Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050719b.jpg" width="353">
Chain store sales rose 0.3% last week for the third consecutive weekly rise, according to the International Council of Shopping Centers (ICSC)-UBS survey. So far this month sales are 0.4% higher than during June when sales fell 0.4% versus May.
During the last ten years there has been a 56% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The leading indicator of chain store sales from ICSC fell a sharp 1.1% w/w (-0.2% y/y) following a downwardly revised 0.3% rise during the week prior.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">07/16/05</th>
<th scope="col">07/09/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>456.9</td>
<td>455.7</td>
<td>4.0%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
</tbody>
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</body>
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Chain store sales rose 0.3% last week for the third consecutive weekly rise, according to the International Council of Shopping Centers (ICSC)-UBS survey. So far this month sales are 0.4% higher than during June when sales fell 0.4% [...]

Chain Store Sales Again Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050719c.jpg" width="353">
The National Association of Home Builders&#39; (NAHB) Composite Housing Market Index fell to 70 in July from the upwardly revised record level one month prior. The index this year has averaged 70, up slightly versus 2004.
During the last twenty years, annual changes in the composite index had an 85% correlation with the change in single family housing starts.
The July index for current sales of single family homes fell 2.6% y/y but remained up 1.4% versus a year ago. The index of expected sales in six months retraced all of the prior month&#39;s increase but was up 4.1% y/y.
Traffic of prospective home buyers remained at June&#39;s record high level.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>70</td>
<td>72</td>
<td>67</td>
<td>68</td>
<td>64</td>
<td>61</td>
</tr>
</tbody>
</table>
</body>
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The National Association of Home Builders' (NAHB) Composite Housing Market Index fell to 70 in July from the upwardly revised record level one month prior. The index this year has averaged 70, up slightly versus 2004. During the last [...]

NAHB Housing Market Index Fell from Record High

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050719a.jpg" width="353">
Housing starts were unchanged last month at 2.004M units.Consensus expectations had been for 2.05M starts.
Single-family starts slipped 2.5% after rising 4.2% in May which was a slightly weaker gain than reported initially. The June decline in single family starts occurred in the Midwest (-10.0% m/m, +13.4% y/y) and in the West (-10.2% m/m, +4.8% y/y). In the Northeast starts rose to the second highest level on record (5.1% m/m, 7.5% y/y) and in the South single family starts rose as well (4.0% m/m, 10.4% y/y).
Multi family starts gained back about half of the prior month&#39;s decline with a 14.2% rise.
Building permits rose 2.4% and generally have moved sideways this year.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Total</td>
<td>2,004</td>
<td>2,004</td>
<td>9.7%</td>
<td>1,950</td>
<td>1,854</td>
<td>1,7 10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,667</td>
<td>1,709</td>
<td>9.2%</td>
<td>1,604</td>
<td>1,505</td>
<td>1,363</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>337</td>
<td>295</td>
<td>12.0%</td>
<td>345</td>
<td>349</td>
<td>347</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,111</td>
<td>2,062</td>
<td>4.8%</td>
<td>2,058</td>
<td>1,8 88</td>
<td>1,749</td>
</tr>
</tbody>
</table>
</body>
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Housing starts were unchanged last month at 2.004M units.Consensus expectations had been for 2.05M starts. Single-family starts slipped 2.5% after rising 4.2% in May which was a slightly weaker gain than reported initially. The June [...]

Housing Starts Unchanged, Single Family Slipped

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050719a.jpg" width="353">
Housing starts were unchanged last month at 2.004M units.Consensus expectations had been for 2.05M starts.
Single-family starts slipped 2.5% after rising 4.2% in May which was a slightly weaker gain than reported initially. The June decline in single family starts occurred in the Midwest (-10.0% m/m, +13.4% y/y) and in the West (-10.2% m/m, +4.8% y/y). In the Northeast starts rose to the second highest level on record (5.1% m/m, 7.5% y/y) and in the South single family starts rose as well (4.0% m/m, 10.4% y/y).
Multi family starts gained back about half of the prior month&#39;s decline with a 14.2% rise.
Building permits rose 2.4% and generally have moved sideways this year.

<table border="0" cellspacing="0" width="100%">

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<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
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<td class="firstcol">Total</td>
<td>2,004</td>
<td>2,004</td>
<td>9.7%</td>
<td>1,950</td>
<td>1,854</td>
<td>1,7 10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,667</td>
<td>1,709</td>
<td>9.2%</td>
<td>1,604</td>
<td>1,505</td>
<td>1,363</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>337</td>
<td>295</td>
<td>12.0%</td>
<td>345</td>
<td>349</td>
<td>347</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,111</td>
<td>2,062</td>
<td>4.8%</td>
<td>2,058</td>
<td>1,8 88</td>
<td>1,749</td>
</tr>
</tbody>
</table>
NAHB Housing Market Index Fell from Record High 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 19, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050719c.jpg" width="353">
The National Association of Home Builders&#39; (NAHB) Composite Housing Market Index fell to 70 in July from the upwardly revised record level one month prior. The index this year has averaged 70, up slightly versus 2004.
During the last twenty years, annual changes in the composite index had an 85% correlation with the change in single family housing starts.
The July index for current sales of single family homes fell 2.6% y/y but remained up 1.4% versus a year ago. The index of expected sales in six months retraced all of the prior month&#39;s increase but was up 4.1% y/y.
Traffic of prospective home buyers remained at June&#39;s record high level.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>70</td>
<td>72</td>
<td>67</td>
<td>68</td>
<td>64</td>
<td>61</td>
</tr>
</tbody>
</table>
Chain Store Sales Again Higher 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 19, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050719b.jpg" width="353">
Chain store sales rose 0.3% last week for the third consecutive weekly rise, according to the International Council of Shopping Centers (ICSC)-UBS survey. So far this month sales are 0.4% higher than during June when sales fell 0.4% versus May.
During the last ten years there has been a 56% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The leading indicator of chain store sales from ICSC fell a sharp 1.1% w/w (-0.2% y/y) following a downwardly revised 0.3% rise during the week prior.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<table border="0" cellspacing="0" width="100%">
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<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">07/16/05</th>
<th scope="col">07/09/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>456.9</td>
<td>455.7</td>
<td>4.0%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
</body>
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Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050718a.jpg" width="353">
The Ukrainian economy seems still trying to find its footing. Data reported today by the National Bank indicate continuing good gains in retail trade and continuing improvement in unemployment. But previous information shows that inflation remains well in double digits and industrial sector growth has slowed markedly so far this year.
Retail trade turnover gained 21.1% in constant prices in June from a year ago, slightly faster than in May and about the same pace as prevailed during 2004. The unemployment rate looks attractive at just 3.0%. This is down 0.5% from a year ago and compares with a peak in June and August 2000 of 4.3%. Thus, some conditions in the economy are clearly showing good health.
At the same time, industrial production, which had expanded 15.8% and 12.5% in 2003 and 2004, respectively, is growing much more slowly this year. Through May, it was up just 6.2% from May 2004, with progressively diminishing year-on-year growth rates each month. But prices continue to rise rapidly. The June CPI is up 14.4% from a year ago; the acceleration began about the middle of last year, and we&#39;d surmise that energy costs were a contributor. The inflationary tendency is indicated in money growth that runs in the upper 30% range over a year ago. Thus, while there is strong real growth in such as retail trade, the accompanying inflation clouds the economic atmosphere, along with persistent political uncertainties.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGECW/@EA/@EA.HTM">&nbsp;Ukraine</a><a href="http://www.haverselect.com/dlx/EMERGECW/@EA/@EA.HTM"> </a></th>
<th scope="col">June 2005 </th>
<th scope="col">May 2005 </th>
<th scope="col">Year Ago </th>
<th scope="col">2004 </th>
<th scope="col">2003 </th>
<th scope="col">2002 </th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Retail Trade (yr/yr % change, constant prices) </td>
<td>21.1</td>
<td>20.4</td>
<td>&nbsp;</td>
<td>21.0*</td>
<td>15.6*</td>
<td>16.4*</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%) </td>
<td>3.03</td>
<td>3.22</td>
<td>3.54</td>
<td>3.56</td>
<td>3.73</td>
<td>3.76</td>
</tr>
</tbody>
</table>
</body>
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The Ukrainian economy seems still trying to find its footing. Data reported today by the National Bank indicate continuing good gains in retail trade and continuing improvement in unemployment. But previous information shows that [...]

Ukraine Retail Trade Grows, but Production Turns Weaker

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050718b.jpg" width="353">
Though the level of the leading index of the US economy published by the Economic Cycle Research Institute (ECRI) fell in the latest week, the 0.7% decline was not enough to undo the modest improvement in the leaders since late May. Since then index&#39;s six month growth rate has risen to 1.2% from -0.3%.
During the last ten years there has been a 54% correlation between the change in the weekly leading index and the change in US real GDP growth during the following quarter. The correlation has risen to 67% during the last five years.
While growth in the leaders is down sharply from double digit rates logged during 2003, recession is not indicated. Negative growth in excess of -4% typically preceded past U.S. recessions.
Moreover, slower economic growth may not even be indicated by the more than 10 percentage point drop in the leaders&#39; growth. During both the late 1980s and the late 1990s the leaders slowed by an even greater degree and little slowing in real GDP occurred.
Visit the <a href="http://www.businesscycle.com/">Economic Cycle Research Institute</a> for analysis of US and international business cycles.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Economic Cycle Research Institute&nbsp;</th>
<th scope="col">07/08/05</th>
<th scope="col">12/31/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Weekly Leading Index</td>
<td>133.5</td>
<td>132.4</td>
<td>1.6%</td>
<td>132.6</td>
<td>124.9</td>
<td>119.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; 6 Month Growth Rate</td>
<td>1.2%</td>
<td>1.4%</td>
<td>&nbsp;</td>
<td>4.2%</td>
<td>6.7%</td>
<td>1.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

Though the level of the leading index of the US economy published by the Economic Cycle Research Institute (ECRI) fell in the latest week, the 0.7% decline was not enough to undo the modest improvement in the leaders since late May. [...]

ECRI Leading Economic Index Improved Slightly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050718b.jpg" width="353">
Though the level of the leading index of the US economy published by the Economic Cycle Research Institute (ECRI) fell in the latest week, the 0.7% decline was not enough to undo the modest improvement in the leaders since late May. Since then index&#39;s six month growth rate has risen to 1.2% from -0.3%.
During the last ten years there has been a 54% correlation between the change in the weekly leading index and the change in US real GDP growth during the following quarter. The correlation has risen to 67% during the last five years.
While growth in the leaders is down sharply from double digit rates logged during 2003, recession is not indicated. Negative growth in excess of -4% typically preceded past U.S. recessions.
Moreover, slower economic growth may not even be indicated by the more than 10 percentage point drop in the leaders&#39; growth. During both the late 1980s and the late 1990s the leaders slowed by an even greater degree and little slowing in real GDP occurred.
Visit the <a href="http://www.businesscycle.com/">Economic Cycle Research Institute</a> for analysis of US and international business cycles.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol">Economic Cycle Research Institute&nbsp;</th>
<th scope="col">07/08/05</th>
<th scope="col">12/31/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Weekly Leading Index</td>
<td>133.5</td>
<td>132.4</td>
<td>1.6%</td>
<td>132.6</td>
<td>124.9</td>
<td>119.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; 6 Month Growth Rate</td>
<td>1.2%</td>
<td>1.4%</td>
<td>&nbsp;</td>
<td>4.2%</td>
<td>6.7%</td>
<td>1.1%</td>
</tr>
</tbody>
</table>
Ukraine Retail Trade Grows, but Production Turns Weaker 
by <a href="/comment/Stone.html">Carol Stone</a> July 18, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050718a.jpg" width="353">
The Ukrainian economy seems still trying to find its footing. Data reported today by the National Bank indicate continuing good gains in retail trade and continuing improvement in unemployment. But previous information shows that inflation remains well in double digits and industrial sector growth has slowed markedly so far this year.
Retail trade turnover gained 21.1% in constant prices in June from a year ago, slightly faster than in May and about the same pace as prevailed during 2004. The unemployment rate looks attractive at just 3.0%. This is down 0.5% from a year ago and compares with a peak in June and August 2000 of 4.3%. Thus, some conditions in the economy are clearly showing good health.
At the same time, industrial production, which had expanded 15.8% and 12.5% in 2003 and 2004, respectively, is growing much more slowly this year. Through May, it was up just 6.2% from May 2004, with progressively diminishing year-on-year growth rates each month. But prices continue to rise rapidly. The June CPI is up 14.4% from a year ago; the acceleration began about the middle of last year, and we&#39;d surmise that energy costs were a contributor. The inflationary tendency is indicated in money growth that runs in the upper 30% range over a year ago. Thus, while there is strong real growth in such as retail trade, the accompanying inflation clouds the economic atmosphere, along with persistent political uncertainties.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGECW/@EA/@EA.HTM">Ukraine</a><a href="http://www.haverselect.com/dlx/EMERGECW/@EA/@EA.HTM"> </a></th>
<th scope="col">June 2005 </th>
<th scope="col">May 2005 </th>
<th scope="col">Year Ago </th>
<th scope="col">2004 </th>
<th scope="col">2003 </th>
<th scope="col">2002 </th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Trade (yr/yr % change, constant prices) </td>
<td>21.1</td>
<td>20.4</td>
<td>&nbsp;</td>
<td>21.0*</td>
<td>15.6*</td>
<td>16.4*</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%) </td>
<td>3.03</td>
<td>3.22</td>
<td>3.54</td>
<td>3.56</td>
<td>3.73</td>
<td>3.76</td>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050715f.jpg" width="353">
Israel&#39;s monthly price data were reported today by the Central Bureau of Statistics. The June consumer price index, like that in the US, was flat. It had risen 0.2% in May. The year-on-year rate is a mere 0.3%. For wholesale prices, the index for June fell 0.4%, although prior increases have put the year-on-year rate at 5.1%.
It&#39;s interesting to see in the first graph that the consumer and wholesale indexes moved along pretty much the same trend until 2002. Since then, the consumer price index has been almost flat, while the wholesale index has continued along its former trend or even somewhat stronger. Wholesale prices are domestic prices, those charged by manufacturers selling their finished output &quot;at the factory gate&quot;. Input costs are likely a major determinant, and over the last five years there has been some correlation with oil prices, 57%, as seen in the second graph. Notably, this relationship was not so clear in prior years, but perhaps the wide swings in the oil market since 2000 have had an impact on this smaller country.
But then how can consumer prices be so stable? A quick look at the value of the shekel will give a good clue. In the third graph, it is seen to run very close to the level of the CPI. The foreign exchange rate is no trivial matter for the final price level. For the economy as a whole, imports run right at 50% of GDP. With imports so important, prices of imported products matter a great deal to pricing, so the fact that the shekel has steadied and even improved against the US dollar since mid-2002 has probably helped greatly in flattening the Israeli CPI. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050715g.jpg" width="353"> <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050715h.jpg" width="353">

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<th scope="col" class="firstcol">% Changes; Yr/Yr calculated from NSA</th>
<th scope="col">June 2005</th>
<th scope="col">May 2005</th>
<th scope="col">Year/ Year</th>
December/December
</tr>
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<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
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<td class="firstcol">Consumer Prices: &quot;General Index&quot; (SA)</td>
<td>0.0</td>
<td>0.2</td>
<td>0.3</td>
<td>1.2</td>
<td>-1.9</td>
<td>6.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Memo:&nbsp; Exchange Rate: Shekels/US$</td>
<td>4.4849</td>
<td>4.3737</td>
<td>4.5166</td>
<td>4.4820</td>
<td>4.5483</td>
<td>4.7378</td>
</tr>
<tr>
<td class="firstcol">Wholesale Prices (NSA)</td>
<td>-0.4</td>
<td>0.6</td>
<td>5.1</td>
<td>7.6</td>
<td>3.3</td>
<td>6.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; ex Fuel&nbsp; (NSA)</td>
<td>0.4</td>
<td>0.2</td>
<td>4.1</td>
<td>5.2</td>
<td>2.9</td>
<td>5.6</td>
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Israel's monthly price data were reported today by the Central Bureau of Statistics. The June consumer price index, like that in the US, was flat. It had risen 0.2% in May. The year-on-year rate is a mere 0.3%. For wholesale prices, [...]

Israel's Consumer Prices Are Flat in June; Wholesale Prices Flat, but Up More Than 5% in Year

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.

250501Z2.jpg

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

250501Z3.jpg

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

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

250501Z5.jpg

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

250501Z6.jpg

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

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Charts of the Week: Tariff Truce, Tenuous Trust

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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

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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: July 2005

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Chain Store Sales Again Higher

NAHB Housing Market Index Fell from Record High

Housing Starts Unchanged, Single Family Slipped

Housing Starts Unchanged, Single Family Slipped

Ukraine Retail Trade Grows, but Production Turns Weaker

ECRI Leading Economic Index Improved Slightly

ECRI Leading Economic Index Improved Slightly

Israel's Consumer Prices Are Flat in June; Wholesale Prices Flat, but Up More Than 5% in Year