Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119c.jpg" width="353">
Housing starts rose 10.9% in December to 2.004M, were upwardly revised for November and beatConsensus expectations for 1.91M starts. Starts for all of last year of 1.948M were the most since 2.001M homes were started in 1978.
Higher single-family starts led the gain in December with a 13.1% m/m rise to 1.678M which more than reversed the sharp decline in November, capping off a record year. Single family starts of 1.601M in 2004 were a 6.4% improvement on the old record set the year prior.
Multi family starts also edged higher in December but just modestly. For the full year they ended slightly below the 2003 average.
Building permits slipped in December by 0.3% m/m to 2.021M after an upwardly revised gain in November.

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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">Dec</th>
<th scope="col">Nov</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 class="odd">
<td class="firstcol">Total</td>
<td>2,004</td>
<td>1,807</td>
<td>-3.0%</td>
<td>1,948</td>
<td>1,853</td>
<td>1,7 10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,678</td>
<td>1,483</td>
<td>1.3%</td>
<td>1,601</td>
<td>1,505</td>
<td>1,3 63</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>3 26</td>
<td>324</td>
<td>-20.5%</td>
<td>346</td>
<td>348</td>
<td>347</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,021</td>
<td>2,028</td>
<td>2.1%</td>
<td>1,996</td>
<td>1,8 89</td>
<td>1,749</td>
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</tbody>
</table>
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Housing starts rose 10.9% in December to 2.004M, were upwardly revised for November and beatConsensus expectations for 1.91M starts. Starts for all of last year of 1.948M were the most since 2.001M homes were started in 1978. Higher [...]

Housing Starts Firm: 2004 The Highest Since 1978

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119a.jpg" width="353">
Consumer Prices (CPI-U) declined 0.1% in December, the first decline since July. Consensus expectations had been for no change. During 2004 prices logged the largest increase in some time. December to December, the 3.4% gain was the strongest since 2000 and the 2.7% rise for the whole year was the largest since 2001.
Prices less food &amp; energy rose an expected 0.2% in December for the third consecutive month. Again, 2004 was the strongest year for &quot;core&quot; pricing in years; the 2.3% gain December to December the largest since 2001 and the 2.7% gain for the full year was the strongest since 1996. The firming was, however, not due to stronger price increases but to less deflation of goods prices.
&quot;Core&quot; commodities price inflation weakened in December as lower prices for furniture (-0.5% y/y), apparel (-0.4% y/y) and computers (-13.2% y/y) offset higher tobacco prices. The 0.9% full year decline in core goods prices was the third in a row but it was less of a fall than during the prior two years.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119b.jpg" width="353">
Services prices less energy also were tame last month, rising the same 0.2% as during the prior two. The full year increase of 2.8% was the weakest since 1999 as lower public transportation prices and lower communication prices offset faster gains in prices for shelter (2.7% y/y), medical care services (5.0% y/y) and tuition (7.1% y/y).
Lower energy prices pulled the CPI down last month, led lower by gasoline prices which fell 3.7% (+18.1% y/y) and lower fuel oil prices ((+15.5% y/y). Natural gas prices rose slightly (+3.8% y/y).
Food prices were unchanged in December but the full year gain of 3.5% was the strongest since 1990.
The chained CPI, which adjusts for shifts in the mix of consumer purchases, fell 0.4% in December. Similar to the PCE price deflator, core chain prices also fell last month and for the full year firmed moderately versus 2003.

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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/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</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 class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>3.4%</td>
<td>2.7%</td>
<td>2.3%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.3%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.6%</td>
<td>-0.9%</td>
<td>-2.0%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.9%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>-1.8%</td>
<td>0.2%</td>
<td>16.5%</td>
<td>10.9%</td>
<td>12.2%</td>
<td>-5.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.0%</td>
<td>0.2%</td>
<td>2.7%</td>
<td>3.5%</td>
<td>2.1%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a></td>
<td>-0.4%</td>
<td>0.0%</td>
<td>2.9%</td>
<td>2.2%</td>
<td>1.9%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>-0.3%</td>
<td>0.0%</td>
<td>1.9%</td>
<td>1.4%</td>
<td>1.1%</td>
<td>1.9%</td>
</tr>
</tbody>
</table>
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Consumer Prices (CPI-U) declined 0.1% in December, the first decline since July. Consensus expectations had been for no change. During 2004 prices logged the largest increase in some time. December to December, the 3.4% gain was the [...]

December CPI Fell. 2004 Average Raised by Less Goods Price Deflation

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119a.jpg" width="353">
Consumer Prices (CPI-U) declined 0.1% in December, the first decline since July. Consensus expectations had been for no change. During 2004 prices logged the largest increase in some time. December to December, the 3.4% gain was the strongest since 2000 and the 2.7% rise for the whole year was the largest since 2001.
Prices less food &amp; energy rose an expected 0.2% in December for the third consecutive month. Again, 2004 was the strongest year for &quot;core&quot; pricing in years; the 2.3% gain December to December the largest since 2001 and the 2.7% gain for the full year was the strongest since 1996. The firming was, however, not due to stronger price increases but to less deflation of goods prices.
&quot;Core&quot; commodities price inflation weakened in December as lower prices for furniture (-0.5% y/y), apparel (-0.4% y/y) and computers (-13.2% y/y) offset higher tobacco prices. The 0.9% full year decline in core goods prices was the third in a row but it was less of a fall than during the prior two years.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119b.jpg" width="353">
Services prices less energy also were tame last month, rising the same 0.2% as during the prior two. The full year increase of 2.8% was the weakest since 1999 as lower public transportation prices and lower communication prices offset faster gains in prices for shelter (2.7% y/y), medical care services (5.0% y/y) and tuition (7.1% y/y).
Lower energy prices pulled the CPI down last month, led lower by gasoline prices which fell 3.7% (+18.1% y/y) and lower fuel oil prices ((+15.5% y/y). Natural gas prices rose slightly (+3.8% y/y).
Food prices were unchanged in December but the full year gain of 3.5% was the strongest since 1990.
The chained CPI, which adjusts for shifts in the mix of consumer purchases, fell 0.4% in December. Similar to the PCE price deflator, core chain prices also fell last month and for the full year firmed moderately versus 2003.

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</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/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</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 class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>3.4%</td>
<td>2.7%</td>
<td>2.3%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.3%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.6%</td>
<td>-0.9%</td>
<td>-2.0%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.9%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>-1.8%</td>
<td>0.2%</td>
<td>16.5%</td>
<td>10.9%</td>
<td>12.2%</td>
<td>-5.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.0%</td>
<td>0.2%</td>
<td>2.7%</td>
<td>3.5%</td>
<td>2.1%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a></td>
<td>-0.4%</td>
<td>0.0%</td>
<td>2.9%</td>
<td>2.2%</td>
<td>1.9%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>-0.3%</td>
<td>0.0%</td>
<td>1.9%</td>
<td>1.4%</td>
<td>1.1%</td>
<td>1.9%</td>
</tr>
</tbody>
</table>
Housing Starts Firm: 2004 The Highest Since 1978 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 19, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119c.jpg" width="353">
Housing starts rose 10.9% in December to 2.004M, were upwardly revised for November and beatConsensus expectations for 1.91M starts. Starts for all of last year of 1.948M were the most since 2.001M homes were started in 1978.
Higher single-family starts led the gain in December with a 13.1% m/m rise to 1.678M which more than reversed the sharp decline in November, capping off a record year. Single family starts of 1.601M in 2004 were a 6.4% improvement on the old record set the year prior.
Multi family starts also edged higher in December but just modestly. For the full year they ended slightly below the 2003 average.
Building permits slipped in December by 0.3% m/m to 2.021M after an upwardly revised gain in November.

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</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">Dec</th>
<th scope="col">Nov</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 class="odd">
<td class="firstcol">Total</td>
<td>2,004</td>
<td>1,807</td>
<td>-3.0%</td>
<td>1,948</td>
<td>1,853</td>
<td>1,7 10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,678</td>
<td>1,483</td>
<td>1.3%</td>
<td>1,601</td>
<td>1,505</td>
<td>1,3 63</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>3 26</td>
<td>324</td>
<td>-20.5%</td>
<td>346</td>
<td>348</td>
<td>347</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,021</td>
<td>2,028</td>
<td>2.1%</td>
<td>1,996</td>
<td>1,8 89</td>
<td>1,749</td>
</tr>
</tbody>
</table>
Initial Claims for Unemployment Insurance Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 19, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119d.jpg" width="353">
With a 48,000 w/w decline to 319,000 last week, initial claims for unemployment insurance reversed all of the gains during the prior two weeks and fell to the lowest level in a month. Consensus expectations had been for 345,000 claims.
The latest figure is for the survey period for January nonfarm payrolls and it was 12,000 (3.6%) below the December period.
The four week moving average of initial claims fell to 341,000 (-4.1% y/y).
During the last ten years there has been a (negative) 82% correlation between the level of initial claims and the y/y change in payroll employment.
Continuing claims for unemployment insurance rose 47,000 and reversed just some of the huge 209,000 drop the week prior.
The insured rate of unemployment was stable at 2.1%.

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<thead>
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<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">01/15/05</th>
<th scope="col">01/08/05</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">Initial Claims</td>
<td>319</td>
<td>367</td>
<td>-10.6%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,694</td>
<td>-15.4%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
Chain Store Sales Slipped Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 19, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119e.jpg" width="353">
Chain store sales fell another 0.9% last week ion top of the 0.6% decline the week earlier, according to the International Council of Shopping Centers (ICSC)-UBS survey.
Despite the weekly declines, sales in January are 1.6% ahead of the December average.
During the last ten years there has been a 58% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department.
The leading indicator of chain store sales from ICSC dropped for the third consecutive week (-1.4% y/y).
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%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">01/15/05</th>
<th scope="col">01/08/05</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>443.9</td>
<td>447.9</td>
<td>4.1%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
Mortgage Applications Rebound 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 19, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119f.jpg" width="353">
Mortgage applications rebounded 16.2% last week following three weeks of decline according to the Mortgage Bankers Association (MBA) Survey.
Refi&#39;s led the gain with a 19.1% rise and so far this year are 2.4% higher than in December.
Purchase applications also rose 14.0% w/w. Nevertheless, the level of purchase applications were 10.6% below the December average which fell 0.3% from November. During the last ten years there has been a 59% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The effective interest rate on a conventional 30-year mortgage slipped to 5.89% versus an average 6.05% during 2004 and 5.95% in December. The effective rate on a 15-year mortgage also fell to 5.44% last week.
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">01/14/05</th>
<th scope="col">01/07/05</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 class="odd">
<td class="firstcol">Total Market Index</td>
<td>682.9</td>
<td>587.8</td>
<td>-25.5%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>448.1</td>
<td>393.1</td>
<td>-10.7%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,048.6</td>
<td>1,720.5</td>
<td>-38.4%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
</body>
</html>

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118e.jpg" width="353">
The Bank of Canada released the findings of its Winter 2004-5 Business Outlook Survey today. The Survey is one of the inputs used by the Bank in its determinations of monetary policy that will be discussed at its next interest rate setting meeting on January 25. The Bank raised its overnight target rate on September 8, 2004 to 2.25% from 2% and on October 19 to 2.50% where it has since remained.
Business is still optimistic, but less so than in the Fall survey. The balance of firms who expect increases over those who expect declines in future sales growth fell from 21.8% in the third quarter to 7.9% in the fourth quarter.
The Survey revealed that more firms expect to encounter some difficulty in meeting unexpected increases in demand, although fewer firms expect significant difficulty. The percent balance of those firms expecting some difficulty in meeting unexpected demand rose from 33% in the third quarter to 38% in the fourth quarter. While the percent balance expecting significant difficulty declined from 10% to 7% in the same period, the trend in those expecting significant difficulty has definitely been rising, though irregularly, since the last half of 2001. In all, the excess of firms expecting difficulty in meeting unexpected demand was 45%, up from 43% in the previous quarter. The balance of firms expecting to encounter some difficulty in meeting demand is a reasonably good indicator of business capacity utilization, as shown in the attached chart.
With increased capacity utilization, it is not surprising that business expects to increase employment and expenditures on machinery and equipment In the latest survey, the balance of firms expecting to increase machinery and equipment expenditures rose from 16.8% to 21.8% and the balance of firms expecting to increase employment rose from 32.7% to 37.6% even though the balance of firms experiencing a labor shortage fell from 44% to 36%
While the increase in the balance of firms expecting difficulty in meeting demand suggests an increase in inflationary pressures, the Survey showed a lessening of inflationary pressure from business pricing expectations. There was a significant decline in the balance of firms experiencing a decline in input prices--due, no doubt, to the rising Canadian dollar-- and an even larger decline in the balance of firms expecting to raise their output prices. The balance expecting a decline in input prices fell 22.8 percentage points and those expecting to raise output prices fell 24.8 percentage points from the Fall to the Winter survey. With regard to general inflation, the Survey revealed that the percentage of firms expecting inflation to be between 1 and 2% declined from 33% to 29% while the percentage of firms expecting inflation to between 2 and 3% rose from 54% to 56% and those expecting inflation of over 3% rose from 9% to12%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Percent Balance</th>
<th scope="col">Q4 04</th>
<th scope="col">Q3 O4</th>
<th scope="col">Q4 03</th>
<th scope="col">Q/Q Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">&nbsp;2004&nbsp;</th>
<th scope="col">&nbsp;2003&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2002&nbsp;</th>
<th scope="col">&nbsp; 2001&nbsp; &nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Future Sales Growth</td>
<td>7.9</td>
<td>21.8</td>
<td>32.0</td>
<td>13.9</td>
<td>24.1</td>
<td>17.9</td>
<td>22.0</td>
<td>21.8</td>
<td>-1.4</td>
</tr>
<tr>
<td class="firstcol">Investment in machinery and equipment</td>
<td>21.8</td>
<td>16.8</td>
<td>11.0</td>
<td>5.0</td>
<td>10.8</td>
<td>17.0</td>
<td>3.0</td>
<td>10.7</td>
<td>-2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Future employment</td>
<td>37.6</td>
<td>32.7</td>
<td>27.0</td>
<td>5.0</td>
<td>10.6</td>
<td>33.4</td>
<td>18.0</td>
<td>29.2</td>
<td>14.8</td>
</tr>
<tr>
<td class="firstcol">Some difficulty in meeting demand</td>
<td>38</td>
<td>33</td>
<td>32</td>
<td>5</td>
<td>6</td>
<td>34</td>
<td>33</td>
<td>33</td>
<td>31</td>
</tr>
<tr class="odd">
<td class="firstcol">Significant difficulty in meeting demand</td>
<td>7</td>
<td>10</td>
<td>6</td>
<td>-3</td>
<td>1</td>
<td>7</td>
<td>6</td>
<td>5</td>
<td>4</td>
</tr>
<tr>
<td class="firstcol">Labor shortage &quot;Yes&quot;</td>
<td>36</td>
<td>44</td>
<td>30</td>
<td>-8</td>
<td>6</td>
<td>38</td>
<td>33</td>
<td>37</td>
<td>42</td>
</tr>
<tr class="odd">
<td class="firstcol">Input prices</td>
<td>-22.8</td>
<td>-1.0</td>
<td>-4.0</td>
<td>-21.8</td>
<td>-18.8</td>
<td>-3.5</td>
<td>-6.5</td>
<td>7.7</td>
<td>-19.3</td>
</tr>
<tr>
<td class="firstcol">Output prices</td>
<td>-14.8</td>
<td>9.9</td>
<td>-19.0</td>
<td>-24.8</td>
<td>4.1</td>
<td>-3.2</td>
<td>-6.0</td>
<td>3.7</td>
<td>-13.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Inflation expectations</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 0%</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>1</td>
<td>1</td>
<td>2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; 1-2%</td>
<td>29</td>
<td>33</td>
<td>40</td>
<td>-4</td>
<td>-11</td>
<td>32</td>
<td>34</td>
<td>37</td>
<td>39</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 2-3%</td>
<td>56</td>
<td>54</td>
<td>54</td>
<td>2</td>
<td>2</td>
<td>53</td>
<td>55</td>
<td>54</td>
<td>49</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; over 3%</td>
<td>12</td>
<td>9</td>
<td>3</td>
<td>3</td>
<td>9</td>
<td>11</td>
<td>10</td>
<td>5</td>
<td>4</td>
</tr>
</tbody>
</table>
</body>
</html>

The Bank of Canada released the findings of its Winter 2004-5 Business Outlook Survey today. The Survey is one of the inputs used by the Bank in its determinations of monetary policy that will be discussed at its next interest rate [...]

Canadian Business Outlook Survey Provides Food for Thought for The Bank of Canada's Interest Rate Meeting on January 25

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118d.jpg" width="353">
The National Association of Home Builders&#39; (NAHB) Composite Housing Market Index fell slightly in January to 70 versus December&#39;s level of 71. Through 2004 the index drifted higher from 67 in 1Q to 69 in 2Q to 68 in 3Q to 70 in 4Q. The average of 68 rose 7.3% from 2003.
During the last twenty years, annual changes in the composite index had an 83% correlation with the change in new home sales. There&#39;s been an 86% correlation with the change in single family housing starts.
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.
Each of the components of the composite fell in January with the largest declines logged in home builders&#39; read of prospective activity in six months and in traffic of prospective buyers of new homes.
Visit the National Association of Home Builders using this <a href="http://www.nahb.org">link</a>.
Philadelphia Federal Reserve Bank President Anthony M Santomero&#39;s speech today on the economic outlook is available <a href="http://www.philadelphiafed.org/publicaffairs/speeches/2005_santomero1.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Jan &#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>7 0</td>
<td>71</td>
<td>68</td>
<td>68</td>
<td>64</td>
<td>61</td>
</tr>
</tbody>
</table>
</body>
</html>

The National Association of Home Builders' (NAHB) Composite Housing Market Index fell slightly in January to 70 versus December's level of 71. Through 2004 the index drifted higher from 67 in 1Q to 69 in 2Q to 68 in 3Q to 70 in 4Q. [...]

NAHB Housing Market Index Off

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118b.jpg" width="353">
The 4Q&#39;04 Composite Business Index published by the Manufacturers&#39; Alliance/MAPI fell to 70 from 75 the prior quarter. Despite moderate declines both last quarter and in 3Q, the average level for 2004 set a series&#39; record indicating sharp improvement in US factory sector output.
Since 1992 there has been a 68% correlation between the Composite Index Level and quarterly growth in factory sector output.
The current orders index fell modestly to 89 but the average of 91 for 2004 by far set a record. The export orders index for 4Q moved to a new record.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118c.jpg" width="353">
The profit margins index likewise moved lower but the annual level in 2004 set a new record.Capital spending intentions for the coming year moved higher and since 1992 there has been a 75% correlation between the capital spending index a y/y growth in business investment in equipment &amp; software.
For the latest press release from the MAPI click <a href="http://www.mapi.net/html/prelease.cfm?release_id=1064"> 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/@SE/@SE.HTM">Manufacturers&#39; Alliance/MAPI Survey</a></th>
<th scope="col">4Q &#39;04</th>
<th scope="col">3Q &#39;04</th>
<th scope="col">4Q03</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Business Index</td>
<td>70</td>
<td>75</td>
<td>77</td>
<td>76</td>
<td>67</td>
<td>60</td>
</tr>
</tbody>
</table>
</body>
</html>

The 4Q'04 Composite Business Index published by the Manufacturers' Alliance/MAPI fell to 70 from 75 the prior quarter. Despite moderate declines both last quarter and in 3Q, the average level for 2004 set a series' record indicating [...]

MAPI Business Outlook Survey Lower in 4Q, 2004 Set Record

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118a.jpg" width="353">
The Empire State Index of General Business Conditions in New York&#39;s manufacturing industries fell seven points to 20.08 during January following revisions that lowered earlier months&#39; levels. The latest level at 20.08 nevertheless indicates continued positive economic growth.
The new orders component eased sharply from the near record level in December and shipments eased sharply as well. The employment measure fell a relatively moderate three points. Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
The prices paid index surged more than twelve points to a record high.
Expectations for business conditions in six months again fell for the fourth consecutive month to the lowest level since March 2003.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">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/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Jan &#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">General Business Conditions (diffusion index)</td>
<td>20.08</td>
<td>27.07</td>
<td>37.43</td>
<td>28.76</td>
<td>16.17</td>
<td>7.19</td>
</tr>
</tbody>
</table>
</body>
</html>

The Empire State Index of General Business Conditions in New York's manufacturing industries fell seven points to 20.08 during January following revisions that lowered earlier months' levels. The latest level at 20.08 nevertheless [...]

Empire State Index Eased

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118a.jpg" width="353">
The Empire State Index of General Business Conditions in New York&#39;s manufacturing industries fell seven points to 20.08 during January following revisions that lowered earlier months&#39; levels. The latest level at 20.08 nevertheless indicates continued positive economic growth.
The new orders component eased sharply from the near record level in December and shipments eased sharply as well. The employment measure fell a relatively moderate three points. Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
The prices paid index surged more than twelve points to a record high.
Expectations for business conditions in six months again fell for the fourth consecutive month to the lowest level since March 2003.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">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/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Jan &#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">General Business Conditions (diffusion index)</td>
<td>20.08</td>
<td>27.07</td>
<td>37.43</td>
<td>28.76</td>
<td>16.17</td>
<td>7.19</td>
</tr>
</tbody>
</table>
MAPI Business Outlook Survey Lower in 4Q, 2004 Set Record   
by <a href="/comment/Moeller.html">Tom Moeller</a> January 18, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118b.jpg" width="353">
The 4Q&#39;04 Composite Business Index published by the Manufacturers&#39; Alliance/MAPI fell to 70 from 75 the prior quarter. Despite moderate declines both last quarter and in 3Q, the average level for 2004 set a series&#39; record indicating sharp improvement in US factory sector output.
Since 1992 there has been a 68% correlation between the Composite Index Level and quarterly growth in factory sector output.
The current orders index fell modestly to 89 but the average of 91 for 2004 by far set a record. The export orders index for 4Q moved to a new record.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118c.jpg" width="353">
The profit margins index likewise moved lower but the annual level in 2004 set a new record.Capital spending intentions for the coming year moved higher and since 1992 there has been a 75% correlation between the capital spending index a y/y growth in business investment in equipment &amp; software.
For the latest press release from the MAPI click <a href="http://www.mapi.net/html/prelease.cfm?release_id=1064"> 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/@SE/@SE.HTM">Manufacturers&#39; Alliance/MAPI Survey</a></th>
<th scope="col">4Q &#39;04</th>
<th scope="col">3Q &#39;04</th>
<th scope="col">4Q03</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Business Index</td>
<td>70</td>
<td>75</td>
<td>77</td>
<td>76</td>
<td>67</td>
<td>60</td>
</tr>
</tbody>
</table>
NAHB Housing Market Index Off 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 18, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118d.jpg" width="353">
The National Association of Home Builders&#39; (NAHB) Composite Housing Market Index fell slightly in January to 70 versus December&#39;s level of 71. Through 2004 the index drifted higher from 67 in 1Q to 69 in 2Q to 68 in 3Q to 70 in 4Q. The average of 68 rose 7.3% from 2003.
During the last twenty years, annual changes in the composite index had an 83% correlation with the change in new home sales. There&#39;s been an 86% correlation with the change in single family housing starts.
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.
Each of the components of the composite fell in January with the largest declines logged in home builders&#39; read of prospective activity in six months and in traffic of prospective buyers of new homes.
Visit the National Association of Home Builders using this <a href="http://www.nahb.org">link</a>.
Philadelphia Federal Reserve Bank President Anthony M Santomero&#39;s speech today on the economic outlook is available <a href="http://www.philadelphiafed.org/publicaffairs/speeches/2005_santomero1.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Jan &#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>7 0</td>
<td>71</td>
<td>68</td>
<td>68</td>
<td>64</td>
<td>61</td>
</tr>
</tbody>
</table>
</body>
</html>

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

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

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Andrew Cates

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

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

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

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

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

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

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

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Charts of the Week: Tariff Truce, Tenuous Trust

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

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

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

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

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

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

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

U.S. Light Vehicle Sales Fall in April

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

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

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

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

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

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

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

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

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

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

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

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

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

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

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

Carol Stone, CBE

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

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

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

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

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

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

Economy in Brief: January 2005

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Housing Starts Firm: 2004 The Highest Since 1978

December CPI Fell. 2004 Average Raised by Less Goods Price Deflation

December CPI Fell. 2004 Average Raised by Less Goods Price Deflation

Canadian Business Outlook Survey Provides Food for Thought for The Bank of Canada's Interest Rate Meeting on January 25

NAHB Housing Market Index Off

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Empire State Index Eased

Empire State Index Eased