Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071022a.jpg" width="353">
Through the second quarter of this year, delinquent payments on loans at commercial banks in the U.S. has soared to the highest level since 2004. The rate on residential loans is up to the highest since the recession year 2001.
The data are reported quarterly by the U.S. Federal Reserve Board and are available in Haver&#39;s USECON database. The numbers for 2Q 07 will be reported in the next few weeks.
Loan delinquency rates are also available from the Mortgage Bankers Association. They too show an increase. All mortgages past due by 30 days number 3.02% of all mortgages versus a low of 2.77% at the end of 2004.
These data are available in Haver&#39;s MBAMTG database.
The rise in the loan delinquencies has prompted a huge increase in mortgage foreclosure rates.
While these rates are still low, foreclosure rates on all mortgages in the U.S. have risen to 0.65% from their quarterly low of 0.40% in 2004. For prime fixed rate mortgages foreclosures have risen to 0.18% from the low of 0.12% in 2002.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071022b.jpg" width="353">
The more dramatic increase has been for adjustable rate mortgages. For conventional adjustable rate mortgages (ARMs) the rise the foreclosure rate is noticeable, but to a still very low level of 0.62% from the low of 0.16% in 2004.
For subprime mortgages, however, the rise in foreclosures has been more dramatic to 2.72% and more than doubled the lowest quarterly rate of 2004. And foreclosure rates on subprime ARMs has about tripled from the quarterly low of 1.32% in 2004. These have clearly followed the past increase in short term interest rates and the latest easing of that rise will (hopefully) lessen the pressure in the mortgage market.
Recent Financial Developments and the U.S. Economic Outlook from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-26-27.pdf"> here</a>. 

<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/SURVEYS/@S5/@S511/@S511.HTM">Delinquency Rate</a>&nbsp;</th>
<th scope="col">2Q 07</th>
<th scope="col">1Q 07 &nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real Estate Loans&nbsp;</td>
<td>1.99%</td>
<td>1.77%&nbsp;</td>
<td>1.48%</td>
<td>1.38%</td>
<td>1.44%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>2.28%</td>
<td>2.07%</td>
<td>1.73%</td>
<td>1.54%</td>
<td>1.55%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Commercial</td>
<td>1.59%</td>
<td>1.39%</td>
<td>1.11%</td>
<td>1.07%</td>
<td>1.20%</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Foreclosure Rate</a>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">All Mortgages</td>
<td>0.65%</td>
<td>0.58%</td>
<td>1.84%</td>
<td>1.64%</td>
<td>1.73%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Conventional ARM Mortgages&nbsp;</td>
<td>0.62%</td>
<td>0.53%</td>
<td>0.30%</td>
<td>0.19%</td>
<td>0.18%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Subprime ARM Mortgages</td>
<td>3.84%</td>
<td>3.23%</td>
<td>2.20%</td>
<td>1.52%</td>
<td>1.52%</td>
</tr>
</tbody>
</table>


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Through the second quarter of this year, delinquent payments on loans at commercial banks in the U.S. has soared to the highest level since 2004. The rate on residential loans is up to the highest since the recession year 2001. The [...]

U.S. Loan Delinquencies & Foreclosures Soar

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071022a.jpg" width="353">
Through the second quarter of this year, delinquent payments on loans at commercial banks in the U.S. has soared to the highest level since 2004. The rate on residential loans is up to the highest since the recession year 2001.
The data are reported quarterly by the U.S. Federal Reserve Board and are available in Haver&#39;s USECON database. The numbers for 2Q 07 will be reported in the next few weeks.
Loan delinquency rates are also available from the Mortgage Bankers Association. They too show an increase. All mortgages past due by 30 days number 3.02% of all mortgages versus a low of 2.77% at the end of 2004.
These data are available in Haver&#39;s MBAMTG database.
The rise in the loan delinquencies has prompted a huge increase in mortgage foreclosure rates.
While these rates are still low, foreclosure rates on all mortgages in the U.S. have risen to 0.65% from their quarterly low of 0.40% in 2004. For prime fixed rate mortgages foreclosures have risen to 0.18% from the low of 0.12% in 2002.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071022b.jpg" width="353">
The more dramatic increase has been for adjustable rate mortgages. For conventional adjustable rate mortgages (ARMs) the rise the foreclosure rate is noticeable, but to a still very low level of 0.62% from the low of 0.16% in 2004.
For subprime mortgages, however, the rise in foreclosures has been more dramatic to 2.72% and more than doubled the lowest quarterly rate of 2004. And foreclosure rates on subprime ARMs has about tripled from the quarterly low of 1.32% in 2004. These have clearly followed the past increase in short term interest rates and the latest easing of that rise will (hopefully) lessen the pressure in the mortgage market.
Recent Financial Developments and the U.S. Economic Outlook from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-26-27.pdf"> here</a>.

<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/SURVEYS/@S5/@S511/@S511.HTM">Delinquency Rate</a>&nbsp;</th>
<th scope="col">2Q 07</th>
<th scope="col">1Q 07 &nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real Estate Loans&nbsp;</td>
<td>1.99%</td>
<td>1.77%&nbsp;</td>
<td>1.48%</td>
<td>1.38%</td>
<td>1.44%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>2.28%</td>
<td>2.07%</td>
<td>1.73%</td>
<td>1.54%</td>
<td>1.55%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Commercial</td>
<td>1.59%</td>
<td>1.39%</td>
<td>1.11%</td>
<td>1.07%</td>
<td>1.20%</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Foreclosure Rate</a>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">All Mortgages</td>
<td>0.65%</td>
<td>0.58%</td>
<td>1.84%</td>
<td>1.64%</td>
<td>1.73%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Conventional ARM Mortgages&nbsp;</td>
<td>0.62%</td>
<td>0.53%</td>
<td>0.30%</td>
<td>0.19%</td>
<td>0.18%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Subprime ARM Mortgages</td>
<td>3.84%</td>
<td>3.23%</td>
<td>2.20%</td>
<td>1.52%</td>
<td>1.52%</td>
</tr>
</tbody>
</table>
 Are China's Imports Becoming a  Problem?   
by <a href="/comment/Curley.html">Louise Curley</a> October 22, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071022c.jpg" width="353">
While China&#39;s balance of trade on goods has risen steadily, it has been the rise in exports that has captured most attention. Now attention is beginning to the paid to the deceleration in imports that has begun to take place in the last year or so. The year to year monthly increase in imports had generally been greater than that of exports, but in the last year or so, this relationship has been reversed as can be seen in the first chart that shows the year to year increases in exports and imports.
A rise in the yuan could account for some of the recent dampening of imports, but the rise of the yuan so far has been minimal suggesting that other factors may be at work. While outsourcing on the part of the western industrialized countries has led to an increase in China&#39;s exports, in the initial stage of the process it raised China&#39;s demand for intermediate goods which it had to import. As China increased the sophistication of its own production, the need to import intermediate good diminished and resulted in a growing trade surplus with most western countries. It appears that this process is now taking place with some of the Asian countries, such as South Korea and Singapore that have outsourced production to China. These countries are now experiencing a decline in demand from China for intermediate goods. China&#39;s imports from Singapore have very definitely leveled off and those from Korea, somewhat less so. China&#39;s exports to Singapore and Korea meanwhile, continue to increase with the result that China&#39;s surplus on trade in goods with Singapore has widened and China&#39;s deficit on trade with Korea has narrowed. These trends are shown in the second and third charts.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071022d.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071022e.jpg" width="353">

<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">CHINA&#39;S TRADE Y/Y % CHG.&nbsp;</th>
<th scope="col">Sep 07</th>
<th scope="col">Aug 07&nbsp;</th>
<th scope="col">Jul&nbsp;07&nbsp;</th>
<th scope="col">Jun&nbsp; 07&nbsp;</th>
<th scope="col">May 07&nbsp;</th>
<th scope="col">2006</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">Exports</td>
<td>22.8</td>
<td>22.7</td>
<td>34.2</td>
<td>27.0</td>
<td>28.7</td>
<td>27.2</td>
<td>28.4</td>
<td>35.9</td>
<td>34.6</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>16.1</td>
<td>20.1</td>
<td>26.9</td>
<td>14.2</td>
<td>19.1</td>
<td>19.9</td>
<td>17.6</td>
<td>36.0</td>
<td>40.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports from Singapore</td>
<td>-0.2</td>
<td>3.3</td>
<td>6.7</td>
<td>-2.4</td>
<td>-4.7</td>
<td>6.9</td>
<td>18.1</td>
<td>33.5</td>
<td>48.6</td>
</tr>
<tr>
<td class="firstcol"> Imports from South Korea </td>
<td>14.7</td>
<td>14.6</td>
<td>23.8</td>
<td>5.6</td>
<td>13.4</td>
<td>16.8</td>
<td>23.7</td>
<td>44.0</td>
<td>51.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports to Singapore</td>
<td>29.8</td>
<td>24.0</td>
<td>53.3</td>
<td>33.0</td>
<td>36.0</td>
<td>38.7</td>
<td>31.7</td>
<td>43.1</td>
<td>27.3</td>
</tr>
<tr>
<td class="firstcol"> Exports to South Korea </td>
<td>10.28</td>
<td>19.9</td>
<td>25.8</td>
<td>29.2</td>
<td>28.2</td>
<td>26.9</td>
<td>26.3</td>
<td>38.3</td>
<td>29.6</td>
</tr>
</tbody>
</table>
German Real Wages Slide Lower Y/Y and Plunge in Current Quarter  
by <a href="/comment/Brusca.html">Robert Brusca</a> October 22, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071022f.jpg" width="353">
The threat to growth in Europe has been named in the past weekend&#146;s G-7 meeting as primarily due to the strong Euro. The Euro remains a threat to growth though Germany&#146;s finance minister was quite blas&eacute; about it in comparison to Trichet (of France and the ECB) and LaGarde (FinMin of France). Still one important factor remains, the consumer, and there the rise in energy prices remains a problem as headline inflation is eroding real wages. Real wages may not be deemed &#145;growth threat number one&#146;, but just because your picture is not framed at the top of the most-wanted list at the post office is no reason to count the risk as benign. Real wages are dropping on the sequential growth rates at an increasingly rapid pace. In the third quarter they are falling at a pace of nearly 5% annualized.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
German Wages and Estimated Real Wages
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Month-to-Month</td>
<td colspan="3">At Saar</td>
<td>Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Qtr-2-Date</td>
</tr>
<tr>
<td class="firstcol">Wages</td>
<td>-2.5%</td>
<td>1.1%</td>
<td>-0.5%</td>
<td>-7.4%</td>
<td>0.5%</td>
<td>1.0%</td>
<td>-2.8%</td>
</tr>
<tr>
<td class="firstcol">Inflation (CPI)</td>
<td>0.1%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>1.8%</td>
<td>2.7%</td>
<td>2.0%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">Real Wages</td>
<td>-2.6%</td>
<td>0.9%</td>
<td>-0.6%</td>
<td>-9.0%</td>
<td>-2.1%</td>
<td>-1.0%</td>
<td>-4.9%</td>
</tr>
</tbody>
</table>


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Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071019c.jpg" width="353">
Overall Q3 GDP growth in the UK appears to make for boring reading, at 0.8% Qtr/Qtr for a fourth consecutive time and a sixth time out of the last seven quarters. But with the upheaval in world financial markets coming to a head right in the middle of Q3, we&#39;ll be grateful for a steady growth rate. At the same time, a quick look at the table indicates that it is only the total that is steady. Almost every major industrial sector altered its recent trends noticeably during the period to bring offsetting gains and losses.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071019d.jpg" width="353">
Manufacturing slowed to a 0.2% rise in Q3 from 0.8% in Q2. As with the economy as a whole, segments of manufacturing experienced a mixed performance, according to industrial production data through August, reported about 10 days ago. Food, some metals and transportation equipment appear to have declined in Q3; textiles, chemicals and electrical equipment are flattish, while wood products, furniture and machinery have all been expanding. We noted here three months ago in our discussion of Q2 data that the publishing industry was showing great strength then. That was borne out by later, more complete information showing 6.9% Qtr/Qtr growth in Q2; now, in Q3, that is fading, with output actually down noticeably in August.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071019e.jpg" width="353">
Another source of strength in Q2 was mining. Output in that sector has apparently fallen in Q3, but only by 0.3%, according to today&#39;s ONS estimates. That is still a far cry from the 8% and 9% declines during 2005 and 2006 and reflects the continuing benefits of the new Buzzard oil field.
As for the service sectors, Robert Brusca highlighted yesterday the strengthening in retail sales, and that contributed to an estimated 1.1% advance in the distribution industries in Q3, nearly double Q2&#39;s 0.6%. Transport and communication also saw a pickup in growth, to 1.1% from 0.8% in Q2. Business services, an area of strong growth in many parts of the world, kept up its already high 1.7% Q2 gain through Q3 as well. The separate construction sector repeated its 0.8% growth in Q1 and Q2 through Q3.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UK GDP, SA % Chg</th>
Qtr/Qtr
Year/Year
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3Q 2007</td>
<td>2Q 2007</td>
<td>3Q 2007</td>
<td>2Q 2007</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>0.8</td>
<td>0.8</td>
<td>3.3</td>
<td>3.1</td>
<td>2.8</td>
<td>1.9</td>
<td>3.2</td>
</tr>
<tr>
<td class="firstcol">Mining*</td>
<td>-0.3</td>
<td>1.3</td>
<td>-1.8</td>
<td>-1.3</td>
<td>-8.2</td>
<td>-9.2</td>
<td>-7.2</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>0.2</td>
<td>0.8</td>
<td>0.6</td>
<td>1.1</td>
<td>1.3</td>
<td>-1.2</td>
<td>2.0</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>1.0</td>
<td>0.9</td>
<td>4.0</td>
<td>3.7</td>
<td>3.7</td>
<td>2.9</td>
<td>3.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Distribution, Hotels, Restaurants</td>
<td>1.1</td>
<td>0.6</td>
<td>4.1</td>
<td>3.4</td>
<td>3.5</td>
<td>1.2</td>
<td>5.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Transportation &amp; Communication</td>
<td>1.1</td>
<td>0.8</td>
<td>5.8</td>
<td>5.4</td>
<td>3.8</td>
<td>4.3</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Services &amp; Finance</td>
<td>1.7</td>
<td>1.7</td>
<td>5.6</td>
<td>5.1</td>
<td>5.3</td>
<td>4.5</td>
<td>5.0</td>
</tr>
<tr>
<td colspan="8">*Includes oil &amp; gas extraction</td>
</tr>
</tbody>
</table>
</body>
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Overall Q3 GDP growth in the UK appears to make for boring reading, at 0.8% Qtr/Qtr for a fourth consecutive time and a sixth time out of the last seven quarters. But with the upheaval in world financial markets coming to a head right [...]

UK GDP Maintains 0.8% Growth in Q3; Industry Sectors Rotate Leadership

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071019a.jpg" width="353">
The October index of manufacturing activity in New York State reversed its September deterioration and rose 14.1 points to 28.75, its highest level since July 2004. The figures are reported by the Federal Reserve Bank of New York.
Since the series&#39; inception in 2001 there has been a 55% correlation between the index level and the three month change in U.S. factory sector industrial production.
New orders and shipments improved, but employment improved markedly.
In the (perhaps too) short six year history of the NY employment index, there has been an 85% correlation between it and the three month growth in overall factory sector employment.
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.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071019b.jpg" width="353">
Pricing pressure rose very slightly. Since 2001 there has been an 81% correlation between the index of prices paid and the three month change in the core intermediate materials PPI.
The Empire State index of expected business conditions in six months rose the highest level in two years.
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/survey/empire/empiresurvey_overview.html">here</a>.
Monetary Policy under Uncertainty is today&#39;s speech by Federal Reserve Board Chairman Ben S. Bernanke and it is available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20071019a.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/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Oct. &#39;06&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)&nbsp;&nbsp;</td>
<td>28.75</td>
<td>14.70&nbsp;</td>
<td>21.19</td>
<td>20.33</td>
<td>15.62</td>
<td>28.70</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>36.05</td>
<td>35.11</td>
<td>30.63</td>
<td>41.88</td>
<td>44.74</td>
<td>50.50</td>
</tr>
</tbody>
</table>


</html>

The October index of manufacturing activity in New York State reversed its September deterioration and rose 14.1 points to 28.75, its highest level since July 2004. The figures are reported by the Federal Reserve Bank of New York. [...]

U.S. Empire State Index Improved

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071019a.jpg" width="353">
The October index of manufacturing activity in New York State reversed its September deterioration and rose 14.1 points to 28.75, its highest level since July 2004. The figures are reported by the Federal Reserve Bank of New York.
Since the series&#39; inception in 2001 there has been a 55% correlation between the index level and the three month change in U.S. factory sector industrial production.
New orders and shipments improved, but employment improved markedly.
In the (perhaps too) short six year history of the NY employment index, there has been an 85% correlation between it and the three month growth in overall factory sector employment.
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.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071019b.jpg" width="353">
Pricing pressure rose very slightly. Since 2001 there has been an 81% correlation between the index of prices paid and the three month change in the core intermediate materials PPI.
The Empire State index of expected business conditions in six months rose the highest level in two years.
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/survey/empire/empiresurvey_overview.html">here</a>.
Monetary Policy under Uncertainty is today&#39;s speech by Federal Reserve Board Chairman Ben S. Bernanke and it is available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20071019a.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/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Oct. &#39;06&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)&nbsp;&nbsp;</td>
<td>28.75</td>
<td>14.70&nbsp;</td>
<td>21.19</td>
<td>20.33</td>
<td>15.62</td>
<td>28.70</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>36.05</td>
<td>35.11</td>
<td>30.63</td>
<td>41.88</td>
<td>44.74</td>
<td>50.50</td>
</tr>
</tbody>
</table>
UK GDP Maintains 0.8% Growth in Q3; Industry Sectors Rotate Leadership 
by <a href="/comment/Stone.html">Carol Stone</a> October 19, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071019c.jpg" width="353">
Overall Q3 GDP growth in the UK appears to make for boring reading, at 0.8% Qtr/Qtr for a fourth consecutive time and a sixth time out of the last seven quarters. But with the upheaval in world financial markets coming to a head right in the middle of Q3, we&#39;ll be grateful for a steady growth rate. At the same time, a quick look at the table indicates that it is only the total that is steady. Almost every major industrial sector altered its recent trends noticeably during the period to bring offsetting gains and losses.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071019d.jpg" width="353">
Manufacturing slowed to a 0.2% rise in Q3 from 0.8% in Q2. As with the economy as a whole, segments of manufacturing experienced a mixed performance, according to industrial production data through August, reported about 10 days ago. Food, some metals and transportation equipment appear to have declined in Q3; textiles, chemicals and electrical equipment are flattish, while wood products, furniture and machinery have all been expanding. We noted here three months ago in our discussion of Q2 data that the publishing industry was showing great strength then. That was borne out by later, more complete information showing 6.9% Qtr/Qtr growth in Q2; now, in Q3, that is fading, with output actually down noticeably in August.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071019e.jpg" width="353">
Another source of strength in Q2 was mining. Output in that sector has apparently fallen in Q3, but only by 0.3%, according to today&#39;s ONS estimates. That is still a far cry from the 8% and 9% declines during 2005 and 2006 and reflects the continuing benefits of the new Buzzard oil field.
As for the service sectors, Robert Brusca highlighted yesterday the strengthening in retail sales, and that contributed to an estimated 1.1% advance in the distribution industries in Q3, nearly double Q2&#39;s 0.6%. Transport and communication also saw a pickup in growth, to 1.1% from 0.8% in Q2. Business services, an area of strong growth in many parts of the world, kept up its already high 1.7% Q2 gain through Q3 as well. The separate construction sector repeated its 0.8% growth in Q1 and Q2 through Q3.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UK GDP, SA % Chg</th>
Qtr/Qtr
Year/Year
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3Q 2007</td>
<td>2Q 2007</td>
<td>3Q 2007</td>
<td>2Q 2007</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>0.8</td>
<td>0.8</td>
<td>3.3</td>
<td>3.1</td>
<td>2.8</td>
<td>1.9</td>
<td>3.2</td>
</tr>
<tr>
<td class="firstcol">Mining*</td>
<td>-0.3</td>
<td>1.3</td>
<td>-1.8</td>
<td>-1.3</td>
<td>-8.2</td>
<td>-9.2</td>
<td>-7.2</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>0.2</td>
<td>0.8</td>
<td>0.6</td>
<td>1.1</td>
<td>1.3</td>
<td>-1.2</td>
<td>2.0</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>1.0</td>
<td>0.9</td>
<td>4.0</td>
<td>3.7</td>
<td>3.7</td>
<td>2.9</td>
<td>3.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Distribution, Hotels, Restaurants</td>
<td>1.1</td>
<td>0.6</td>
<td>4.1</td>
<td>3.4</td>
<td>3.5</td>
<td>1.2</td>
<td>5.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Transportation &amp; Communication</td>
<td>1.1</td>
<td>0.8</td>
<td>5.8</td>
<td>5.4</td>
<td>3.8</td>
<td>4.3</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Services &amp; Finance</td>
<td>1.7</td>
<td>1.7</td>
<td>5.6</td>
<td>5.1</td>
<td>5.3</td>
<td>4.5</td>
<td>5.0</td>
</tr>
<tr>
<td colspan="8">*Includes oil &amp; gas extraction</td>
</tr>
</tbody>
</table>


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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071018g.jpg" width="353">
The Philadelphia Federal Reserve Bank&#39;s Index of General Business Conditions in the manufacturing sector dipped in October. The decline to 6.8 followed a great improvement in September to 10.9.
During the last ten years there has been a 59% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 42% correlation with q/q growth in real GDP.
Fewer new orders and shipments seemed to account for much of the overall decline in the general index while employment improved. 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/071018h.jpg" width="353">
The prices paid index improved to its highest level since August of last year. 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 fell slightly but remained near its best level since late in 2004. Expectations for new orders were quite firm and though expectations for the number of employees fell from its recent high, it remained firm.
Subprime Side Effects in the Federal Funds Market from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20071001/cover.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/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">October</th>
<th scope="col">September &nbsp;</th>
<th scope="col">Oct. &#145;06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>6.8</td>
<td>10.9</td>
<td>2.3&nbsp;</td>
<td>8.1</td>
<td>11.5</td>
<td>28.1</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>40.3&nbsp;</td>
<td>23.1&nbsp;</td>
<td>32.7&nbsp;</td>
<td>36.6</td>
<td>40.1</td>
<td>51.2</td>
</tr>
</tbody>
</table>
</body>
</html>

The Philadelphia Federal Reserve Bank's Index of General Business Conditions in the manufacturing sector dipped in October. The decline to 6.8 followed a great improvement in September to 10.9. During the last ten years there has been [...]

Philadelphia Fed Index Dipped

Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071018f.jpg" width="353">
UK retail sales are accelerating. The acceleration is real as the volume graph on the left shows. The table&#146;s growth calculations show that upsurge has not been steadily building but is nonetheless across the main categories over the past three months with food sales leading the nominal acceleration part of that due to prices, no doubt. Clothing sales are accelerating too, but that is after a flat six-month growth rate, and to a growth rate marginally stronger than the 12-month rate. The surge in volume growth in the last three months is striking. In the quarter now complete sales volumes are up at a 7.1% annualized pace.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
UK Real and Nominal Retail Sales
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Nominal</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAGo</td>
</tr>
<tr>
<td class="firstcol">Retail Total</td>
<td>0.5%</td>
<td>0.9%</td>
<td>-0.4%</td>
<td>4.1%</td>
<td>3.2%</td>
<td>4.6%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">Food Beverages &amp; Tobacco</td>
<td>0.9%</td>
<td>1.8%</td>
<td>-0.5%</td>
<td>8.8%</td>
<td>3.9%</td>
<td>3.6%</td>
<td>4.0%</td>
</tr>
<tr>
<td class="firstcol">Clothing footwear</td>
<td>0.6%</td>
<td>1.3%</td>
<td>-0.4%</td>
<td>6.0%</td>
<td>0.0%</td>
<td>5.8%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Real</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">Retail Ex Auto</td>
<td>0.6%</td>
<td>0.7%</td>
<td>0.7%</td>
<td>7.9%</td>
<td>5.6%</td>
<td>6.2%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

UK retail sales are accelerating. The acceleration is real as the volume graph on the left shows. The tables growth calculations show that upsurge has not been steadily building but is nonetheless across the main categories over the [...]

UK Retail Sales Accelerate

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071018e.jpg" width="353">
European trade is proving to be resilient in the face of a strongly rising euro currency. Some of this is undoubtedly the reflection of true strength, but some is also the acumen of the European exporters who have learned to use markets to hedge and some perhaps to giving back some profit margins as the euro puts an increasingly strong squeeze on margins and makes even hedging less of a dodge for foreign exchange rate induced pressures. Euro area data show that foreign orders have been slipping and remarks by policymakers and businesses leaders indicate that businesses are feeling the pinch. So far the data only show that exports are not just growing but also accelerating. Imports have slowed and that is particularly clear in the six-month growth rates. Over three months both exports and imports are locked into some real strength. The growing surplus is again poised to augment EMU growth in Q3.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
E-zone 13-Trade Trends for Goods
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="3">% Saar</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
</tr>
<tr class="grey3">
<td class="firstcol">Balance*</td>
<td>&#128;&#128; 4,345</td>
<td>&#128;&#128; 809</td>
<td>&#128;&#128; 3,301</td>
<td>&#128;&#128; 3,650</td>
<td>&#128;&#128; 2,679</td>
</tr>
<tr class="grey2">
<td colspan="6">Exports</td>
</tr>
<tr class="grey1">
<td class="firstcol">All exports</td>
<td>4.9%</td>
<td>-0.9%</td>
<td>28.9%</td>
<td>11.9%</td>
<td>12.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Food and drinks</td>
<td>2.8%</td>
<td>2.5%</td>
<td>36.5%</td>
<td>10.7%</td>
<td>13.4%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Raw materials</td>
<td>-0.6%</td>
<td>-1.5%</td>
<td>0.4%</td>
<td>9.5%</td>
<td>12.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">MFG</td>
<td>2.8%</td>
<td>-0.3%</td>
<td>26.1%</td>
<td>6.3%</td>
<td>11.5%</td>
</tr>
<tr class="grey2">
<td colspan="6">Imports</td>
</tr>
<tr class="grey1">
<td class="firstcol">All imports</td>
<td>2.0%</td>
<td>2.4%</td>
<td>27.7%</td>
<td>7.1%</td>
<td>6.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Food and drinks</td>
<td>-0.1%</td>
<td>0.7%</td>
<td>22.7%</td>
<td>-2.7%</td>
<td>6.2%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Raw materials</td>
<td>0.2%</td>
<td>2.3%</td>
<td>19.5%</td>
<td>2.1%</td>
<td>6.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">MFG</td>
<td>0.5%</td>
<td>1.5%</td>
<td>23.3%</td>
<td>-0.8%</td>
<td>8.7%</td>
</tr>
<tr class="grey1">
<td colspan="6">*Million Euros; mo or period average</td>
</tr>
</tbody>
</table>
</body>
</html>

European trade is proving to be resilient in the face of a strongly rising euro currency. Some of this is undoubtedly the reflection of true strength, but some is also the acumen of the European exporters who have learned to use [...]

EMU Trade Surplus Grows as Imports Steady and Exports Accelerate

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), after surging 10.8% to 17.82 million units in March. The retreat in April vehicle sales accompanied a 1.7% y/y rise in real disposable income through March, which compared to 2.0% growth last year.

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

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

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

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

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

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

U.S. Light Vehicle Sales Fall in April

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

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

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

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

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

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

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

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

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

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

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

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

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

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

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

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

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

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

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

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

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

Economy in Brief: October 2007

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U.S. Loan Delinquencies & Foreclosures Soar

U.S. Loan Delinquencies & Foreclosures Soar

UK GDP Maintains 0.8% Growth in Q3; Industry Sectors Rotate Leadership

U.S. Empire State Index Improved

U.S. Empire State Index Improved

Philadelphia Fed Index Dipped

UK Retail Sales Accelerate

EMU Trade Surplus Grows as Imports Steady and Exports Accelerate