Robert Brusca

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100519d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
Industrial output in Japan soared in March but could not stave
off an erosion in the Yr/Yr rate of growth. Output was up by 1.2% m/m
across the major sectors. But that followed a result in February that
was less than stellar, headlined by a 0.6% drop in IP.
The sequential growth rates in the table show growth at a
Yr/Yr pace of 29.9%, a six month annualized pace of 25.6% and a
three-month annualized pace of 20.9%. While the growth rates
progressively step lower they are still way too elevated to be
sustainable. While there is still a lot of slack in Japan&#8217;s economy
some deceleration in the growth rates is just what the economy needs to
keep its expansion on the &#8216;long track&#8217; which is better than the &#8216;fast
track.&#8217;
Yesterday Japan reported its service sector index took a large
step back from the previous month&#8217;s value. That sort of step back is
more worrisome. Japan, the US, and Europe need to drive their
respective service sectors to better results. That sector is where the
jobs are and that sector has been growing painfully slowly across
countries.
Manufacturing continues to do well in the global economy.
Japan is farther from making a full recovery that Europe or the US but
it is pushing hard on the recovery path. This month&#8217;s IP report is a
good one.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">Japan
Industrial Production Trends </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td style="font-weight: bold;" colspan="3">m/m %</td>
<td style="font-weight: bold;" colspan="3">Saar %</td>
<td style="font-weight: bold;">Yr/Yr</td>
<td style="font-weight: bold;" colspan="1" rowspan="2">Qtr-2 Date %AR&nbsp;</td>
<td style="font-weight: bold;" colspan="1" rowspan="2"> % 0f 
Cycle &nbsp;Peak&nbsp;</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">seas adjusted</td>
<td style="font-weight: bold;">Mar 10</td>
<td style="font-weight: bold;">Feb 10</td>
<td style="font-weight: bold;">Jan 10</td>
<td style="font-weight: bold;">3-mo</td>
<td style="font-weight: bold;">6-mo</td>
<td style="font-weight: bold;">12-mo</td>
<td style="font-weight: bold;">Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">Mining &amp;
MFG</td>
<td>1.2%</td>
<td style="color: red;">-0.6%</td>
<td>4.3%</td>
<td>20.9%</td>
<td>25.6%</td>
<td>29.9%</td>
<td style="color: red;">-32.8%</td>
<td>30.9%</td>
<td>86.1%</td>
</tr>
<tr>
<td class="firstcol">Total Industry</td>
<td>1.2%</td>
<td style="color: red;">-1.1%</td>
<td>4.6%</td>
<td>20.3%</td>
<td>24.9%</td>
<td>28.9%</td>
<td style="color: red;">-32.0%</td>
<td>30.5%</td>
<td>86.5%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>1.2%</td>
<td style="color: red;">-0.6%</td>
<td>4.3%</td>
<td>20.9%</td>
<td>25.6%</td>
<td>30.0%</td>
<td style="color: red;">-33.0%</td>
<td>30.9%</td>
<td>86.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Textiles</td>
<td>1.2%</td>
<td style="color: red;">-2.6%</td>
<td>3.8%</td>
<td>9.4%</td>
<td>4.9%</td>
<td>2.1%</td>
<td style="color: red;">-23.1%</td>
<td>8.1%</td>
<td>72.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; T-port</td>
<td>1.2%</td>
<td>0.8%</td>
<td>12.2%</td>
<td>71.5%</td>
<td>59.5%</td>
<td>87.0%</td>
<td style="color: red;">-53.9%</td>
<td>88.5%</td>
<td>83.1%</td>
</tr>
<tr style="font-weight: bold;" class="odd">
<td colspan="10" class="firstcol">Product Group</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Consumer Gds</td>
<td>3.0%</td>
<td style="color: red;">-3.4%</td>
<td>0.9%</td>
<td>1.6%</td>
<td>8.9%</td>
<td>20.1%</td>
<td style="color: red;">-24.6%</td>
<td>4.9%</td>
<td>87.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Intermediate Gds</td>
<td style="color: red;">-0.6%</td>
<td style="color: red;">-0.2%</td>
<td>6.5%</td>
<td>24.8%</td>
<td>32.0%</td>
<td>43.6%</td>
<td style="color: red;">-37.6%</td>
<td>45.9%</td>
<td>89.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Investment Gds</td>
<td>2.0%</td>
<td>4.1%</td>
<td>4.4%</td>
<td>51.2%</td>
<td>34.6%</td>
<td>15.9%</td>
<td style="color: red;">-31.4%</td>
<td>47.6%</td>
<td>76.3%</td>
</tr>
<tr>
<td class="firstcol">Miining</td>
<td>0.1%</td>
<td>3.3%</td>
<td>1.1%</td>
<td>19.2%</td>
<td style="color: red;">-8.6%</td>
<td>1.4%</td>
<td style="color: red;">-9.1%</td>
<td>14.1%</td>
<td>87.9%</td>
</tr>
<tr>
<td class="firstcol">Electric&amp;Gas</td>
<td>-0.9%</td>
<td>2.0%</td>
<td>2.2%</td>
<td>14.3%</td>
<td>20.2%</td>
<td>7.8%</td>
<td style="color: red;">-7.5%</td>
<td>19.3%</td>
<td>94.5%</td>
</tr>
</tbody>
</table>
</body></html>

Industrial output in Japan soared in March but could not stave off an erosion in the Yr/Yr rate of growth. Output was up by 1.2% m/m across the major sectors. But that followed a result in February that was less than stellar, [...]

Japan’s IP Growth Rates Level Out And Decay

Tom Moeller

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100519a.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
Moderate economic improvement since the middle of last year
has done nothing to improve retail pricing power. The Consumer Price
Index for April fell 0.1% (+2.2% y/y) and reversed a modest 0.1% uptick
in March. The latest figure fell short of Consensus expectations for a
0.1% gain. Moreover, continuing weak was the 0.5% (AR) CPI increase so
far this year.
A 1.4% drop in energy prices was behind
much of last month's total decline, the third consecutive monthly slip.
A 4.4% drop (-2.9% y/y) in natural gas prices led the decline followed
by a 2.4% drop in gasoline prices (+38.3% y/y). Higher fuel oil prices
(28.0% y/y) offset much of these declines along with an uptick in
electricity costs (0.6% y/y).
Core consumer prices also were weak. They
were unchanged for the second consecutive month. A 0.1% increase had
been expected and prices have gained just 0.1% since October. Core
goods prices led the weakness with a 0.3% decline, the third
consecutive monthly shortfall. Lower apparel prices fell by a sharp
0.7% (-0.9% y/y) while prices of home furnishings &amp; operation
declined by 0.5% (-2.8% y/y). New &amp; used motor vehicles prices
rounded off the weakness and slipped 0.2% (+4.9% y/y). Tobacco prices
nudged up 0.1% (6.1% y/y).
Core services prices strengthened
marginally and rose 0.2% (0.9% y/y). That improvement was led by a
quickened 1.7% increase (8.4% y/y) in the cost of public
transportation. The 0.3% increase in recreation prices also was a bit
improved (-0.4% y/y). Elsewhere, weakness in the housing market left
shelter prices unchanged and down 0.6% y/y. Owners equivalent rent of
primary residences, a measure not equivalent to other house price
measures, slipped again m/m (-0.2% y/y). The slight y/y decline in this
measure was the weakest reading since the series' start in 1983.
Elsewhere in services, education costs rose 0.5% (5.0% y/y) and medical
care services prices again rose 0.3% (3.7% y/y).
Food &amp; beverage prices again firmed
a bit by 0.2% and the y/y gain of 0.5% was improved from late-last
year's low of -0.5%. Dairy prices firmed by 0.1% y/y versus the 10.4%
decline last summer. Also showing less deflation were prices for meats,
poultry, fish &amp; eggs (-0.2% y/y) but cereal &amp; bakery
product prices continued weak (-0.9% y/y). Fruit &amp; vegetable
prices slipped m/m but the 1.8% y/y increase is improved from a 6.5%
decline as of last summer. Finally, the cost of eating out rose just
1.1% y/y, a record low increase, while alcoholic beverage prices also
rose just 1.2% y/y, the least since 1995.
The chained CPI, which adjusts for shifts in consumption
patterns, eased last month and rose 2.3% year-to-year. Chained prices
less food &amp; energy gained just 0.6% y/y.
The consumer price data is available in Haver's USECON
database while detailed figures can be found in the CPIDATA
database.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100519b.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100519c.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> 
(%)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">April y/y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>-0.1</td>
<td>0.1</td>
<td>0.0</td>
<td>2.2</td>
<td>-0.3</td>
<td>3.8</td>
<td>2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.0</td>
<td>0.0</td>
<td>0.1</td>
<td>1.0</td>
<td>1.7</td>
<td>2.3</td>
<td>2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>-0.3</td>
<td>-0.1</td>
<td>-0.1</td>
<td>1.2</td>
<td>1.3</td>
<td>0.1</td>
<td>-0.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Services less Energy</td>
<td>0.2</td>
<td>0.1</td>
<td>0.1</td>
<td>0.9</td>
<td>1.9</td>
<td>3.1</td>
<td>3.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Energy</td>
<td>-1.4</td>
<td>-0.0</td>
<td>-0.5</td>
<td>18.0</td>
<td>-18.1</td>
<td>13.7</td>
<td>5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>0.2</td>
<td>0.2</td>
<td>0.0</td>
<td>0.5</td>
<td>1.9</td>
<td>5.4</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM" style="color: black;">Chained CPI: Total (NSA)</a>&nbsp;</td>
<td>0.2</td>
<td>0.4</td>
<td>-0.0</td>
<td>2.3</td>
<td>-0.1</td>
<td>3.7</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food
&amp; Energy&nbsp;</td>
<td>0.0</td>
<td>0.2</td>
<td>0.2</td>
<td>0.6</td>
<td>1.5</td>
<td>2.0</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</body></html>

Moderate economic improvement since the middle of last year has done nothing to improve retail pricing power. The Consumer Price Index for April fell 0.1% (+2.2% y/y) and reversed a modest 0.1% uptick in March. The latest figure fell [...]

U.S. CPI: Broad-Based Weakness Is Behind Slight M/M Decline

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100519a.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
Moderate economic improvement since the middle of last year
has done nothing to improve retail pricing power. The Consumer Price
Index for April fell 0.1% (+2.2% y/y) and reversed a modest 0.1% uptick
in March. The latest figure fell short of Consensus expectations for a
0.1% gain. Moreover, continuing weak was the 0.5% (AR) CPI increase so
far this year.
A 1.4% drop in energy prices was behind
much of last month's total decline, the third consecutive monthly slip.
A 4.4% drop (-2.9% y/y) in natural gas prices led the decline followed
by a 2.4% drop in gasoline prices (+38.3% y/y). Higher fuel oil prices
(28.0% y/y) offset much of these declines along with an uptick in
electricity costs (0.6% y/y).
Core consumer prices also were weak. They
were unchanged for the second consecutive month. A 0.1% increase had
been expected and prices have gained just 0.1% since October. Core
goods prices led the weakness with a 0.3% decline, the third
consecutive monthly shortfall. Lower apparel prices fell by a sharp
0.7% (-0.9% y/y) while prices of home furnishings &amp; operation
declined by 0.5% (-2.8% y/y). New &amp; used motor vehicles prices
rounded off the weakness and slipped 0.2% (+4.9% y/y). Tobacco prices
nudged up 0.1% (6.1% y/y).
Core services prices strengthened
marginally and rose 0.2% (0.9% y/y). That improvement was led by a
quickened 1.7% increase (8.4% y/y) in the cost of public
transportation. The 0.3% increase in recreation prices also was a bit
improved (-0.4% y/y). Elsewhere, weakness in the housing market left
shelter prices unchanged and down 0.6% y/y. Owners equivalent rent of
primary residences, a measure not equivalent to other house price
measures, slipped again m/m (-0.2% y/y). The slight y/y decline in this
measure was the weakest reading since the series' start in 1983.
Elsewhere in services, education costs rose 0.5% (5.0% y/y) and medical
care services prices again rose 0.3% (3.7% y/y).
Food &amp; beverage prices again firmed
a bit by 0.2% and the y/y gain of 0.5% was improved from late-last
year's low of -0.5%. Dairy prices firmed by 0.1% y/y versus the 10.4%
decline last summer. Also showing less deflation were prices for meats,
poultry, fish &amp; eggs (-0.2% y/y) but cereal &amp; bakery
product prices continued weak (-0.9% y/y). Fruit &amp; vegetable
prices slipped m/m but the 1.8% y/y increase is improved from a 6.5%
decline as of last summer. Finally, the cost of eating out rose just
1.1% y/y, a record low increase, while alcoholic beverage prices also
rose just 1.2% y/y, the least since 1995.
The chained CPI, which adjusts for shifts in consumption
patterns, eased last month and rose 2.3% year-to-year. Chained prices
less food &amp; energy gained just 0.6% y/y.
The consumer price data is available in Haver's USECON
database while detailed figures can be found in the CPIDATA
database.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100519b.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100519c.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer
Price Index</a> 
(%)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">April y/y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>-0.1</td>
<td>0.1</td>
<td>0.0</td>
<td>2.2</td>
<td>-0.3</td>
<td>3.8</td>
<td>2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.0</td>
<td>0.0</td>
<td>0.1</td>
<td>1.0</td>
<td>1.7</td>
<td>2.3</td>
<td>2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>-0.3</td>
<td>-0.1</td>
<td>-0.1</td>
<td>1.2</td>
<td>1.3</td>
<td>0.1</td>
<td>-0.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Services less Energy</td>
<td>0.2</td>
<td>0.1</td>
<td>0.1</td>
<td>0.9</td>
<td>1.9</td>
<td>3.1</td>
<td>3.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Energy</td>
<td>-1.4</td>
<td>-0.0</td>
<td>-0.5</td>
<td>18.0</td>
<td>-18.1</td>
<td>13.7</td>
<td>5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>0.2</td>
<td>0.2</td>
<td>0.0</td>
<td>0.5</td>
<td>1.9</td>
<td>5.4</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM" style="color: black;">Chained CPI: Total (NSA)</a>&nbsp;</td>
<td>0.2</td>
<td>0.4</td>
<td>-0.0</td>
<td>2.3</td>
<td>-0.1</td>
<td>3.7</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food
&amp; Energy&nbsp;</td>
<td>0.0</td>
<td>0.2</td>
<td>0.2</td>
<td>0.6</td>
<td>1.5</td>
<td>2.0</td>
<td>1.9</td>
</tr>
</tbody>
</table>
Japan&#8217;s IP Growth Rates Level Out
And Decay 
by <a href="/comment/Brusca.html">Robert
Brusca</a> May 19, 2010


<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100519d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
Industrial output in Japan soared in March but could not stave
off an erosion in the Yr/Yr rate of growth. Output was up by 1.2% m/m
across the major sectors. But that followed a result in February that
was less than stellar, headlined by a 0.6% drop in IP.
The sequential growth rates in the table show growth at a
Yr/Yr pace of 29.9%, a six month annualized pace of 25.6% and a
three-month annualized pace of 20.9%. While the growth rates
progressively step lower they are still way too elevated to be
sustainable. While there is still a lot of slack in Japan&#8217;s economy
some deceleration in the growth rates is just what the economy needs to
keep its expansion on the &#8216;long track&#8217; which is better than the &#8216;fast
track.&#8217;
Yesterday Japan reported its service sector index took a large
step back from the previous month&#8217;s value. That sort of step back is
more worrisome. Japan, the US, and Europe need to drive their
respective service sectors to better results. That sector is where the
jobs are and that sector has been growing painfully slowly across
countries.
Manufacturing continues to do well in the global economy.
Japan is farther from making a full recovery that Europe or the US but
it is pushing hard on the recovery path. This month&#8217;s IP report is a
good one.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">Japan
Industrial Production Trends </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td style="font-weight: bold;" colspan="3">m/m
%</td>
<td style="font-weight: bold;" colspan="3">Saar
%</td>
<td style="font-weight: bold;">Yr/Yr</td>
<td style="font-weight: bold;" colspan="1" rowspan="2">Qtr-2 
Date %AR&nbsp;</td>
<td style="font-weight: bold;" colspan="1" rowspan="2"> % 0f 
Cycle 
&nbsp;Peak&nbsp;</td>
</tr>
<tr class="odd">
<td style="font-weight: bold;" class="firstcol">seas
adjusted</td>
<td style="font-weight: bold;">Mar 
10</td>
<td style="font-weight: bold;">Feb 
10</td>
<td style="font-weight: bold;">Jan 
10</td>
<td style="font-weight: bold;">3-mo</td>
<td style="font-weight: bold;">6-mo</td>
<td style="font-weight: bold;">12-mo</td>
<td style="font-weight: bold;">Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">Mining &amp;
MFG</td>
<td>1.2%</td>
<td style="color: red;">-0.6%</td>
<td>4.3%</td>
<td>20.9%</td>
<td>25.6%</td>
<td>29.9%</td>
<td style="color: red;">-32.8%</td>
<td>30.9%</td>
<td>86.1%</td>
</tr>
<tr>
<td class="firstcol">Total Industry</td>
<td>1.2%</td>
<td style="color: red;">-1.1%</td>
<td>4.6%</td>
<td>20.3%</td>
<td>24.9%</td>
<td>28.9%</td>
<td style="color: red;">-32.0%</td>
<td>30.5%</td>
<td>86.5%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>1.2%</td>
<td style="color: red;">-0.6%</td>
<td>4.3%</td>
<td>20.9%</td>
<td>25.6%</td>
<td>30.0%</td>
<td style="color: red;">-33.0%</td>
<td>30.9%</td>
<td>86.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Textiles</td>
<td>1.2%</td>
<td style="color: red;">-2.6%</td>
<td>3.8%</td>
<td>9.4%</td>
<td>4.9%</td>
<td>2.1%</td>
<td style="color: red;">-23.1%</td>
<td>8.1%</td>
<td>72.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; T-port</td>
<td>1.2%</td>
<td>0.8%</td>
<td>12.2%</td>
<td>71.5%</td>
<td>59.5%</td>
<td>87.0%</td>
<td style="color: red;">-53.9%</td>
<td>88.5%</td>
<td>83.1%</td>
</tr>
<tr style="font-weight: bold;" class="odd">
<td colspan="10" class="firstcol">Product
Group</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Consumer Gds</td>
<td>3.0%</td>
<td style="color: red;">-3.4%</td>
<td>0.9%</td>
<td>1.6%</td>
<td>8.9%</td>
<td>20.1%</td>
<td style="color: red;">-24.6%</td>
<td>4.9%</td>
<td>87.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Intermediate Gds</td>
<td style="color: red;">-0.6%</td>
<td style="color: red;">-0.2%</td>
<td>6.5%</td>
<td>24.8%</td>
<td>32.0%</td>
<td>43.6%</td>
<td style="color: red;">-37.6%</td>
<td>45.9%</td>
<td>89.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Investment Gds</td>
<td>2.0%</td>
<td>4.1%</td>
<td>4.4%</td>
<td>51.2%</td>
<td>34.6%</td>
<td>15.9%</td>
<td style="color: red;">-31.4%</td>
<td>47.6%</td>
<td>76.3%</td>
</tr>
<tr>
<td class="firstcol">Miining</td>
<td>0.1%</td>
<td>3.3%</td>
<td>1.1%</td>
<td>19.2%</td>
<td style="color: red;">-8.6%</td>
<td>1.4%</td>
<td style="color: red;">-9.1%</td>
<td>14.1%</td>
<td>87.9%</td>
</tr>
<tr>
<td class="firstcol">Electric&amp;Gas</td>
<td>-0.9%</td>
<td>2.0%</td>
<td>2.2%</td>
<td>14.3%</td>
<td>20.2%</td>
<td>7.8%</td>
<td style="color: red;">-7.5%</td>
<td>19.3%</td>
<td>94.5%</td>
</tr>
</tbody>
</table>
U.S. Mortgages Past Due Set
Another Record 
by <a href="/comment/Moeller.html">Tom
Moeller</a> May 19,2010


<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100519e.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
Financial strains in the housing market just won't let up. The
Mortgage Bankers Association reported that as of last quarter, a record
10.1% of all mortgages were late. That's up from 9.5% at the end of
last year and nearly double the rate before the last recession began.
Including those loans in inventory the percentage is an even higher
14.0%.
The record number of delinquencies is quite notable for those
late by 90 days and over. The rise to 5.0% is up from 1.5% in 2007. For
those late by 90 days or less, the figure actually is down from the
peak in early 2009, though it's up since before the recession.
No category of mortgages has seen delinquencies rise more than
amongst subprime borrowers. Here, more than one-quarter of the loans
were past due last quarter versus 7.3% for prime loans. The largest
increase has occurred for those late by more than 90 days to 15.0% of
loans from 3% in 2004.
Despite the rise in delinquencies, lenders have found it more
promising to renegotiate loan terms than to foreclose. As a result, the
foreclosure rate has fallen to 1.2% from its high during the middle of
last year of 1.5%.
The Mortgage Bankers data is available in
Haver's MBAMTG database.
The minutes to the latest FOMC meeting can
be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/fomcminutes20100428.pdf">here</a>. 
 

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100519f.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100519g.jpg" style="width: 312px; height: 265px;">
<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/WEEKLY/@W4/@W4.HTM">Mortgage
Loan Delinquency
Rate (%)</a></th>
<th scope="col">1Q '10</th>
<th scope="col">4Q '09</th>
<th scope="col">3Q '09</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">All Mortgages Past Due</td>
<td>10.1</td>
<td>9.5</td>
<td>9.6</td>
<td>9.5</td>
<td>7.9</td>
<td>5.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
30-59 Days</td>
<td>3.5</td>
<td>3.3</td>
<td>3.6</td>
<td>3.3</td>
<td>3.5</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
60-89 Days</td>
<td>1.6</td>
<td>1.5</td>
<td>1.7</td>
<td>1.5</td>
<td>1.6</td>
<td>1.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
90 Days &amp; Over</td>
<td>5.0</td>
<td>4.6</td>
<td>4.4</td>
<td>4.6</td>
<td>2.8</td>
<td>1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Conventional Prime</td>
<td>7.3</td>
<td>6.7</td>
<td>6.8</td>
<td>6.7</td>
<td>5.1</td>
<td>3.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Conventional Subprime</td>
<td>27.2</td>
<td>25.3</td>
<td>26.4</td>
<td>25.3</td>
<td>21.9</td>
<td>17.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Mortgages in Foreclosure</td>
<td>1.2</td>
<td>1.1</td>
<td>1.4</td>
<td>5.4</td>
<td>4.3</td>
<td>2.8</td>
</tr>
</tbody>
</table>

</body></html>

U.S. CPI: Broad-Based Weakness IsBehind Slight M/M Decline

Louise Curley

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518j.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
The financial crisis in the Euro Area cast a wet blanket on
the optimism of German institutional investors and analysts. The survey
of 275 participants was taken during the period from May 3 to May 17.
The May balance of opinion of those expecting improved conditions over
the next six months over those expecting worsening conditions dropped
7.2 points from 53.0% in April to 45.8% in May. The balance has fallen
from the peak of 57.7% in September of last year, but it is still well
above its average value of 27.4, as can be seen in the first chart.
The balance of opinion on current conditions, however,
improved by 17.6 points from -39.2% to 21.6% over the same period. The
excess of pessimists is down substantially from the -92.8% balance in
May 2009. The German financial community tends to view current
conditions pessimistically. Over the life of the survey, the average
view of current conditions has been a balance of pessimist over
optimists of 32.4% as can be seen in the second chart. The May figure
is slightly above the average.
In spite of downgrade in expectations for the economy over the
next six months, the financial community expects increased profits for
each of the industries polled except for Services, Banking, and
Insurance, industries most likely to be affected by financial turmoil.
Small increases in profits are expected in the Utilities,
Telecommunication, Information Technology, Construction and
Consumption/Trade industries. More substantial increases in profits are
expected in the Vehicle/Automotive, Chemical/Pharmaceutical, Machinery,
Steel/Metal and Electronic industries. Profit expectations in the first
four of these industries are shown in the third chart.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518k.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518l.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">ZEW
Indicator (% Balance)</th>
<th scope="col">May 10&nbsp;</th>
<th scope="col">Apr 10&nbsp;</th>
<th scope="col">Mar 10</th>
<th scope="col">Feb 10</th>
<th scope="col">Jan 10</th>
<th scope="col">Dec 09</th>
<th scope="col">Nov 09</th>
<th scope="col">Oct 09</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Current Conditions</td>
<td>-21.6</td>
<td>-39.2</td>
<td>-56.9</td>
<td>-54.8</td>
<td>-56.6</td>
<td>-60.6</td>
<td>-65.6</td>
<td>-42.2</td>
</tr>
<tr>
<td class="firstcol">Expectation Next
Six Months</td>
<td>45.8</td>
<td>53.0</td>
<td>44.5</td>
<td>45.1</td>
<td>47.2</td>
<td>50.4</td>
<td>51.1</td>
<td>56.0</td>
</tr>
</tbody>
</table>
</body></html>

The financial crisis in the Euro Area cast a wet blanket on the optimism of German institutional investors and analysts. The survey of 275 participants was taken during the period from May 3 to May 17. The May balance of opinion of [...]

The May ZEW Survey Of The German Financial Community Sends A Mixed Message

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
Thanks to lower food &amp; energy prices, the overall
producer price index fell 0.1% last month (+5.4% y/y) following a 0.7%
March increase. Consensus expectations had been for a 0.1% uptick.
Nevertheless, the y/y gain in prices of 5.4% remained near the
higlyhest since late-2008.
Finished energy prices fell 0.8% (+20.6% y/y) and reversed all
of the March gain. A moderate gain in not seasonally adjusted monthly
gasoline prices (52.7% y/y) was the third this year and home heating
oil prices rose about as they did in March (48.5% y/y). Finally,
natural gas prices continued lower (-2.5% y/y) but electricity prices
rose (1.6% y/y).
A 0.2% slip (+4.9% y/y) in finished food prices last month
followed the 2.4% March jump. The decline was greatest amongst fresh
fruit (+17.3% y/y), vegetable (33.3% y/y) and egg prices (-20.8% y/y).
Beef prices (16.0% y/y) were strong for the third straight month.
The 0.2% increase in finished producer prices less food
&amp; energy prices was the firmest since January and beat
Consensus expectations for a 0.1% uptick. Nevertheless, the 1.0% y/y
increase remained nearly the weakest since early-2004. Continuing to
lose steam was the PPI for finished consumer goods less food &amp;
energy. It rose 0.2% and left the 1.5% y/y increase half the annual
gains during the last two years. Finished durables prices ticked up
0.1% (0.4% y/y) while core finished consumer nondurable goods prices
gained a modest 0.2% (2.4% y/y), nearly the weakest rise since early
2007. Capital equipment prices rose 0.2% (0.3% y/y) versus annual gains
between 1.0% and 3.0% back to 2004.
Future pressure on finished goods prices may possibly stem
from higher prices for intermediate goods. Their 0.8% increase raised
the y/y gain to 8.5%. Core prices jumped 1.1% and the 5.6% y/y gain was
the strongest since late-2008. The strength reflected increases in the
price of copper &amp; mill shapes, steel &amp; aluminum.
Additional price pressure to come also may be evident in the
4.0% increase (49.7 y/y) in core crude materials producer prices. The
jump was led by higher scrap copper prices which have nearly doubled
and iron &amp; steel scrap prices which have more than doubled.
The producer price data is available in Haver's USECON
database. More detailed data is in the PPI and in
the PPIR databases.
 


<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518e.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518f.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer
Price Index</a>(%)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">y/y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.1</td>
<td>0.7</td>
<td>-0.6</td>
<td>5.4</td>
<td>-2.5</td>
<td>6.4</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less Food &amp;
Energy</td>
<td>0.2</td>
<td>0.1</td>
<td>0.1</td>
<td>1.0</td>
<td>2.6</td>
<td>3.4</td>
<td>2.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.8</td>
<td>0.6</td>
<td>0.1</td>
<td>8.5</td>
<td>-8.4</td>
<td>10.3</td>
<td>4.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less Food &amp;
Energy</td>
<td>1.1</td>
<td>0.7</td>
<td>0.9</td>
<td>5.6</td>
<td>-4.2</td>
<td>7.4</td>
<td>2.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-1.2</td>
<td>3.2</td>
<td>-3.5</td>
<td>28.9</td>
<td>-30.4</td>
<td>21.4</td>
<td>11.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less Food &amp;
Energy</td>
<td>4.0</td>
<td>6.0</td>
<td>-0.6</td>
<td>49.7</td>
<td>-23.5</td>
<td>14.8</td>
<td>15.6</td>
</tr>
</tbody>
</table>
</body></html>

Thanks to lower food & energy prices, the overall producer price index fell 0.1% last month (+5.4% y/y) following a 0.7% March increase. Consensus expectations had been for a 0.1% uptick. Nevertheless, the y/y gain in prices of 5.4% [...]

U.S. PPI Slips With Lower Food & Energy Prices

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518a.jpg" style="border: 0px solid ; width: 363px; height: 265px; float: left;" align="left">
Forward momentum behind the recovery in the housing market
continued to develop last month. Housing starts rose 5.8% to 672,000
(AR) units from an upwardly revised 635,000 during March. The monthly
gain powered starts up by 40.9% y/y. That annual comparison is biased
since its base is the lowest level reached during the recession.
Nevertheless, starts were at their highest in eighteen months. The
figure also beat Consensus expectations for 650,000 starts.
Starts of single-family homes showed the greatest improvement
versus a weather-depressed March level. The 10.2% m/m gain to 593,000
(53.6% y/y) was the fourth consecutive monthly rise. Single-family
starts have now risen nearly two-thirds from the recession low. In the
Midwest, single-family starts jumped 17.7% (40.9% y/y) and recovered
all of the sharp March decline. Nevertheless, starts still were off
nearly three-quarters from the 2006 high. Starts in the South rose
14.8% (69.0% y/y) and rose 5.3% (50.0% y/y) in the Northeast where
starts were roughly double the January '09 low. To the downside, starts
in the West fell 4.5% (28.9% y/y).
Weakness in starts of multi-family housing units continued. An
18.6% m/m decline to 79,000 reversed all of the March gain and left
them 82.4% below the 2006 high. As a result, starts of apartments,
condominiums &amp; town houses remained near their record low.
Building permits during April fell 11.5% to the lowest level
since October. Permits to build a single-family home fell 10.7% (+22.5%
y/y). Permits to build multi-family homes fell 14.7% but
were 13.0% higher than their low last July.
The housing starts figures can be found in Haver's USECON
database.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518b.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518c.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Housing
Starts (000s, SAAR)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">April y/y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>672</td>
<td>635</td>
<td>612</td>
<td>40.9%</td>
<td>554</td>
<td>900</td>
<td>1,342</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>593</td>
<td>538</td>
<td>527</td>
<td>53.6</td>
<td>442</td>
<td>616</td>
<td>1,036</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>79</td>
<td>97</td>
<td>78</td>
<td>-13.2</td>
<td>112</td>
<td>284</td>
<td>306</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>606</td>
<td>685</td>
<td>650</td>
<td>15.9</td>
<td>583</td>
<td>896</td>
<td>1,392</td>
</tr>
</tbody>
</table>
</body></html>

Forward momentum behind the recovery in the housing market continued to develop last month. Housing starts rose 5.8% to 672,000 (AR) units from an upwardly revised 635,000 during March. The monthly gain powered starts up by 40.9% y/y. [...]

U.S. Housing Starts Reach Eighteen Month High

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518a.jpg" style="border: 0px solid ; width: 363px; height: 265px; float: left;" align="left">
Forward momentum behind the recovery in the housing market
continued to develop last month. Housing starts rose 5.8% to 672,000
(AR) units from an upwardly revised 635,000 during March. The monthly
gain powered starts up by 40.9% y/y. That annual comparison is biased
since its base is the lowest level reached during the recession.
Nevertheless, starts were at their highest in eighteen months. The
figure also beat Consensus expectations for 650,000 starts.
Starts of single-family homes showed the greatest improvement
versus a weather-depressed March level. The 10.2% m/m gain to 593,000
(53.6% y/y) was the fourth consecutive monthly rise. Single-family
starts have now risen nearly two-thirds from the recession low. In the
Midwest, single-family starts jumped 17.7% (40.9% y/y) and recovered
all of the sharp March decline. Nevertheless, starts still were off
nearly three-quarters from the 2006 high. Starts in the South rose
14.8% (69.0% y/y) and rose 5.3% (50.0% y/y) in the Northeast where
starts were roughly double the January '09 low. To the downside, starts
in the West fell 4.5% (28.9% y/y).
Weakness in starts of multi-family housing units continued. An
18.6% m/m decline to 79,000 reversed all of the March gain and left
them 82.4% below the 2006 high. As a result, starts of apartments,
condominiums &amp; town houses remained near their record low.
Building permits during April fell 11.5% to the lowest level
since October. Permits to build a single-family home fell 10.7% (+22.5%
y/y). Permits to build multi-family homes fell 14.7% but
were 13.0% higher than their low last July.
The housing starts figures can be found in Haver's USECON
database.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518b.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518c.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Housing
Starts (000s, SAAR)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">April y/y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>672</td>
<td>635</td>
<td>612</td>
<td>40.9%</td>
<td>554</td>
<td>900</td>
<td>1,342</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>593</td>
<td>538</td>
<td>527</td>
<td>53.6</td>
<td>442</td>
<td>616</td>
<td>1,036</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>79</td>
<td>97</td>
<td>78</td>
<td>-13.2</td>
<td>112</td>
<td>284</td>
<td>306</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>606</td>
<td>685</td>
<td>650</td>
<td>15.9</td>
<td>583</td>
<td>896</td>
<td>1,392</td>
</tr>
</tbody>
</table>
U.S. PPI Slips With Lower Food
&amp; Energy Prices 
by <a href="/comment/Moeller.html">Tom
Moeller</a> May 18, 2010


<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
Thanks to lower food &amp; energy prices, the overall
producer price index fell 0.1% last month (+5.4% y/y) following a 0.7%
March increase. Consensus expectations had been for a 0.1% uptick.
Nevertheless, the y/y gain in prices of 5.4% remained near the
higlyhest since late-2008.
Finished energy prices fell 0.8% (+20.6% y/y) and reversed all
of the March gain. A moderate gain in not seasonally adjusted monthly
gasoline prices (52.7% y/y) was the third this year and home heating
oil prices rose about as they did in March (48.5% y/y). Finally,
natural gas prices continued lower (-2.5% y/y) but electricity prices
rose (1.6% y/y).
A 0.2% slip (+4.9% y/y) in finished food prices last month
followed the 2.4% March jump. The decline was greatest amongst fresh
fruit (+17.3% y/y), vegetable (33.3% y/y) and egg prices (-20.8% y/y).
Beef prices (16.0% y/y) were strong for the third straight month.
The 0.2% increase in finished producer prices less food
&amp; energy prices was the firmest since January and beat
Consensus expectations for a 0.1% uptick. Nevertheless, the 1.0% y/y
increase remained nearly the weakest since early-2004. Continuing to
lose steam was the PPI for finished consumer goods less food &amp;
energy. It rose 0.2% and left the 1.5% y/y increase half the annual
gains during the last two years. Finished durables prices ticked up
0.1% (0.4% y/y) while core finished consumer nondurable goods prices
gained a modest 0.2% (2.4% y/y), nearly the weakest rise since early
2007. Capital equipment prices rose 0.2% (0.3% y/y) versus annual gains
between 1.0% and 3.0% back to 2004.
Future pressure on finished goods prices may possibly stem
from higher prices for intermediate goods. Their 0.8% increase raised
the y/y gain to 8.5%. Core prices jumped 1.1% and the 5.6% y/y gain was
the strongest since late-2008. The strength reflected increases in the
price of copper &amp; mill shapes, steel &amp; aluminum.
Additional price pressure to come also may be evident in the
4.0% increase (49.7 y/y) in core crude materials producer prices. The
jump was led by higher scrap copper prices which have nearly doubled
and iron &amp; steel scrap prices which have more than doubled.
The producer price data is available in Haver's USECON
database. More detailed data is in the PPI and in
the PPIR databases.
 


<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518e.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518f.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer
Price Index</a>(%)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">y/y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.1</td>
<td>0.7</td>
<td>-0.6</td>
<td>5.4</td>
<td>-2.5</td>
<td>6.4</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less Food &amp;
Energy</td>
<td>0.2</td>
<td>0.1</td>
<td>0.1</td>
<td>1.0</td>
<td>2.6</td>
<td>3.4</td>
<td>2.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.8</td>
<td>0.6</td>
<td>0.1</td>
<td>8.5</td>
<td>-8.4</td>
<td>10.3</td>
<td>4.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less Food &amp;
Energy</td>
<td>1.1</td>
<td>0.7</td>
<td>0.9</td>
<td>5.6</td>
<td>-4.2</td>
<td>7.4</td>
<td>2.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-1.2</td>
<td>3.2</td>
<td>-3.5</td>
<td>28.9</td>
<td>-30.4</td>
<td>21.4</td>
<td>11.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less Food &amp;
Energy</td>
<td>4.0</td>
<td>6.0</td>
<td>-0.6</td>
<td>49.7</td>
<td>-23.5</td>
<td>14.8</td>
<td>15.6</td>
</tr>
</tbody>
</table>
U.S. Petroleum Prices Lower With
Economic Recovery Concerns 
by <a href="/comment/Moeller.html">Tom
Moeller</a> May 18,2010


<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518g.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
U.S. petroleum prices have come under pressure with worries
about the strength of the global economic recovery. Those worries
spilled through to a slightly lower pump price of regular
gasoline to $2.86 last week, but that remained up more than
three-quarters since December of 2008. Yesterday the spot market price
for a gallon of regular gasoline was thirty cents (14%) below the high
averaged during the last week of April. The figures are reported by the
U.S. Department of Energy and can be found in Haver's WEEKLY
&amp; DAILY databases.
Crude oil costs continued lower as concerns rose regarding the
shape of the global financial market and the worldwide economic
recovery. The average price for a barrel of light sweet crude (WTI)
fell last week to $74.97 versus $84.23 averaged during April.
Yesterday, crude prices fell further to $70.08.
Demand for gasoline rose 2.1% last week versus one year ago
and that compares with a 3.0% decline in early-February. The demand for
residual fuel oil rose an easier 4.6% and distillate demand recovered
6.3% y/y. That's improved from a 12.3% decline during February.
Inventories of crude oil and petroleum products improved into May but
still were down moderately from one year ago.
U.S. natural gas prices increased modestly last week to an
average $4.20 per mmbtu (-0.7% y/y). Prices reached a high of $6.50
early in January. Nevertheless, prices remained nearly double the
September low.
The energy price data can be found in Haver's WEEKLY
database while the daily figures are in DAILY.
The gasoline demand figures are in OILWKLY.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518h.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518i.jpg" style="width: 312px; height: 265px;">
<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/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">05/17/10</th>
<th scope="col">05/10/10</th>
<th scope="col">05/03/10</th>
<th scope="col">y/y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.86</td>
<td>2.91</td>
<td>2.90</td>
<td>24.0%</td>
<td>2.35</td>
<td>3.25</td>
<td>2.80</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>74.97</td>
<td>80.22</td>
<td>84.24</td>
<td>29.1%</td>
<td>61.39</td>
<td>100.16</td>
<td>72.25</td>
</tr>
<tr class="odd">
<td class="firstcol">Natural Gas Price ($/mmbtu)</td>
<td>4.20</td>
<td>3.96</td>
<td>4.13</td>
<td>-0.7%</td>
<td>3.95</td>
<td>8.88</td>
<td>6.97</td>
</tr>
</tbody>
</table>
The May ZEW Survey Of The German
Financial Community Sends A Mixed Message 
by <a href="/comment/Curley.html">Louise
Curley</a> May 18, 2010


<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518j.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
The financial crisis in the Euro Area cast a wet blanket on
the optimism of German institutional investors and analysts. The survey
of 275 participants was taken during the period from May 3 to May 17.
The May balance of opinion of those expecting improved conditions over
the next six months over those expecting worsening conditions dropped
7.2 points from 53.0% in April to 45.8% in May. The balance has fallen
from the peak of 57.7% in September of last year, but it is still well
above its average value of 27.4, as can be seen in the first chart.
The balance of opinion on current conditions, however,
improved by 17.6 points from -39.2% to 21.6% over the same period. The
excess of pessimists is down substantially from the -92.8% balance in
May 2009. The German financial community tends to view current
conditions pessimistically. Over the life of the survey, the average
view of current conditions has been a balance of pessimist over
optimists of 32.4% as can be seen in the second chart. The May figure
is slightly above the average.
In spite of downgrade in expectations for the economy over the
next six months, the financial community expects increased profits for
each of the industries polled except for Services, Banking, and
Insurance, industries most likely to be affected by financial turmoil.
Small increases in profits are expected in the Utilities,
Telecommunication, Information Technology, Construction and
Consumption/Trade industries. More substantial increases in profits are
expected in the Vehicle/Automotive, Chemical/Pharmaceutical, Machinery,
Steel/Metal and Electronic industries. Profit expectations in the first
four of these industries are shown in the third chart.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518k.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100518l.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">ZEW
Indicator (% Balance)</th>
<th scope="col">May 10&nbsp;</th>
<th scope="col">Apr 10&nbsp;</th>
<th scope="col">Mar 10</th>
<th scope="col">Feb 10</th>
<th scope="col">Jan 10</th>
<th scope="col">Dec 09</th>
<th scope="col">Nov 09</th>
<th scope="col">Oct 09</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Current Conditions</td>
<td>-21.6</td>
<td>-39.2</td>
<td>-56.9</td>
<td>-54.8</td>
<td>-56.6</td>
<td>-60.6</td>
<td>-65.6</td>
<td>-42.2</td>
</tr>
<tr>
<td class="firstcol">Expectation Next
Six Months</td>
<td>45.8</td>
<td>53.0</td>
<td>44.5</td>
<td>45.1</td>
<td>47.2</td>
<td>50.4</td>
<td>51.1</td>
<td>56.0</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Housing Starts Reach EighteenMonth High

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Japan's Domestic Corporate Goods Price index has been inching
up in each month since November of last year. By April the index,
published today, was 0.9% above November. On a year over year basis,
the index in April was only 0.2% below April, 2009.
The Domestic Corporate Goods Price Index is analogous to a
Wholesale or Producer Price Index. In fact, until 2002, the index was
called the Wholesale Price Index. At that time, substantial revisions
were made in the index, the base was changed from 1995 to 2000 and the
name was changed. The base of the index is now 2005.
The rise in prices at the wholesale level, though small, gives
some reason to hope that the deflation in consumer prices will also be
lessening. There is a good correlation between the Domestic Corporate
Goods Price Index and the Consumer Price Index as shown in the first
Chart which compares the year to year changes in the two series. The
year to year change in the Consumer Price Index was -1.09% in March,
the latest month available. This compares with a -2.53% year to year
decline in October, 2009.
Data for machinery orders were also released today. Total
orders were up 3.6% in March from February, and those for the headline
series, Private machinery orders excluding volatile orders (ships and
electric power) were up 5.4%. Even excluding the volatile factors,
monthly orders are still erratic. As a result we have aggregated the
total and the headline series to quarterly totals which are shown in
the second chart. Increased activity in new orders bodes well for
future sales and may have a small but positive effect on total GDP for
the first quarter, which is to be published this Thursday.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100517e.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100517f.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Year
to Year Changes (%)</th>
<th scope="col">Apr 10</th>
<th scope="col">Mar 10&nbsp;</th>
<th scope="col">Feb 10&nbsp;</th>
<th scope="col">Jan 10</th>
<th scope="col">Dec 09</th>
<th scope="col">Nov 09</th>
<th scope="col">Oct 09</th>
<th scope="col">Sep&nbsp; 09</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Domestic Corporate
Goods Price Index</td>
<td>-0.19</td>
<td>-1.25</td>
<td>-1.63</td>
<td>-2.20</td>
<td>-3.77</td>
<td>-5.02</td>
<td>-6.76</td>
<td>-7.88</td>
</tr>
<tr>
<td class="firstcol">Consumer Price
Index</td>
<td>--&nbsp;</td>
<td>-1.09</td>
<td>-1.10</td>
<td>-1.29</td>
<td>-1.68</td>
<td>-1.87</td>
<td>-2.53</td>
<td>-2.24</td>
</tr>
<tr class="grey3">
<td style="font-weight: bold;" class="firstcol">Quarter to Quarter
Changes (%)</td>
<td>Q1 10</td>
<td>Q4 09&nbsp;</td>
<td>Q3 09&nbsp;</td>
<td>Q2 09</td>
<td>Q1 09</td>
<td>Q4 08</td>
<td>Q3 08</td>
<td>Q2 08</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Machinery
Orders</td>
<td>9.02</td>
<td>8.03</td>
<td>8.99</td>
<td>-7.32</td>
<td>-14.47</td>
<td>-19.91</td>
<td>-10.12</td>
<td>-5.90</td>
</tr>
<tr>
<td class="firstcol">Private ex
Volatile Orders (Head line)</td>
<td>2.92</td>
<td>1.13</td>
<td>-0.70</td>
<td>-5.64</td>
<td>-9.64</td>
<td>-14.69</td>
<td>-8.72</td>
<td>-2.05</td>
</tr>
</tbody>
</table>
</body></html>

Japan's Domestic Corporate Goods Price index has been inching up in each month since November of last year. By April the index, published today, was 0.9% above November. On a year over year basis, the index in April was only 0.2% [...]

Japanese Corporate Prices And Machinery Orders

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

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

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Andrew Cates

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

250501Z1.jpg

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

250501Z2.jpg

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

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

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

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

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

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Charts of the Week: Tariff Truce, Tenuous Trust

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

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

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

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

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

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

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

U.S. ISM Manufacturing Index Indicates Contraction in April

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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.

U.S. GDP Unexpectedly Declines in Q1’25; Prices Strengthen

Michael J. Moran

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High-side readings on the price indexes for personal consumption expenditures in January and February caused some concern about emerging price pressure, especially with some policies of the Trump administration possibly adding to the upward force. However, March brought notable relief, with the headline price index falling slightly (-0.04%). A marked decline in energy prices was helpful (-2.7%), but core prices also were subdued, increasing less than 0.1%.  Year-over-year changes were still above the Fed’s target of 2%, but only barely so for the headline measure (2.3%). The core index backed away from the reading of 3.0% in February, but the latest reading of 2.7% was in line with observations in the past year, and still uncomfortably above target.

Consumers roused from a winter slumber in March, with nominal outlays increasing 0.7%. With inflation restrained, real outlays also posted a gain of 0.7%. Spending on durable gods stood out, with real outlays advancing 3.2%. Real outlays for both nondurable goods and services rose 0.4%, a solid pace. Signs of life were certainly welcome after an average decline of 0.1% in January and February. The March rebound left growth of 1.8% (annual rate) in the first quarter.

The brisk increase in spending in March was supported by a solid gain in personal income (0.5% in both nominal and real terms). Growth in wage income was firm at 0.5%, while proprietors’ income was robust with a gain of 1.8% (not annualized!). The farm sector led the advance in proprietors’ income, but the nonfarm sector also was strong (0.6%).

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- Price pressure eases.
- Spending rebounds after two soft months.

Personal Income, Consumption, and Prices in March

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The Pending Home Sales Index, a forward-looking home sales measure based on contract signings, from the National Association of Realtors rose 6.1% to 76.5 (-0.6% y/y) during March after rising a little-revised 2.1% in February. These changes followed a 4.6% January decline.

The rise in March sales occurred as the rate on a 30-year mortgage eased to an average 6.65% from 6.84% in February. This rate was well above a low of 2.68% averaged in December 2020.

Pending home sales were up in most regions of the country. Sales in the Midwest rose 4.9% (1.4% y/y) last month after rising 1.8% in February. Sales in the South increased 9.8% (-0.4% y/y) following a 5.8% February rise. Sales in the West improved 4.8% (-2.0% y/y) after falling 3.0% in February. Sales in the Northeast were off 0.5% (-3.0% y/y) in March after falling 0.9% in February.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- Sales rise to highest level in four months.
- Strength is evident throughout most of country.

Economy in Brief: May 2010

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