Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090619a.jpg" width="353">
New figures available in Haver&#39;s SURVEYS database point up how chain store sales have been influenced this year by sales at Wal-Mart. The International Council of Shopping Centers (ICSC) along with Goldman Sachs produce monthly chain store sales figures with and without this big, value-priced retailer. Both data sets paint a picture of recovery in consumer spending; however, sales minus Wal-Mart have been less vibrant. Estimates suggest that Wal-Mart boosted sales growth by four percentage points or more during the depths of the recession. Before this recession began, the sales gains were more comparable to one another -- except in the 2001 recession, when a differential also opened up.
Wal-Mart does not currently report monthly sales along with the other retailers; instead, it reports just quarterly. Therefore, the monthly figures must be interpolated as they are by ICSC and are available only with a lag. These numbers show that from June to December, sales without Wal-Mart fell 6.8% but with Wal-Mart they were down a lesser 2.5%. The quest for value was acute. Now that consumer spending seems to be recovering from last year&#39;s slump, bargain hunting has become less intense. Sales excluding the retail giant rose 3.2% from January through April while sales with Wal-Mart rose a comparable 1.8%. Sales without Wal-Mart during May slipped 0.5% and Wal-Mart&#39;s sales will be available shortly.
The lesson clearly is that value matters a lot when times get tough. What sales patterns might we continue to see into the recovery? The historical evidence shows that the inroads made by Wal-Mart may be sustained, but that the growth differentials between sales with or without this big retailer will narrow. During the whole year following the recession of 2001, for instance, overall chain store sales rose by 2.3%, but without Wal-Mart they increased 1.8%.It will be useful to continue to watch both series for the fullest perspective of consumers&#39; spending patterns.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090619b.jpg" width="353">
Regardless of which chain store sales series is observed, consumer spending currently is under pressure. Gains in store sales are just moderate versus last year. Furniture &amp; appliance store sales are lower though apparel store sales have risen slightly. The consumer spending prospects do, however, look brighter. Consumer confidence and consumer sentiment have been rising this year along with after-tax incomes due to recent tax cuts. Moreover, weakness in pricing power has enabled real after-tax incomes to grow this year at a 6.3% annual rate following their measly 1.3% gain during 2008. Even the job market has improved marginally as first time claims for unemployment insurance have fallen.
The chain store figures sighted above are comparable-store, or same-store, sales figures. As such they are similar to the weekly chain store sales values reported by ICSC/Goldman Sachs. These are available in Haver&#39;s SURVEYW database.
From 1996, this article from the Federal Reserve Bank of New York concludes that chain store sales can significantly improve the accuracy of predictions for several measures of consumer spending. It can be found <a href="http://www.newyorkfed.org/research/epr/96v02n2/9610harr.pdf">here.</a>
Oil prices and consumer spending from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/research/economic_quarterly/2005/summer/pdf/mehrapetersen.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">ICSC/Goldman Sachs Chain Store Sales (SA, 1977=100)</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">April</th>
<th scope="col">Y/Y</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>
<td class="firstcol">Total</td>
<td>--</td>
<td>--</td>
<td>486.9</td>
<td>-0.3%</td>
<td>478.0</td>
<td>-0.8%</td>
<td>1.0%</td>
<td>2.3%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">Excluding Wal-Mart</td>
<td>104.4</td>
<td>-4.6%</td>
<td>104.9</td>
<td>-2.8%</td>
<td>103.5</td>
<td>-5.2%</td>
<td>-0.6%</td>
<td>3.0%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

New figures available in Haver's SURVEYS database point up how chain store sales have been influenced this year by sales at Wal-Mart. The International Council of Shopping Centers (ICSC) along with Goldman Sachs produce monthly chain [...]

U.S. Consumers' Quest For Value

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090619c.jpg" width="353">
Commentary has been offered regularly on Haver.com about weekly chain store sales. That begs the question of how these figures differ from the monthly? The answer is that the weekly figures are based on a survey of sales taken by ICSC-Goldman Sachs while the monthly figures are based on reports directly from the retailers. And the tallies can differ. After the weekly figures are aggregated, during the last ten years there has been a not-perfect 73% correlation between the y/y change in the two series. Moreover, on a three-month basis that correlation shrinks to 14%. The one-month correlation is even smaller.
What the weekly figures indicate is that sales have lost their upward momentum. Weekly store sales declined in the latest period for the third week in the last five. The 0.6% decline lowered sales so far in June 0.5% below the May average after that month&#39;s 0.2% slip. Since the October &#39;08 low, however, sales remained up by 2.3%. We&#39;ll have to wait and see whether these figures foreshadow a similar trend in the monthly report.
During the last ten years there has been a 69% correlation between the year-to-year growth in chain store sales and the growth in general merchandise sales. The weekly figures are available in Haver&#39;s SURVEYW database.
The ICSC-Goldman Sachs retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
Prospects for spending also seemed less than promising last week. Last week, the leading indicator of sales reversed all of the prior period&#39;s rise with a 0.7% decline. The decline lowered the indicator 0.4% from May and by 2.9% y/y.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">06/12/09</th>
<th scope="col">06/05/09</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>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>485.6</td>
<td>488.6</td>
<td>-1.5%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


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Commentary has been offered regularly on Haver.com about weekly chain store sales. That begs the question of how these figures differ from the monthly? The answer is that the weekly figures are based on a survey of sales taken by [...]

Gains in Weekly Chain Store Sales Fade

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090619a.jpg" align="left" border="0" height="265" width="353">
New figures available in Haver's SURVEYS
database point up how chain store sales have been influenced this year
by sales at Wal-Mart. The International Council of Shopping Centers
(ICSC) along with Goldman Sachs produce monthly chain store sales
figures with and without this big, value-priced retailer. Both data
sets paint a picture of recovery in consumer spending; however, sales
minus Wal-Mart have been less vibrant. Estimates suggest that Wal-Mart
boosted sales growth by four percentage points or more during the
depths of the recession. Before this recession began, the sales gains
were more comparable to one another -- except in the 2001 recession,
when a differential also opened up.
Wal-Mart does not currently report monthly sales along with
the other retailers; instead, it reports just quarterly. Therefore, the
monthly figures must be interpolated as they are by ICSC and are
available only with a lag. These numbers show that from June to
December, sales without Wal-Mart fell 6.8% but with Wal-Mart they were
down a lesser 2.5%. The quest for value was acute. Now that consumer
spending seems to be recovering from last year's slump, bargain hunting
has become less intense. Sales excluding the retail giant rose 3.2%
from January through April while sales with Wal-Mart rose a comparable
1.8%. Sales without Wal-Mart during May slipped 0.5% and Wal-Mart's
sales will be available shortly.
The lesson clearly is that value matters a lot when times get
tough. What sales patterns might we continue to see into the recovery?
The historical evidence shows that the inroads made by Wal-Mart may be
sustained, but that the growth differentials between sales with or
without this big retailer will narrow. During the whole year following
the recession of 2001, for instance, overall chain store sales rose by
2.3%, but without Wal-Mart they increased 1.8%.It will be useful to
continue to watch both series for the fullest perspective of consumers'
spending patterns.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090619b.jpg" align="right" border="0" height="265" width="353">
Regardless of which chain store sales series is observed,
consumer spending currently is under pressure. Gains in store sales are
just moderate versus last year. Furniture &amp; appliance store
sales are lower though apparel store sales have risen slightly. The
consumer spending prospects do, however, look brighter. Consumer
confidence and consumer sentiment have been rising this year along with
after-tax incomes due to recent tax cuts. Moreover, weakness in pricing
power has enabled real after-tax incomes to grow this year at a 6.3%
annual rate following their measly 1.3% gain during 2008. Even the job
market has improved marginally as first time claims for unemployment
insurance have fallen.
The chain store figures sighted above are comparable-store, or
same-store, sales figures. As such they are similar to the weekly chain
store sales values reported by ICSC/Goldman Sachs. These are available
in Haver's SURVEYW database.
From 1996, this article from the Federal Reserve Bank of New
York concludes that chain store sales can significantly
improve the accuracy of predictions for several measures of
consumer spending. It can be found <a href="http://www.newyorkfed.org/research/epr/96v02n2/9610harr.pdf">here.</a>
Oil prices and consumer spending from the
Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/research/economic_quarterly/2005/summer/pdf/mehrapetersen.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">ICSC/Goldman
Sachs Chain Store Sales (SA, 1977=100)</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">April</th>
<th scope="col">Y/Y</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>
<td class="firstcol">Total</td>
<td>--</td>
<td>--</td>
<td>486.9</td>
<td>-0.3%</td>
<td>478.0</td>
<td>-0.8%</td>
<td>1.0%</td>
<td>2.3%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">Excluding Wal-Mart</td>
<td>104.4</td>
<td>-4.6%</td>
<td>104.9</td>
<td>-2.8%</td>
<td>103.5</td>
<td>-5.2%</td>
<td>-0.6%</td>
<td>3.0%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>
Gains in Weekly Chain Store Sales
Fade 
by <a href="/comment/Moeller.html">Tom
Moeller</a> June 19, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090619c.jpg" align="left" border="0" height="265" width="353">
Commentary has been offered regularly on Haver.com
about weekly chain store sales. That begs the question of how these
figures differ from the monthly? The answer is that the weekly figures
are based on a survey of sales taken by ICSC-Goldman Sachs while the
monthly figures are based on reports directly from the retailers. And
the tallies can differ. After the weekly figures are aggregated, during
the last ten years there has been a not-perfect 73% correlation between
the y/y change in the two series. Moreover, on a three-month basis that
correlation shrinks to 14%. The one-month correlation is even smaller.
What the weekly figures indicate is that sales have lost their
upward momentum. Weekly store sales declined in the latest period for
the third week in the last five. The 0.6% decline lowered sales so far
in June 0.5% below the May average after that month's 0.2% slip. Since
the October '08 low, however, sales remained up by 2.3%. We'll have to
wait and see whether these figures foreshadow a similar trend in the
monthly report.
During the last ten years there has been a 69% correlation
between the year-to-year growth in chain store sales and the growth in
general merchandise sales. The weekly figures are available
in Haver's SURVEYW database.
The ICSC-Goldman
Sachs retail chain-store sales index is constructed using the
same-store sales (stores open for one year) reported by 78 stores of
seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney,
Sears and Wal-Mart.


Prospects for spending also seemed less than promising last
week. Last week, the leading indicator of sales reversed all of the
prior period's rise with a 0.7% decline. The decline lowered the
indicator 0.4% from May and by 2.9% y/y.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">06/12/09</th>
<th scope="col">06/05/09</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>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>485.6</td>
<td>488.6</td>
<td>-1.5%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
UK Retail Sales Fall And Markets
Quiver 
by <a href="/comment/Brusca.html">Robert
Brusca</a> June 19, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090619d.jpg" align="left" border="0" height="265" width="353">
UK retail sales fell unexpectedly in May and, combined with
news of greater public sector borrowing, markets sold off with
particular pressure on the pound sterling. The UK has been posting some
of the best economic numbers in Europe but with the slippage in retail
sales some of that optimism has faded. Still there are upbeat signs in
the UK economy. 
 

One sign of optimism is still retail sales themselves.
Although the Yr/Yr figures are worsening the six months trends have
barely turned lower and three-month trends are sill quite strong and
advancing. Perhaps the disappointment is more about markets getting
ahead of themselves than about any real disappointment in retail sales
trends themselves. 
 

The UK housing market is showing some signs of stirring.
Mortgage lending still fell in the recent month (May) but lenders
suspect that demand for purchases has been increasing. It is mostly
re-mortgaging activity that has been slackening off. It is reported
that for every home for sale there are four who are looking to buy
according to a survey by the U.K.'s National Association of Estate
Agents on Thursday. There are still signs of an upswing in the UK. 
 

The CBI industrial trend survey is still very weak but its
index moved up to -51 from -56 in May as well. 
 

On balance the reaction to retail sales may prove to be
excessively pessimistic since improving trends still seem to the rule,
not the exception, in the UK. 
 


<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">UK Real
and Nominal Retail Sales </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Nominal</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
<td>Quarter 2-date</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Total</td>
<td>-0.3%</td>
<td>0.6%</td>
<td>1.2%</td>
<td>6.3%</td>
<td>2.4%</td>
<td>-1.1%</td>
<td>6.4%</td>
<td>4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food Bev &amp; Tobacco</td>
<td>0.6%</td>
<td>0.2%</td>
<td>0.8%</td>
<td>6.6%</td>
<td>4.8%</td>
<td>3.8%</td>
<td>8.3%</td>
<td>7.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing footwear</td>
<td>-2.3%</td>
<td>-1.0%</td>
<td>1.3%</td>
<td>-7.9%</td>
<td>1.7%</td>
<td>-8.5%</td>
<td>8.5%</td>
<td>-9.3%</td>
</tr>
<tr>
<td class="firstcol" colspan="9">&nbsp;</td>
</tr>
<tr>
<td class="firstcol" colspan="9">Real</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Ex Auto</td>
<td>-0.7%</td>
<td>1.0%</td>
<td>1.2%</td>
<td>6.0%</td>
<td>2.0%</td>
<td>-1.7%</td>
<td>6.1%</td>
<td>3.2%</td>
</tr>
</tbody>
</table>
</body></html>

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<img align="left" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618e.jpg" width="353">
The decline in initial claims from their high is leading evidence of labor market improvement. Though initial claims for unemployment insurance edged up last week, they remained near the lowest level since late-January. Claims inched up by 3,000 to 608,000 after a revised 20,000 decline during the prior week which was revised a bit shallower. Initial claims were down from their March peak of 674,000. In addition, the four-week average of claims, which smoothes out some of the volatility in the weekly numbers, fell to 615,750 which was its lowest level since since mid-February. Still, the level remained up by two-thirds from the year ago level. The latest level about matched the Consensus expectation which was for 605,000 claims.
The latest claims figure is for the survey week for June nonfarm payrolls. Claims fell 28,000 (4.4%) from the May survey period. During the last ten years there has been an 86% correlation between the level of claims and the change in nonfarm payrolls.
The Labor Department indicated that the largest increases in initial claims for the week ending June 6 were in Pennsylvania (+6,861), Florida (+6,469), Ohio (+5,104), California (+4,894), and New York (+4,795), while the largest decreases were in Arkansas (-1,206), Puerto Rico (-1,131), Wisconsin (-707), Arizona (-693), and Nebraska (-450).
Modest improvement in the job market finally evidenced itself in a lower level of continuing claims for unemployment insurance. They fell for the first time since early January and the decline was a large 148,000 (2.2%). Continuing claims provide an indication of workers&#39; ability to find employment. At 6,687,000, however, claims remained more than twice the year ago level. Further suggesting that the job market&#39;s improvement is just modest was that the four-week average of continuing claims rose to another record of 6,757,500. The series dates back to 1966.<img align="right" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618f.jpg" width="353">
Also indicating marginal labor market improvement was that the insured unemployment rate slipped to 5.0% from 5.1%. The level remained more than double June of 2008 and the highest since 1983. During the last ten years there has been a 93% correlation between the level of the insured unemployment rate and the overall rate of unemployment published by the Bureau of Labor Statistics.
Clearly, the latest weekly figure understates labor market distress in some states.The highest insured unemployment rates in the week ending May 30 were in Michigan (7.5 percent), Oregon (7.0), Nevada (6.3), Puerto Rico (6.3), Pennsylvania (6.2), Wisconsin (6.0), Arkansas (5.6), South Carolina (5.5), California (5.4), and North Carolina (5.4).
The unemployment insurance claims data is available in Haver&#39;s WEEKLY database and the state data is in the REGIONW database.
Community Development Financial Institutions: Challenges and Opportunities is the title of yesterday&#39;s speech by Fed Chairman Ben S, Bernanke and it is available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20090617a.htm"> 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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">06/13/09</th>
<th scope="col">06/06/09</th>
<th scope="col">05/30/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>608</td>
<td>605</td>
<td>625</td>
<td>55.9%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,687</td>
<td>6,835</td>
<td>115.9%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
</body>
</html>

The decline in initial claims from their high is leading evidence of labor market improvement. Though initial claims for unemployment insurance edged up last week, they remained near the lowest level since late-January. Claims inched [...]

U.S. Initial Jobless Insurance Claims Trend Lower But Edge Up In Latest Week

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618c.jpg" width="353">
The Philadelphia Federal Reserve Bank indicated that factory sector activity in the region contracted during June but at the slowest rate since a slight advance during September of last year. The Index of General Activity in the manufacturing sector came in at -2.2 versus Consensus expectations for a reading of -17.0. The This index reflects a question separate from the components which are surveyed separately.
During the last ten years there has been a 77% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 70% correlation with q/q growth in real GDP.
Amongst the sub-indexes shipments turned positive for the first time since May of last year. The new orders, inventory and employment indexes each rose sharply but were still negative. A reduced thirty-one percent of respondents expected to lower employment levels and an improved ten percent expected to raise them. During the last ten years there has been a 79% correlation between the index level and the m/m change in manufacturing sector payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618d.jpg" width="353">
The prices paid index rose to a less-negative 13.0. Only five percent of respondents planned to raise prices while eighteen percent expected to lower them. During the last ten years there has been a 74% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 83% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months improved to its highest level since 2003. The expectations index for new orders, shipments and employment each were up sharply from their winter lows. Expectations for prices also are sharply improved during the last six months
The figures from the Philadelphia Federal Reserve can be found in Haver&#39;s SURVEYS database.
The latest Business Outlook Survey from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2009/bos0609.pdf">here</a>.
Residential Housing and Personal Bankruptcy from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/research-and-data/publications/business-review/2009/q2/brq209_housing-and-bankruptcy.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">Philadelphia Fed (%)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-2.2</td>
<td>-22.6</td>
<td>-17.7</td>
<td>-21.3</td>
<td>5.0</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>-13.0</td>
<td>&nbsp;-22.8</td>
<td>&nbsp;63.4</td>
<td>36.4</td>
<td>26.3</td>
<td>36.7</td>
</tr>
</tbody>
</table>
</body>
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The Philadelphia Federal Reserve Bank indicated that factory sector activity in the region contracted during June but at the slowest rate since a slight advance during September of last year. The Index of General Activity in the [...]

Philadelphia Fed Index Improves Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618a.jpg" width="353">
The Conference Board&#39;s leading index again suggested a coming turn in economic activity. The May composite index of leading economic indicators jumped another 1.2% following the upwardly revised 1.1% April gain. The increases recovered the declines during the prior several months and left the index at its highest level since last September. The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.
Nearly three quarters of the ten components of the leading index increased last month with the largest positive contributions coming from higher stock prices, a higher money supply, a more positively sloped interest rate yield curve and vendor performance (slower delivery speeds). Initial unemployment insurance claims, weekly hours worked and factory orders made negative contributions.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618b.jpg" width="353">
Suggesting that the rate of decline in the economy is slowing were the coincident indicators. They fell 0.2% for the second month and that compared with 0.6% to 1.1% monthly declines since last September. The negative contributions from lower employment and production eased. Half of the four component series rose during May led by gains in real disposable income and business sales. Over the last ten years there has been a 76% correlation between this y/y change and real GDP.
In a sign that excesses in the U.S. economy are diminishing, the lagging index fell for the fifth month in the last six. The ratio of coincident-to-lagging indicators (a measure of economic excess) was unchanged m/m at the highest level this year.
The Conference Board figures are available in Haver&#39;s BCI database. Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.
IMF Asked to Aid G-8 With Exit Strategies For Crisis Policies can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/NEW061309A.htm"> 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/BCI/BCI.HTM">Business Cycle Indicators</a> (%)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Feb. 6-Month % (AR)</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">Leading</td>
<td>1.2</td>
<td>1.1</td>
<td>-0.3</td>
<td>2.4</td>
<td>-2.8</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.2</td>
<td>-0.3</td>
<td>-0.7</td>
<td>-6.4</td>
<td>-0.8</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.2</td>
<td>-0.8</td>
<td>-0.6</td>
<td>-4.0</td>
<td>2.9</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>


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The Conference Board's leading index again suggested a coming turn in economic activity. The May composite index of leading economic indicators jumped another 1.2% following the upwardly revised 1.1% April gain. The increases [...]

U.S. Leading Indicators Rise Sharply For A Second Month

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618a.jpg" width="353">
The Conference Board&#39;s leading index again suggested a coming turn in economic activity. The May composite index of leading economic indicators jumped another 1.2% following the upwardly revised 1.1% April gain. The increases recovered the declines during the prior several months and left the index at its highest level since last September. The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.
Nearly three quarters of the ten components of the leading index increased last month with the largest positive contributions coming from higher stock prices, a higher money supply, a more positively sloped interest rate yield curve and vendor performance (slower delivery speeds). Initial unemployment insurance claims, weekly hours worked and factory orders made negative contributions.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618b.jpg" width="353">
Suggesting that the rate of decline in the economy is slowing were the coincident indicators. They fell 0.2% for the second month and that compared with 0.6% to 1.1% monthly declines since last September. The negative contributions from lower employment and production eased. Half of the four component series rose during May led by gains in real disposable income and business sales. Over the last ten years there has been a 76% correlation between this y/y change and real GDP.
In a sign that excesses in the U.S. economy are diminishing, the lagging index fell for the fifth month in the last six. The ratio of coincident-to-lagging indicators (a measure of economic excess) was unchanged m/m at the highest level this year.
The Conference Board figures are available in Haver&#39;s BCI database. Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.
IMF Asked to Aid G-8 With Exit Strategies For Crisis Policies can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/NEW061309A.htm"> 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/BCI/BCI.HTM">Business Cycle Indicators</a> (%)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Feb. 6-Month % (AR)</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">Leading</td>
<td>1.2</td>
<td>1.1</td>
<td>-0.3</td>
<td>2.4</td>
<td>-2.8</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.2</td>
<td>-0.3</td>
<td>-0.7</td>
<td>-6.4</td>
<td>-0.8</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.2</td>
<td>-0.8</td>
<td>-0.6</td>
<td>-4.0</td>
<td>2.9</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Improves Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 18, 2009


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618c.jpg" width="353">
The Philadelphia Federal Reserve Bank indicated that factory sector activity in the region contracted during June but at the slowest rate since a slight advance during September of last year. The Index of General Activity in the manufacturing sector came in at -2.2 versus Consensus expectations for a reading of -17.0. The This index reflects a question separate from the components which are surveyed separately.
During the last ten years there has been a 77% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 70% correlation with q/q growth in real GDP.
Amongst the sub-indexes shipments turned positive for the first time since May of last year. The new orders, inventory and employment indexes each rose sharply but were still negative. A reduced thirty-one percent of respondents expected to lower employment levels and an improved ten percent expected to raise them. During the last ten years there has been a 79% correlation between the index level and the m/m change in manufacturing sector payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618d.jpg" width="353">
The prices paid index rose to a less-negative 13.0. Only five percent of respondents planned to raise prices while eighteen percent expected to lower them. During the last ten years there has been a 74% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 83% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months improved to its highest level since 2003. The expectations index for new orders, shipments and employment each were up sharply from their winter lows. Expectations for prices also are sharply improved during the last six months
The figures from the Philadelphia Federal Reserve can be found in Haver&#39;s SURVEYS database.
The latest Business Outlook Survey from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2009/bos0609.pdf">here</a>.
Residential Housing and Personal Bankruptcy from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/research-and-data/publications/business-review/2009/q2/brq209_housing-and-bankruptcy.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">Philadelphia Fed (%)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-2.2</td>
<td>-22.6</td>
<td>-17.7</td>
<td>-21.3</td>
<td>5.0</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>-13.0</td>
<td>&nbsp;-22.8</td>
<td>&nbsp;63.4</td>
<td>36.4</td>
<td>26.3</td>
<td>36.7</td>
</tr>
</tbody>
</table>
U.S. Initial Jobless Insurance Claims Trend Lower But Edge Up In Latest Week 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 18, 2009


<img align="left" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618e.jpg" width="353">
The decline in initial claims from their high is leading evidence of labor market improvement. Though initial claims for unemployment insurance edged up last week, they remained near the lowest level since late-January. Claims inched up by 3,000 to 608,000 after a revised 20,000 decline during the prior week which was revised a bit shallower. Initial claims were down from their March peak of 674,000. In addition, the four-week average of claims, which smoothes out some of the volatility in the weekly numbers, fell to 615,750 which was its lowest level since since mid-February. Still, the level remained up by two-thirds from the year ago level. The latest level about matched the Consensus expectation which was for 605,000 claims.
The latest claims figure is for the survey week for June nonfarm payrolls. Claims fell 28,000 (4.4%) from the May survey period. During the last ten years there has been an 86% correlation between the level of claims and the change in nonfarm payrolls.
The Labor Department indicated that the largest increases in initial claims for the week ending June 6 were in Pennsylvania (+6,861), Florida (+6,469), Ohio (+5,104), California (+4,894), and New York (+4,795), while the largest decreases were in Arkansas (-1,206), Puerto Rico (-1,131), Wisconsin (-707), Arizona (-693), and Nebraska (-450).
Modest improvement in the job market finally evidenced itself in a lower level of continuing claims for unemployment insurance. They fell for the first time since early January and the decline was a large 148,000 (2.2%). Continuing claims provide an indication of workers&#39; ability to find employment. At 6,687,000, however, claims remained more than twice the year ago level. Further suggesting that the job market&#39;s improvement is just modest was that the four-week average of continuing claims rose to another record of 6,757,500. The series dates back to 1966.<img align="right" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090618f.jpg" width="353">
Also indicating marginal labor market improvement was that the insured unemployment rate slipped to 5.0% from 5.1%. The level remained more than double June of 2008 and the highest since 1983. During the last ten years there has been a 93% correlation between the level of the insured unemployment rate and the overall rate of unemployment published by the Bureau of Labor Statistics.
Clearly, the latest weekly figure understates labor market distress in some states.The highest insured unemployment rates in the week ending May 30 were in Michigan (7.5 percent), Oregon (7.0), Nevada (6.3), Puerto Rico (6.3), Pennsylvania (6.2), Wisconsin (6.0), Arkansas (5.6), South Carolina (5.5), California (5.4), and North Carolina (5.4).
The unemployment insurance claims data is available in Haver&#39;s WEEKLY database and the state data is in the REGIONW database.
Community Development Financial Institutions: Challenges and Opportunities is the title of yesterday&#39;s speech by Fed Chairman Ben S, Bernanke and it is available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20090617a.htm"> 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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">06/13/09</th>
<th scope="col">06/06/09</th>
<th scope="col">05/30/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>608</td>
<td>605</td>
<td>625</td>
<td>55.9%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,687</td>
<td>6,835</td>
<td>115.9%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>


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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617d.jpg" width="353">
The U.S. current account deficit shrank to its lowest level since 2001 as the recession and lower oil prices limited imports. Despite recessions abroad which lowered U.S. exports, imports fell even more rapidly. The deficit of $101.5 billion was deeper than the Consensus expectation for a reading of $85.0 billion. 
As a percentage of GDP, the shrinkage of the U.S. deficit was dramatic. The 2.9% 1Q figure was the smallest since early-1999. This percentage is sharply reduced from the 6.6% peak reached late in 2005.
Recession in the U.S. worked with the decline in oil prices to drop the 1Q deficit on traded goods to $124.0 billion, its lowest since 2004. Though growth in goods exports was a negative 21.0% y/y, imports fell by a greater 30.1% spurred by the drop in oil prices. 
Fewer U.S. citizens went abroad this year and more came here. As a result, the balance on services trade narrowed as exports fell more then imports. The 1Q surplus of $32.8 billion compared to a peak surplus of $40.0 billion late during 2007. That decline came as exports fell 7.2% y/y against a 6.4% decline in imports.
From the capital account side of the ledger, the U.S. balance on private direct investment remained stable and slightly positive q/q. That compares with deficits during the last three years. U.S. investment abroad rose while foreign investment here fell sharply.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090617e.jpg" width="353"> 
Ties that bind: bilateral trade&#39;s role in synchronizing business cycles from the Federal Reserve Bank of Dallas can be found here.

<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/@EE/@EE01/@EE01.HTM">US Balance of Payments</a> SA</th>
<th scope="col">1Q &#39;09</th>
<th scope="col">4Q &#39;08</th>
<th scope="col">Year Ago</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">Current Account Balance ($ Bil.)</td>
<td>-101.5</td>
<td>-154.9</td>
<td>-179.3</td>
<td>-706.1</td>
<td>-726.6</td>
<td>-803.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Deficit % of GDP</td>
<td>2.9</td>
<td>4.4</td>
<td>5.1</td>
<td>5.0</td>
<td>5.3</td>
<td>6.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Goods ($ Bil.)</td>
<td>-124.0</td>
<td>-178.8</td>
<td>-218.8</td>
<td>-840.3</td>
<td>-831.0</td>
<td>-847.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports&nbsp;</td>
<td>-14.2%</td>
<td>-14.0%</td>
<td>-21.0%</td>
<td>12.2%</td>
<td>12.1%</td>
<td>13.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports&nbsp;</td>
<td>-20.4%</td>
<td>-16.0%</td>
<td>-30.1%</td>
<td>7.5%</td>
<td>5.7%</td>
<td>10.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Private Services ($ Bil.)</td>
<td>32.8</td>
<td>34.3</td>
<td>36.2</td>
<td>144.3</td>
<td>129.6</td>
<td>86.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>-5.7</td>
<td>-4.7%</td>
<td>-7.2%</td>
<td>8.9%</td>
<td>15.8%</td>
<td>12.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>-6.2</td>
<td>-5.4%</td>
<td>-6.4%</td>
<td>8.0%</td>
<td>7.5%</td>
<td>11.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Income ($ Bil.)</td>
<td>19.3</td>
<td>21.1</td>
<td>36.7</td>
<td>118.2</td>
<td>90.8</td>
<td>48.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Unilateral Transfers ($ Bil.)</td>
<td>-29.6</td>
<td>-31.5</td>
<td>-33.3</td>
<td>-128.4</td>
<td>-116.0</td>
<td>-91.3</td>
</tr>
</tbody>
</table>
</body>
</html>

The U.S. current account deficit shrank to its lowest level since 2001 as the recession and lower oil prices limited imports. Despite recessions abroad which lowered U.S. exports, imports fell even more rapidly. The deficit of $101.5 [...]

U.S. 1Q'09 Current Account Deficit Shrinks To Smallest Since 2001

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

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

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Andrew Cates

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

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

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

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

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

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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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U.S. light vehicle sales dropped 2.9% (+6.5% y/y) to 17.31 million units (SAAR) in April after surging 10.8% to 17.82 million units in March. The retreat in April vehicle sales accompanied a 1.7% y/y rise in real disposable income through March, which compared to 2.0% growth last year.

Sales declines were broad-based last month. Light truck sales fell 1.3% (+9.9% y/y) during April to 14.34 million units (SAAR), after rising 12.4% in March. Purchases of domestically-made light trucks declined 1.2% (+11.9% y/y) to 11.02 million units, after jumping 12.5% in March. Sales of imported light trucks fell 1.8% (+4.4% y/y) to 3.32 million units, following an 11.6% March surge.

Trucks’ record 82.8% share of the light vehicle market last month compared to 81.5% in March and 80.3% in April of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales also declined last month, down 9.5% (-7.5%) to 2.97 million units (SAAR) following a 3.5% March rise. The decline reversed all of the increase over the prior two months. Purchases of domestically-produced cars fell 9.8% (-4.3% y/y) last month to 2.22 million units, after rising 3.8% in March. Sales of imported autos declined 9.6% (-15.7% y/y) to 0.75 million units, following a 2.5% March increase.

Imports' 23.5% share of the U.S. light vehicle market was little changed from 23.6% in March and compared to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market held steady at 25.3% last month and compared to 27.7% in April of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market eased to 23.2% last month after falling to 23.3% in March.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the I**NDUSTRY** database.

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- Light truck sales pull back, while auto sales tumble.
- Both domestic and imported sales decline.
- Imports' market share slips further.

U.S. Light Vehicle Sales Fall in April

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

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

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

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

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

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

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

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

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

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

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

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

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

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

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

Carol Stone, CBE

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

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

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

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

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

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

Economy in Brief: June 2009

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