.9%</td>
<td>1.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">UK</td>
<td>-7.4%</td>
<td>-5.9%</td>
<td>-2.8%</td>
<td>-4.2%</td>
<td>-2.0%</td>
<td>0.4%</td>
<td>1.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">US</td>
<td>-6.1%</td>
<td>-6.3%</td>
<td>-0.5%</td>
<td>-2.6%</td>
<td>-0.8%</td>
<td>0.7%</td>
<td>2.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Japan</td>
<td>#N/A</td>
<td>-12.1%</td>
<td>-1.4%</td>
<td>#N/A</td>
<td>-4.3%</td>
<td>-0.2%</td>
<td>0.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Switzerland</td>
<td>#N/A</td>
<td>-1.2%</td>
<td>-0.3%</td>
<td>#N/A</td>
<td>-0.1%</td>
<td>1.3%</td>
<td>2.3%</td>
</tr>
</tbody>
</table>
</body></html>

The EMU region’s sharp drop in GDP has turned out to be worse than expected for the region as well as for most countries. Germany is showing the deepest GDP drop since 1970. The drop that The Netherlands is experiencing is the [...]

EMU GDP Drops Sharply

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090515a.jpg" align="left" border="0">
Weak pricing power continues to stem from a shortfall in U. S.
demand. The Bureau of Labor Statistics reported that the Consumer Price
Index was unchanged last month after a 0.1% slip during March. More
indicative of the weakness in pricing power, the year-to-year change in
consumer prices was -0.7%, the biggest since 1955. The April index was
in accord with Consensus expectations for no change in the month.
The weakness in the recent CPI readings owes mostly to lower
food and energy prices. In contrast, "core" pricing has picked up
slightly. The CPI less food &amp; energy rose 0.3% last month after
three consecutive 0.2% increases. These gains lifted the twelve-month
change to 1.9%, which was the firmest since January, and the growth
rate here in 2009 has averaged 2.4% (AR). That four-month growth is up
from a low of 0.5% as of December.
Lower energy prices again restrained overall pricing pressure
last month. The 2.4% decline in April reflected a 2.8% shortfall in
gasoline prices (-39.5% y/y) which added to a 4.0% March drop. Fuel oil
prices also continued downward with a 2.1% drop (-33.5% y/y). The
latest was the ninth consecutive monthly drop and it lowered prices by
one-third during the last twelve. Finally, prices for natural gas
&amp; electricity have fallen in all but one of the last nine
months and year-to-year they are down 1.7%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090515b.jpg" align="right" border="0">
Lower food &amp; beverage prices also continue to restrain
overall inflationary pressure. Prices slipped for the third straight
month and the y/y change of 3.3% was the weakest since early 2007, down
from a peak of +6.1% last fall. Recent weakness has been led by lower
dairy product prices (-5.1% y/y). Moreover, price gains for meats,
poultry &amp; fish (2.5% y/y) as well as fruits &amp;
vegetables (0.6% y/y) have eased sharply.
Bucking the disinflationary trend have been core
goods prices which rose 0.5% during April after three
consecutive 0.4% increases. Higher tobacco prices account continue to
account for some of that acceleration with a 28.8% y/y increase. But
there has been some modest firming of prices elsewhere. Prices for
household furnishings &amp; operations have risen 1.8% y/y
following price deflation early last year. Apparel prices are up 0.9%
y/y after declines extending back to 1999. Prices of new &amp; used
motor vehicles have risen during the last four months and the y/y
change of -1.7% compares to a rate of decline of 3.5% as of yearend
2008.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090515c.jpg" align="left" border="0">
Gains in core services prices continue to
moderate. The 0.2% uptick last month left the y/y change of 2.3% at its
weakest since 1983. That moderation continues to owe mostly to weakness
in the housing market which caused April shelter prices to rise just
0.2%, putting them up 1.6% y/y. That rise compares to gains above 4.0%
two years ago. Owners equivalent rent of primary residence, a measure
not equivalent to other house price measures, ticked up just 0.1% (2.1%
y/y). The cost of travel did rise 0.5% during April but prices of
lodging away from home are down 5.9% during the last year. Other
service prices rose. The increase in medical care services prices
picked up slightly to 0.4% (3.3% y/y) while education costs rose 0.4%
and the y/y gain remained a firm 5.4%. Public transportation prices
fell again. The 0.8% decline was the eighth drop in a row (-5.9% y/y).
The chained CPI, which adjusts for shifts in consumption
patterns, gained 0.3% while year -to-year prices fell 1.1%. The
increase in chained prices less food and energy eased to 0.2% in the
month.
The consumer price data is available in Haver's USECON
database while detailed figures can be found in the CPIDATA
database.
Seeking Stability: What&#8217;s Next for Banking
Regulation? from the Federal Reserve Bank of Dallas can
be found <a href="http://dallasfed.org/research/eclett/2009/el0903.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer
Price Index</a> (%)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total&nbsp;</td>
<td>0.0</td>
<td>-0.1</td>
<td>-0.7</td>
<td>3.8</td>
<td>2.9</td>
<td>3.2</td>
</tr>
<tr class="even">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.3</td>
<td>0.2</td>
<td>1.9</td>
<td>2.3</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>0.5</td>
<td>0.4</td>
<td>0.9</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Services less Energy</td>
<td>0.2</td>
<td>0.1</td>
<td>2.3</td>
<td>3.1</td>
<td>3.4</td>
<td>3.4</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Energy</td>
<td>-2.4</td>
<td>-3.0</td>
<td>-24.5</td>
<td>13.5</td>
<td>5.7</td>
<td>11.0</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>-0.2</td>
<td>-0.1</td>
<td>3.3</td>
<td>5.4</td>
<td>3.9</td>
<td>2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;&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>&nbsp;</td>
<td>0.3</td>
<td>0.2</td>
<td>-1.1 </td>
<td>3.3</td>
<td>2.5</td>
<td>2.9 </td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Total less Food
&amp; Energy&nbsp;</td>
<td>0.2</td>
<td>0.4</td>
<td>1.4</td>
<td>2.0</td>
<td>2.0</td>
<td>2.2</td>
</tr>
</tbody>
</table>
</body></html>

Weak pricing power continues to stem from a shortfall in U. S. demand. The Bureau of Labor Statistics reported that the Consumer Price Index was unchanged last month after a 0.1% slip during March. More indicative of the weakness in [...]

U.S. CPI Unchanged in April; Year-to-Year Drop of 0.7% Is Largest Since 1955

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US economy expected to outperform other major economies in 2025

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Rising long-term yields a global phenomenon

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Andrew Cates

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

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

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

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

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

250501Z5.jpg

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

250501Z6.jpg

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

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Charts of the Week: Tariff Truce, Tenuous Trust

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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

250501N.jpg

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

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

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

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

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

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

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

Carol Stone, CBE

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

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

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

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

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

250501C8.jpg

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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.

250430P1.jpg

250430Q1.jpg

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: May 2009

Jump to:

News From Eastern Europe Still Mainly Negative

Japan's Consumer Confidence Is Up For The Fourth Month In A Row

U.S. Home Builders' Index Increases Again

U.S. Home Builders' Index Increases Again

Michigan Consumer Sentiment Up On Improved Expectations With Heightened Hopes For Gov't Policy

U.S. Factory Production Shortfall Eases

EMU GDP Drops Sharply

U.S. CPI Unchanged in April; Year-to-Year Drop of 0.7% Is Largest Since 1955