Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720c.jpg" width="353">
The number of mass layoff events rose 2.1% during June. Though the number remained down sharply from last year, for all of 2Q the number of events rose 1.6% from 1Q 2006, the first q/q increase in nearly two years.
During the last ten years there has been a (negative) 85% correlation between the three month average level of layoff announcements and the y/y change in payroll employment.
The number of persons affected in June by mass layoffs jumped 8.9% and rose 2.8% during 2Q. Layoffs in the transportation equipment sector (+29.0% y/y) dominated the rise in June and more than doubled m/m. Less transportation, the number of affected persons rose 1.6% (-10.6% y/y).
Increased layoffs in the apparel (69.8% y/y), machinery (35.1% y/y), furniture (153.0% y/y), textile mill, computer, metals and chemicals industries were damped by declines in electrical equipment (-76.0% y/y) and wholesale trade (-55.9% y/y).
The Mass Layoff Statistics (MLS) program collects reports on mass layoff actions that result in workers being separated from their jobs. Monthly mass layoff numbers are from establishments which have at least 50 initial claims for unemployment insurance (UI) filed against them during a 5-week period.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Mass Layoffs</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">All US Industries (# Events, SA)</td>
<td>1,097</td>
<td>1,074</td>
<td>-7.3%</td>
<td>15,699</td>
<td>15,926</td>
<td>19,220</td>
</tr>
<tr>
<td class="firstcol">Total (# Persons, SA)</td>
<td>119,662</td>
<td>109,858</td>
<td>-6.8%</td>
<td>1,722,452</td>
<td>1,591,081</td>
<td>1,946,548</td>
</tr>
</tbody>
</table>
</body>
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The number of mass layoff events rose 2.1% during June. Though the number remained down sharply from last year, for all of 2Q the number of events rose 1.6% from 1Q 2006, the first q/q increase in nearly two years. During the last ten [...]

Mass Layoffs Rose in June and During 2Q

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720d.jpg" width="353">
The Conference Board reported that the composite index of leading economic indicators ticked up 0.1% in June, the first increase in three months, and followed an unrevised 0.6% decline the prior month. Consensus expectations had been for a 0.2% increase.
Six month growth in the leaders fell to -0.6%, its weakest since early 2001. During the last ten years there has been a 43% correlation between the six-month change in the leading indicators and quarterly growth in real GDP.
The breadth of one month gain amongst the 10 components of the leading index improved sharply to 65% in June but over a six month span only 50% of the index components rose, the weakest breadth of six month gain since early 2005. In June, positive contributions from the money supply, consumer expectations, hours worked &amp; jobless claims were offset by lower stock prices, vendor performance and building permits .<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720e.jpg" width="353">
The method of calculating the contribution to the leading index from the spread between 10 year Treasury securities and the Fed funds rate has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators rose 0.2% and during the last one &amp; six months all of the coincident series rose. Over the last ten years there has been a 69% correlation between the change in the coincident indicators and real GDP growth.
The lagging indicators jumped 0.6%. During June nearly all of the series&#39; components rose but during the last six months 42.9% rose. The ratio of coincident to lagging indicators, a measure of actual economic performance versus excess, fell for the third consecutive month.
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.

<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/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">6 Month Chg., AR</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>0.1%</td>
<td>-0.6%</td>
<td>-0.6%</td>
<td>2.3%</td>
<td>7.4%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.1%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.6%</td>
<td>0.2%</td>
<td>3.1%</td>
<td>3.5%</td>
<td>0.0%</td>
<td>-0.0%</td>
</tr>
</tbody>
</table>
</body>
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The Conference Board reported that the composite index of leading economic indicators ticked up 0.1% in June, the first increase in three months, and followed an unrevised 0.6% decline the prior month. Consensus expectations had been [...]

Leading Economic Indicators Nudged Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720a.jpg" width="353">
Initial claims for unemployment insurance fell 30,000 to 304,000 last week after an upwardly revised 20,000 increase during the prior week. Consensus expectations had been for a lesser decline to 320,000 claims.
The figure covers the survey period for July nonfarm payrolls and initial claims were down 5,000 (-1.6%) from the June period. During the last ten years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720b.jpg" width="353">
The w/w decline reversed all of the increases during the prior four weeks and dropped claims to the lowest level in one month. The four-week moving average of initial claims fell to 316,750 (-1.6% y/y).
Continuing claims for unemployment insurance jumped 85,000 following a deepened 28,000 decline the previous week. Claims were at the highest level since February.
The insured rate of unemployment held steady at 1.9% where it has been since February.
Robust estimation and monetary policy with unobserved structural change from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/review/2006/er1-16.pdf"> here</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">07/15/06</th>
<th scope="col">07/08/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>304</td>
<td>334</td>
<td>-3.5%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,505</td>
<td>-3.5%</td>
<td>2,663</td>
<td>2,923</td>
<td>3,530</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance fell 30,000 to 304,000 last week after an upwardly revised 20,000 increase during the prior week. Consensus expectations had been for a lesser decline to 320,000 claims. The figure covers the [...]

Initial Claims for Unemployment Insurance At One Month Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720f.jpg" width="353">
The Philadelphia Federal Reserve Bank&#39;s July Index of General Business Conditions in the manufacturing sector dropped to 6.0 from an unrevised 13.1 during June. The decline exceeded Consensus expectation for a drop to 12.4.
The July decline was to the lowest level since this past January.
During the last ten years there has been a 65% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 49% correlation with q/q growth in real GDP.
The lower index reflected declines in the sub indexes of new orders, shipments, unfilled orders and delivery times. Moving in the other direction, the employment index advanced to its highest level in three months. During the last ten years there has been a 75% correlation between the employment index and the three month growth in factory payrolls.
The business conditions index reflects a separate survey question, not the sub indexes.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720g.jpg" width="353">
The prices paid index rose moderately. During the last ten years there has been a 76% correlation between the prices paid index and the three month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months about doubled m/m in July but at 15.4 remained below the 2Q average. Expectations for employment fell m/m and the index also was below the 2Q average.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0706.html">here</a>.
The minutes to the latest Federal Open Market Committee meeting can be found <a href="http://www.federalreserve.gov/FOMC/MINUTES/20060629.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>6.0</td>
<td>13.1</td>
<td>9.6</td>
<td>12.4</td>
<td>28.0</td>
<td>10.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>50.3</td>
<td>48.7</td>
<td>31.8</td>
<td>43.5</td>
<td>51.2</td>
<td>16.8</td>
</tr>
</tbody>
</table>
Leading Economic Indicators Nudged Higher 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 20, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720d.jpg" width="353">
The Conference Board reported that the composite index of leading economic indicators ticked up 0.1% in June, the first increase in three months, and followed an unrevised 0.6% decline the prior month. Consensus expectations had been for a 0.2% increase.
Six month growth in the leaders fell to -0.6%, its weakest since early 2001. During the last ten years there has been a 43% correlation between the six-month change in the leading indicators and quarterly growth in real GDP.
The breadth of one month gain amongst the 10 components of the leading index improved sharply to 65% in June but over a six month span only 50% of the index components rose, the weakest breadth of six month gain since early 2005. In June, positive contributions from the money supply, consumer expectations, hours worked &amp; jobless claims were offset by lower stock prices, vendor performance and building permits .<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720e.jpg" width="353">
The method of calculating the contribution to the leading index from the spread between 10 year Treasury securities and the Fed funds rate has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators rose 0.2% and during the last one &amp; six months all of the coincident series rose. Over the last ten years there has been a 69% correlation between the change in the coincident indicators and real GDP growth.
The lagging indicators jumped 0.6%. During June nearly all of the series&#39; components rose but during the last six months 42.9% rose. The ratio of coincident to lagging indicators, a measure of actual economic performance versus excess, fell for the third consecutive month.
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.

<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/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">6 Month Chg., AR</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>0.1%</td>
<td>-0.6%</td>
<td>-0.6%</td>
<td>2.3%</td>
<td>7.4%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.1%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.6%</td>
<td>0.2%</td>
<td>3.1%</td>
<td>3.5%</td>
<td>0.0%</td>
<td>-0.0%</td>
</tr>
</tbody>
</table>
Mass Layoffs Rose in June and During 2Q 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 20, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720c.jpg" width="353">
The number of mass layoff events rose 2.1% during June. Though the number remained down sharply from last year, for all of 2Q the number of events rose 1.6% from 1Q 2006, the first q/q increase in nearly two years.
During the last ten years there has been a (negative) 85% correlation between the three month average level of layoff announcements and the y/y change in payroll employment.
The number of persons affected in June by mass layoffs jumped 8.9% and rose 2.8% during 2Q. Layoffs in the transportation equipment sector (+29.0% y/y) dominated the rise in June and more than doubled m/m. Less transportation, the number of affected persons rose 1.6% (-10.6% y/y).
Increased layoffs in the apparel (69.8% y/y), machinery (35.1% y/y), furniture (153.0% y/y), textile mill, computer, metals and chemicals industries were damped by declines in electrical equipment (-76.0% y/y) and wholesale trade (-55.9% y/y).
The Mass Layoff Statistics (MLS) program collects reports on mass layoff actions that result in workers being separated from their jobs. Monthly mass layoff numbers are from establishments which have at least 50 initial claims for unemployment insurance (UI) filed against them during a 5-week period.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Mass Layoffs</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">All US Industries (# Events, SA)</td>
<td>1,097</td>
<td>1,074</td>
<td>-7.3%</td>
<td>15,699</td>
<td>15,926</td>
<td>19,220</td>
</tr>
<tr>
<td class="firstcol">Total (# Persons, SA)</td>
<td>119,662</td>
<td>109,858</td>
<td>-6.8%</td>
<td>1,722,452</td>
<td>1,591,081</td>
<td>1,946,548</td>
</tr>
</tbody>
</table>
Initial Claims for Unemployment Insurance At One Month Low 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 20, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720a.jpg" width="353">
Initial claims for unemployment insurance fell 30,000 to 304,000 last week after an upwardly revised 20,000 increase during the prior week. Consensus expectations had been for a lesser decline to 320,000 claims.
The figure covers the survey period for July nonfarm payrolls and initial claims were down 5,000 (-1.6%) from the June period. During the last ten years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720b.jpg" width="353">
The w/w decline reversed all of the increases during the prior four weeks and dropped claims to the lowest level in one month. The four-week moving average of initial claims fell to 316,750 (-1.6% y/y).
Continuing claims for unemployment insurance jumped 85,000 following a deepened 28,000 decline the previous week. Claims were at the highest level since February.
The insured rate of unemployment held steady at 1.9% where it has been since February.
Robust estimation and monetary policy with unobserved structural change from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/review/2006/er1-16.pdf"> here</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">07/15/06</th>
<th scope="col">07/08/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>304</td>
<td>334</td>
<td>-3.5%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,505</td>
<td>-3.5%</td>
<td>2,663</td>
<td>2,923</td>
<td>3,530</td>
</tr>
</tbody>
</table>
Egypt's Current Account Surplus Boosted by Large Canal Tolls, Tourism and Petroleum; Direct Investment Gains 
by <a href="/comment/Stone.html">Carol Stone</a> July 20, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720h.jpg" width="353">
The Central Bank of Egypt today reported its balance of payments array for Q1 2006. The current account surplus increased to $934 million from $801 million in Q4 2005, although it was a bit smaller than Q1 2005 at $995 billion. For 2005 as a whole, Egypt had a current account surplus of $2.2 billion.
These numbers are small in absolute size. For instance, the balance on services in the US was $66.0 billion last year, nearly 9 times larger than Egypt&#39;s $7.6 billion. But some aspects of these Egyptian figures are quite fascinating and bear examination.
First, the current account itself shows a surplus. One frequently presumes that emerging market countries run perennial deficits and struggle constantly with debt and debt service issues. But presently, that situation is improving for Egypt. Its current account turned a surplus in its fiscal year 2002 (ended June 30, 2002) and has also achieved that every quarter since the quarterly data began in early 2004.
To be sure, the goods accounts are in deficit, which totaled $11.1 billion in calendar 2005 and continued with a $2.2 billion shortfall in Q1 2006. But Egypt has some oil and, as seen in the table below, is benefiting from the high prices with an increasing surplus in petroleum. This, of course, limits the overall deficit in goods.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720i.jpg" width="353">
The services accounts are important for Egypt. It collected nearly $3.5 billion last year in tolls from the Suez Canal, a strategic and lucrative asset for that nation. Egypt is able, too, to benefit from its ancient history as a tourist attraction, bringing a net of more than $5 billion to the country last year in travel accounts.
Lastly among the current accounts, the country receives substantial amounts of transfers. We in the US look at our transfer item as a drain, but sizable amounts of income go to Egypt, apparently from individuals working abroad. Total net transfers were $5.7 billion in 2005, with the portion from private sources amounting to almost exactly $5.0 billion.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060720j.jpg" width="353">
On the capital and financial account side, the most outstanding item is the recent huge increase in direct investment in Egypt. As seen below, capital inflows for investment projects more than doubled in 2005 to $5.3 billion from $2.0 billion in 2004. The Q1 amount continues the 2005 pace. Information from news sources indicates that these funds cover a wide variety of activities, including manufacturing and the rapidly growing tourism sector. Recently announced projects include a major expansion of port facilities at Suez, so these flows are likely to remain sizable for a considerable period. At the same time, bank lending patterns indicate a persistent net outflow of capital from that sector.
All told, Egypt&#39;s balance of payments accounts are running a positive overall balance, as services, transfers and some capital accounts more than offset a deficit on goods trade. As a result, Egypt&#39;s reserves are increasing, in Q1 by $713 million, following a substantial $6.3 billion in 2005.

<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/EMERGEMA/@M1/@M1.htm">Egypt: Mil. US$</a></th>
<th scope="col">Q1 2006</th>
<th scope="col">Q4 2005</th>
<th scope="col">Q3 2005</th>
<th scope="col">Q1 2005</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account</td>
<td>934</td>
<td>801</td>
<td>327</td>
<td>995</td>
<td>2,207</td>
<td>3,236</td>
</tr>
<tr>
<td class="firstcol">Balance on Goods</td>
<td>-2,222</td>
<td>-2,663</td>
<td>-1,028</td>
<td>-2,128</td>
<td>-11,127</td>
<td>-9,312</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Petroleum</td>
<td>1,518</td>
<td>1,188</td>
<td>985</td>
<td>638</td>
<td>2,562</td>
<td>1,730</td>
</tr>
<tr>
<td class="firstcol">Balance on Services</td>
<td>1,780</td>
<td>2,074</td>
<td>2,170</td>
<td>1,530</td>
<td>7,586</td>
<td>7,982</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Suez Canal</td>
<td>862</td>
<td>891</td>
<td>871</td>
<td>847</td>
<td>3,467</td>
<td>3,076</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Travel (Net)</td>
<td>1,257</td>
<td>1,200</td>
<td>1,928</td>
<td>994</td>
<td>5,222</td>
<td>4,868</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Transfers</td>
<td>1,376</td>
<td>1,390</td>
<td>1,355</td>
<td>1,593</td>
<td>5,748</td>
<td>4,567</td>
</tr>
<tr>
<td class="firstcol">Net Direct Investment</td>
<td>1,296</td>
<td>1,320</td>
<td>1,928</td>
<td>1,214</td>
<td>5,284</td>
<td>1,998</td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Reserves</td>
<td>713</td>
<td>740</td>
<td>1,812</td>
<td>2,538</td>
<td>6,316</td>
<td>680</td>
</tr>
</tbody>
</table>
</body>
</html>

The Philadelphia Federal Reserve Bank's July Index of General Business Conditions in the manufacturing sector dropped to 6.0 from an unrevised 13.1 during June. The decline exceeded Consensus expectation for a drop to 12.4. The July [...]

Philadelphia Fed Business Activity Index Lowest Since January

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/060719h.jpg" width="353">
As the following charts and table illustrate, there&#39;s been something of a building boom in South Africa. Over the last few months, however, some areas of construction have been slowing.
Statistics South Africa reported today that total building plans passed declined in May to ZAR 3.92 billion from ZAR 4.00 billion in April (seasonally adjusted, 2000 prices. &quot;ZAR&quot; is the ISO code for the South African Rand). This amount is 3.2% below May 2005. This collection of data begins in 2000 and remains relatively erratic, so caution should be used in assessing just one month&#39;s figures. Indeed, Statistics South Africa highlights 3-month moving averages and year-to-date data in its press releases.
<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719i.jpg" width="353">By type, there is an emerging downtrend in residential construction, while nonresidential building remains strong. Additions and alterations have been fairly steady. In the residential sector, small houses (under 80 square meters, about 861 square feet) are quite vigorous, with a 6-month moving average ending May up 70% from a year ago. Larger houses, though, are trailing off: in May the 6-month average was up 9.2% year-on-year, but a 3-month average was up only 4.1%.
Within the nonresidential sector, data are available not seasonally adjusted in nominal terms for offices, shopping centers, and industrial and warehouse structures. Perhaps in line with the residential sector&#39;s general slowing, shopping space construction plans have been flat now for about six months. Offices and banks, though, are still advancing, and industrial and warehousing facilities were up in May by nearly 63% from a year ago, based on 3-month average figures. This is large, but considerably more moderate than the 100%+ pace that characterized the latter part of 2005.
These are building &quot;plans&quot;. With the recent surge in plans, many projects, especially nonresidential buildings will take some time for the construction. Thus, buildings completed, a separate measure, is much smaller than the plans figure. In May, a 3-month average of that total (seasonally adjusted) was ZAR 2.12 billion, up 23.9% from May 2005.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGEMA/@M2/@M210/@M210.HTM">South Africa</a><a href="http://www.haverselect.com/dlx/EMERGEMA/@M2/@M210/@M210.HTM">:</a>&nbsp; SA, Mil.2000.Rand</th>
<th scope="col">May 2006</th>
<th scope="col">Apr 2006</th>
<th scope="col">Mar 2006</th>
<th scope="col">Year Ago</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Building Plans Passed</td>
<td>3925</td>
<td>4001</td>
<td>3886</td>
<td>3996</td>
<td>3912</td>
<td>2707</td>
<td>2013</td>
</tr>
<tr class="odd">
<td class="firstcol">Residential</td>
<td>2006</td>
<td>2048</td>
<td>2227</td>
<td>2403</td>
<td>2230</td>
<td>1624</td>
<td>1146</td>
</tr>
<tr>
<td class="firstcol">Nonresidential</td>
<td>847</td>
<td>881</td>
<td>613</td>
<td>591</td>
<td>651</td>
<td>395</td>
<td>334</td>
</tr>
<tr class="odd">
<td class="firstcol">Additions &amp; Alterations</td>
<td>1072</td>
<td>1072</td>
<td>1046</td>
<td>1002</td>
<td>1031</td>
<td>688</td>
<td>533</td>
</tr>
<tr>
<td class="firstcol">Buildings Completed</td>
<td>1915</td>
<td>2064</td>
<td>2371</td>
<td>1884</td>
<td>1943</td>
<td>1417</td>
<td>1147</td>
</tr>
</tbody>
</table>
</body>
</html>

As the following charts and table illustrate, there's been something of a building boom in South Africa. Over the last few months, however, some areas of construction have been slowing. Statistics South Africa reported today that [...]

Building Plans Moderate in South Africa, but Recent Strength Puts Plans Well Ahead of Completions

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719g.jpg" width="353">
A 4.6% decline in the total number of mortgage applications last week reversed most of the increases during the prior two weeks and left applications early in July about even (+0.2%) with the June average which fell 1.5% from May.
Purchase applications fell a hard 6.2% w/w and left applications in July only 1.5% above the June average which fell 0.8% from May.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance fell 1.6% for the second week and the early July average was 2.2% below June. Refis during all of June fell 3.1% from the May average.
The effective interest rate on a conventional 30-year mortgage slipped w/w to 6.96% and the rate on 15-year financing also fell to 6.63%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<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/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">07/14/06</th>
<th scope="col">07/07/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>540.8</td>
<td>566.8</td>
<td>-32.5%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>398.5</td>
<td>425.0</td>
<td>-18.5%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,377.6</td>
<td>1,400.5</td>
<td>-47.4%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
</body>
</html>

A 4.6% decline in the total number of mortgage applications last week reversed most of the increases during the prior two weeks and left applications early in July about even (+0.2%) with the June average which fell 1.5% from May. [...]

Mortgage Applications Confirm Housing Soft in July

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719e.jpg" width="353">
The July Composite Housing Market Index at 39 was at its lowest level since late 1991. The index compiled by the National Association of Home Builders (NAHB) fell from 42 in June and compared to Consensus expectations for a reading of 41.
During the last twenty years there has been a 75% correlation between the y/y change in the Composite Index and the change in single family housing starts.
The sub indexes covering current sales of single family homes (-43.4% y/y) and sales in the next six months (-40.3% y/y) were both down sharply m/m.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719f.jpg" width="353">
An index of the traffic of prospective home buyers fell even further from a dried up June level and was down 50.9% y/y.
Housing markets around the country were weak in July. The index for the Northeast off 47.8% y/y, in the Midwest the index fell 56.3% y/y, out West it was down 42.0% y/y and in the South it fell 32.4% y/y.
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;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>39</td>
<td>42</td>
<td>70</td>
<td>67</td>
<td>68</td>
<td>64</td>
</tr>
</tbody>
</table>
</body>
</html>

The July Composite Housing Market Index at 39 was at its lowest level since late 1991. The index compiled by the National Association of Home Builders (NAHB) fell from 42 in June and compared to Consensus expectations for a reading of [...]

NAHB Housing Market Index Lowest Since 1991

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719c.jpg" width="353">
Housing starts fell 5.3% last month to 1.850M units, a decline that outpaced Consensus expectations for a lesser drop to 1.90M starts. For 2Q starts averaged 1.878M, down 11.5% from 1Q and it was the lowest quarterly level since mid 2003.
Total housing starts in June were 18.3% below the peak this past January.
Single-family starts fell 6.5% last month to 1.486M, a level which was 18.1% below the January peak. During 2Q single family starts fell 12.2% from the prior quarter.
Multi family starts rose a slight 0.3% in June but for 2Q fell 8.2%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719d.jpg" width="353">
By region, single family housing starts were the weakest last month in the Northeast where starts plummeted by one third (-37.8% y/y) to the lowest level in ten years. In the South single family starts fell 5.5% (-11.2% y/y) and in the West single family starts fell 5.9% (-11.0% y/y). In the Midwest starts rose a modest 3.6% during June but were down 13.3% y/y.
Building permits fell for the fifth consecutive month and were down 16.9% from last year&#39;s peak.
Today&#39;s Semiannual Monetary Policy Report to the Congress by Chairman Ben S. Bernanke is available <a href="http://www.federalreserve.gov/boarddocs/hh/2006/july/testimony.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,850</td>
<td>1,953</td>
<td>-11.0%</td>
<td>2,073</td>
<td>1,950</td>
<td>1,854</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,486</td>
<td>1,590</td>
<td>-13.8%</td>
<td>1,719</td>
<td>1,604</td>
<td>1,505</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>364</td>
<td>363</td>
<td>2.8%</td>
<td>354</td>
<td>345</td>
<td>349</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,862</td>
<td>1,946</td>
<td>-14.9%</td>
<td>2,159</td>
<td>2,058</td>
<td>1,888</td>
</tr>
</tbody>
</table>
</body>
</html>

Housing starts fell 5.3% last month to 1.850M units, a decline that outpaced Consensus expectations for a lesser drop to 1.90M starts. For 2Q starts averaged 1.878M, down 11.5% from 1Q and it was the lowest quarterly level since mid [...]

June Housing Starts Fell More Than Expected

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

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

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Andrew Cates

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

250501Z1.jpg

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

250501Z2.jpg

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

250501Z3.jpg

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

250501Z4.jpg

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

250501Z5.jpg

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

250501Z6.jpg

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

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Charts of the Week: Tariff Truce, Tenuous Trust

250501J5.jpg

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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%.

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

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

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

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

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

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

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

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

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

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

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

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

Economy in Brief: July 2006

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