Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081117a.jpg" width="353">
Industrial production recovered 1.3% last month after its 3.8% plummet during September when production was depressed by Hurricanes Gustav &amp; Ike. September output was also held down by a strike at Boeing. Consensus expectations had been for no change in output last month.
During each of the last two months, the Fed indicated that industrial output fell 0.7%, excluding the hurricanes (which reduced mining output by 6.1%) and the strike.
Factory output recovered a modest 0.6% after falling 3.7% during September. Output of consumer goods recovered all of its 1.2% September drop but it was still off 2.8% y/y. Production of motor vehicles &amp; parts dropped 3.5% (-18.4% y/y) but, excluding autos, output was still depressed. It recovered a modest 0.8% following the 4.0% plunge during September. Nonetheless, a 4.3% decline in factory output year-to-year compares to 2.0% growth during all of last year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081117b.jpg" width="353">
Industrial production in the high-tech sector is in a retrenchment mode. Output there fell 0.9% during October and that was the third consecutive monthly decline. And production was up just 9.9% y/y, the weakest gain since early 2005. Less both autos and high-tech, output inched up 0.2% last month following the 3.7% September plunge (-5.6% y/y).
The industry detail further reflected recession in the factory sector. Output of furniture &amp; related products fell 2.9% last month for a 16.3% y/y decline. That was the largest y/y drop since the recession of 1975. Machinery production also reflected recession and it was down 1.7% (-6.9% y/y). A somewhat brighter spot was the 0.6% increase in electrical equipment production which left it down just 0.9% year-to-year. Apparel output, in the &quot;recession-resistant&quot; nondurables sector fell just 1.8% (-2.5% y/y. Production of chemicals recovered 5.1% after the 8.3% plunge due to the hurricanes. Reflecting the aftermath of the hurricanes was a 9.9% jump in output of petroleum &amp; coal which recovered an 8.5% plummet.
Capacity utilization recovered to 76.4% which was still near its lowest level since 2003. Utilization in the factory sector of 73.8% also was near the lowest since 2003.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">INDUSTRIAL PRODUCTION (SA, %)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Output </td>
<td>1.3</td>
<td>-3.8</td>
<td>1.3</td>
<td>1.7</td>
<td>2.2</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Manufacturing</td>
<td>0.6</td>
<td>-3.7</td>
<td>0.6</td>
<td>1.7</td>
<td>2.4</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Consumer Goods</td>
<td>1.4</td>
<td>-1.2</td>
<td>-2.8</td>
<td>1.7</td>
<td>0.3</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Business Equipment</td>
<td>-2.2</td>
<td>-7.1</td>
<td>-8.8</td>
<td>3.3</td>
<td>10.4</td>
<td>7.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Construction Supplies</td>
<td>-1.1</td>
<td>-1.9</td>
<td>-6.9</td>
<td>-2.5</td>
<td>2.2</td>
<td>4.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>0.4</td>
<td>2.5</td>
<td>-0.6</td>
<td>3.3</td>
<td>-0.6</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>76.4</td>
<td>75.5</td>
<td>80.8</td>
<td>81.0</td>
<td>80.9</td>
<td>80.2</td>
</tr>
</tbody>
</table>
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Industrial production recovered 1.3% last month after its 3.8% plummet during September when production was depressed by Hurricanes Gustav & Ike. September output was also held down by a strike at Boeing. Consensus expectations had [...]

U.S. Industrial Production Rebounds Modestly After Hurricanes

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081117a.jpg" align="left" border="0" height="265" width="353">
Industrial production recovered 1.3% last month after its 3.8%
plummet during September when production was depressed by Hurricanes
Gustav &amp; Ike. September output was also held down by a strike
at Boeing. Consensus expectations had been for no change in output last
month.
During each of the last two months, the Fed indicated that
industrial output fell 0.7%, excluding the hurricanes (which reduced
mining output by 6.1%) and the strike.
Factory output recovered a modest 0.6% after falling 3.7%
during September. Output of consumer goods recovered all of its 1.2%
September drop but it was still off 2.8% y/y. Production of motor
vehicles &amp; parts dropped 3.5% (-18.4% y/y) but, excluding
autos, output was still depressed. It recovered a modest 0.8% following
the 4.0% plunge during September. Nonetheless, a 4.3% decline in
factory output year-to-year compares to 2.0% growth during all of last
year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081117b.jpg" align="right" border="0" height="265" width="353">
Industrial production in the high-tech sector is in a
retrenchment mode. Output there fell 0.9% during October and that was
the third consecutive monthly decline. And production was up just 9.9%
y/y, the weakest gain since early 2005. Less both autos and high-tech,
output inched up 0.2% last month following the 3.7% September plunge
(-5.6% y/y).
The industry detail further reflected recession in the factory
sector. Output of furniture &amp; related products fell 2.9% last
month for a 16.3% y/y decline. That was the largest y/y drop since the
recession of 1975. Machinery production also reflected recession and it
was down 1.7% (-6.9% y/y). A somewhat brighter spot was the 0.6%
increase in electrical equipment production which left it down just
0.9% year-to-year. Apparel output, in the "recession-resistant"
nondurables sector fell just 1.8% (-2.5% y/y. Production of chemicals
recovered 5.1% after the 8.3% plunge due to the hurricanes. Reflecting
the aftermath of the hurricanes was a 9.9% jump in output of petroleum
&amp; coal which recovered an 8.5% plummet.
Capacity utilization recovered to 76.4% which was still near
its lowest level since 2003. Utilization in the factory sector of 73.8%
also was near the lowest since 2003.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">INDUSTRIAL
PRODUCTION (SA, %)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Output </td>
<td>1.3</td>
<td>-3.8</td>
<td>1.3</td>
<td>1.7</td>
<td>2.2</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Manufacturing</td>
<td>0.6</td>
<td>-3.7</td>
<td>0.6</td>
<td>1.7</td>
<td>2.4</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Consumer Goods</td>
<td>1.4</td>
<td>-1.2</td>
<td>-2.8</td>
<td>1.7</td>
<td>0.3</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Business Equipment</td>
<td>-2.2</td>
<td>-7.1</td>
<td>-8.8</td>
<td>3.3</td>
<td>10.4</td>
<td>7.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Construction Supplies</td>
<td>-1.1</td>
<td>-1.9</td>
<td>-6.9</td>
<td>-2.5</td>
<td>2.2</td>
<td>4.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>0.4</td>
<td>2.5</td>
<td>-0.6</td>
<td>3.3</td>
<td>-0.6</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>76.4</td>
<td>75.5</td>
<td>80.8</td>
<td>81.0</td>
<td>80.9</td>
<td>80.2</td>
</tr>
</tbody>
</table>
U.S. Empire State Index Negative
Again; Prices Paid The Weakest Since 2003 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 17, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081117c.jpg" align="left" border="0" height="265" width="353">
The November Empire State Index of manufacturing actor
activity as reported by the Federal Reserve Bank of New York fell to
-25.43 which, for the series' short eight year history, was a record
low. The decline was just modest versus the October level but it was
down sharply from an average of -3.19 during the third quarter. A
November reading of -26.1 for had been the Consensus expectation.
The figure is a diffusion index. Since the series' inception
in 2001 there has been a 58% correlation between its' level and the
three-month change in U.S. factory sector industrial production.
The index of pricing pressure also fell fell sharply to 20.48.
The ten point decline from October was to the lowest level since
December of 2003. Since inception in 2001 there has been an 81%
correlation between the index of prices paid and the three-month change
in the core intermediate materials PPI.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081117d.jpg" align="right" border="0" height="265" width="353">
The indexes for new orders, shipments and unfilled orders each
fell but the delivery times component ticked higher.
The employment index also fell during November dropping
sharply to its lowest level since late 2001, negative for the fifth
consecutive month. In the history of the NY employment index, there has
been an 86% 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.
The Empire State index of expected business
conditions in six months fell to 13.02 which was its lowest
since 2001. The subseries for shipments and employment jumped and the
pricing series fell to its lowest level in twelve months.
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.
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>.


<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">November</th>
<th scope="col">October</th>
<th scope="col">November '07&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions
(diffusion index, %)&nbsp;&nbsp;</td>
<td>-25.43</td>
<td>-24.62</td>
<td>24.05</td>
<td>17.23</td>
<td>20.24</td>
<td>15.53</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>20.48</td>
<td>31.71</td>
<td>47.37</td>
<td>35.64</td>
<td>41.88</td>
<td>44.74</td>
</tr>
</tbody>
</table>
Euro Area's September TradeDeficit
of 5.7 Billion Euros Shows Little Change from August 
by <a href="/comment/Curley.html">Louise
Curley</a> November 17, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081117e.jpg" align="right" border="0" height="265" width="353">
The Euro Areatrade balance in September was -5,742 million
euros virtually unchanged fromthe -5,705 million euros in August. It
was, however, 8,549 million euros below the trade surplus of 2,807
million euros in September 2007. Since December 2007, the trade balance
in the Euro Area has, more often than not, been negative. The largest
deficit of 6,387 million euros was recorded in July of this year, as
can be seen in the first chart.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081117f.jpg" align="right" border="0" height="265" width="353">
Both high oil prices and a rising euro led to the
deterioration in the trade balance. High oil prices accounted for much
of the increasing trade deficits with Russia and OPEC earlier this
year. With the recent decline in the price of oil, the trade balance
with OPEC has become less negative. The trade balances with Russia and
OPEC are shown in the second chart.
The rising euro has dampened exports to and encouraged imports
from trading partners, leading to smaller surpluses or larger deficits.
For example, the Euro Area's trade surplus with the United States has
fallen sharply over the last year and a half, as shown in the third
chart. 
 

The price of oil and the value of the euro declined
dramatically in recent months as the global financial crisis spread to
more countries and intensified. The daily price of oil and the daily
value of the euro are shown in the fourth chart. While the decline in
the price of oil should reduce the Euro Area's imports, the effect of
the decline in the euro is less predictable. Although it should be good
for exports, falling world demand could outweigh the positive effects
of the lower euro. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081117g.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081117h.jpg" border="0" height="265" width="312">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">EURO
AREA 15 &nbsp;TRADE BALANCES</th>
<th scope="col">Sep 08</th>
<th scope="col">Aug&nbsp; 08&nbsp;</th>
<th scope="col">Sep&nbsp; 07</th>
<th scope="col">M/M&nbsp; chg&nbsp;</th>
<th scope="col">Y/Y&nbsp; chg&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">TOTAL</td>
<td>-5742</td>
<td>-5705</td>
<td>2807</td>
<td>-36</td>
<td>-8549</td>
<td>20384</td>
<td>-13049</td>
<td>10744</td>
</tr>
<tr>
<td class="firstcol">With United States</td>
<td>4197</td>
<td>4160</td>
<td>5098</td>
<td>37</td>
<td>-901</td>
<td>63525</td>
<td>73914</td>
<td>65239</td>
</tr>
<tr class="odd">
<td class="firstcol">With Russia</td>
<td>-3729</td>
<td>-3429</td>
<td>-1891</td>
<td>-299</td>
<td>-1837</td>
<td>-30843</td>
<td>-40429</td>
<td>-32676</td>
</tr>
<tr>
<td class="firstcol">With OPEC</td>
<td>-5235</td>
<td>-6226</td>
<td>-2286</td>
<td>981</td>
<td>-2949</td>
<td>-33532</td>
<td>-48010</td>
<td>-36611</td>
</tr>
</tbody>
</table>

French Prospects Drop Sharply 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 17, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081117i.jpg" align="left" border="0" height="265" width="353">
The Bank of France Industry Sentiment Index is pointing much
lower. At 77.14 it has fallen in October from 86.08 the month before.
This compares to its 12-month average of 97. The index is weaker than
this level only about 2 percent of the time. The latest production and
production outlook indices are at bottom-scraping levels. Foreign
orders and new industry orders are both at their
lowest level since 1987. The hiring outlook is worse only about 20% of
the time.
It is no wonder that, armed with this survey result, French
Finance Minister Christine Lagarde warned on the outlook. All of Europe
is crumbling under the strain.

<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Bank of
France Monthly INDUSTRY Survey: SUMMARY </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>12 MO</td>
<td>Since Jan-87</td>
<td>Percentile</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>Oct-08</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>AVERAGE</td>
<td>Average</td>
<td>rank/range</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">Production-Latest
Month</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total Industry</td>
<td>-23.53</td>
<td>-20.09</td>
<td>8.2</td>
<td>-2</td>
<td>7</td>
<td>0.06</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">Production
Outlook</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total Industry</td>
<td>-18</td>
<td>-9</td>
<td>0</td>
<td>4</td>
<td>15</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">Demand</td>
</tr>
<tr class="grey2">
<td class="firstcol">Overall Order Books</td>
<td>-22.61</td>
<td>-6.61</td>
<td>-2.17</td>
<td>10</td>
<td>4</td>
<td>22.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Foreign Orders</td>
<td>-33.2</td>
<td>-28.65</td>
<td>-5.85</td>
<td>-3</td>
<td>8</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">New
Orders</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total Industry</td>
<td>-35.36</td>
<td>-32.17</td>
<td>-1.49</td>
<td>-3</td>
<td>8</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">Stocks:
Finished Goods</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total Industry</td>
<td>3.62</td>
<td>0.35</td>
<td>1.26</td>
<td>0</td>
<td>-2</td>
<td>80.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Capacity Utilization</td>
<td>77.87</td>
<td>79.9</td>
<td>80.47</td>
<td>82</td>
<td>83</td>
<td>3.4%</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">Hiring</td>
</tr>
<tr class="grey2">
<td class="firstcol">Latest Month</td>
<td>-12.12</td>
<td>-6.62</td>
<td>-2.27</td>
<td>-3</td>
<td>-1</td>
<td>20.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Outlook</td>
<td>-16.19</td>
<td>-9.93</td>
<td>-4.2</td>
<td>-5</td>
<td>-4</td>
<td>22.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Industry Sentiment
Index</td>
<td>77.14</td>
<td>86.07</td>
<td>92.92</td>
<td>97</td>
<td>102</td>
<td>2.3%</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/081114i.jpg" width="353">
During September, total business inventories reversed all of their August rise and fell 0.2%. The decline was weaker than Consensus expectations for no change. More importantly, however, it could suggest that the addition to 3Q GDP growth of 0.6 percentage points from faster inventory accumulation waned as the quarter progressed. As of September the three-month growth in inventories fell to 4.4% (AR) from roughly 6.5% during the prior two quarters.
Normally, the suggestion of less of a contribution would be a sure thing. But these are not normal times given the drop in oil prices. Lower oil prices have dramatically reduced the value of inventories held by retailers, wholesalers and manufacturers.
Retail inventories rose 0.2% in September after a 0.7% August decline. The three-month growth rate of retail inventories picked up to 3.4% from 0.1% during 2Q. Accumulation of automobiles accounted for that increase rising at a 3.5% rate last quarter versus a decline of 5.7% during 2Q. Outside of autos, retail inventories rose 0.4% during September after a 0.2% August decline. The 3.3 rate of accumulation last quarter was roughly the same as during 2Q.
The industry detail in the retail sector indicated that higher apparel inventories contributed with a 3.1% rise last quarter versus 0.2% decumulation during 2Q. Furniture inventories rose at a 7.4% rate last quarter, about the same as during 2Q, and general merchandise inventories showed virtually zero growth after a 2.0% gain during 2Q. The fastest rate of accumulation came from building materials which ran up last quarter at a 13.1% rate after slight 2Q decumulation.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081114j.jpg" width="353">
Factory inventories declined 0.7% during September and the three-month rate of accumulation fell sharply to 2.2% from a 7.4% rate during 2Q.
Wholesale inventories slipped 0.1%, largely reflecting a 3.5% decline in petroleum inventories. For the quarter wholesale inventories rose at an 8.6% rate after a 13.4% 2Q increase.
Total business sales fell 2.0% during September, about as they did in August, led lower by the drop in oil prices.
Today&#39;s speech by Fed President Ben S. Bernanke titled Policy Coordination Among Central Banks can be found <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20081214a.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/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">usiness Inventories</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>5.5%</td>
<td>3.8%</td>
<td>5.9%</td>
<td>6.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.2%</td>
<td>-0.7%</td>
<td>0.5%</td>
<td>2.6%</td>
<td>3.5%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Auto</td>
<td>0.4%</td>
<td>-0.2%</td>
<td>2.2%</td>
<td>2.7%</td>
<td>4.9%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>-0.1%</td>
<td>0.6%</td>
<td>9.7%</td>
<td>5.5%</td>
<td>8.3%</td>
<td>7.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.7%</td>
<td>0.7%</td>
<td>7.0%</td>
<td>3.7%</td>
<td>6.4%</td>
<td>8.9%</td>
</tr>
</tbody>
</table>
</body>
</html>

During September, total business inventories reversed all of their August rise and fell 0.2%. The decline was weaker than Consensus expectations for no change. More importantly, however, it could suggest that the addition to 3Q GDP [...]

U.S. Business Inventory Accumulation Waned

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081114g.jpg" width="353">
The University of Michigan&#39;s reading of consumer sentiment for the middle of this month remained near the low posted during October. The index ticked up to 57.9 from 57.6. The latest level was near the lowest for the series since this past June which in turn was the lowest since early-1980. The latest figure was higher than Consensus expectations for a reading of 56.0.
During the last ten years there has been a 55% correlation between the level of sentiment and the three-month change in real consumer spending.
The mid-month current conditions index improved modestly to 61.4 but it remained down by one-third from last year. The view of current personal finances ticked up m/m but remained down by more than one-third from last year. The index of buying conditions for large household goods recouped about one-third of the October decline but remained off 30.9% y/y and near the lowest since 1980.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081114h.jpg" width="353">
The expectations component of consumer sentiment was down. A 2.3% m/m decline this month came on top of the 15.2% October drop. The figures were, however, slightly above the lows reached this past Spring. Expectations for business conditions during the next years fell slightly as did expectations for conditions during the next year, but they both remained up from their recent lows. The expected change in personal finances ticked higher by 0.9% m/m and the reading was up 10% from the Spring low.
The opinion of government policy, which apparently influences economic expectations, also ticked up from October (-35.4% y/y). Only a slightly improved seven percent of respondents thought that a good job was being done by government while 54% thought a poor job was being done. That was near the highest percentage on record.
Recent economic weakness and lower oil prices caused inflation expectations to fall. The mean expected rate of inflation during the next year plummeted to 2.9% from 4.3% last month. It was as high as 7.0% in May. The expected inflation rate during the next five years ticked up to 3.3%, near the lowest level since 2003.
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database, with details in the proprietary UMSCA database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Mid-November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">November y/y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>57.9</td>
<td>57.6</td>
<td>70.3</td>
<td>-23.9%</td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>61.4</td>
<td>58.4</td>
<td>75.0</td>
<td>-32.9</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>55.7</td>
<td>57.0</td>
<td>67.2</td>
<td>-15.9</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
</body>
</html>

The University of Michigan's reading of consumer sentiment for the middle of this month remained near the low posted during October. The index ticked up to 57.9 from 57.6. The latest level was near the lowest for the series since this [...]

Michigan Reading of Consumer Sentiment Remained Glum

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081114e.jpg" width="353">
Total U.S. import prices fell another 4.7% last month following the little-revised 3.3% September drop. Consensus expectations had been for a 4.4% drop during October.
Petroleum prices cratered another 16.7% and this month imported crude petroleum prices are down another 19% m/m.
During October import prices less petroleum fell 0.9%, the same as during September. During the last three months prices fell at an 8.4% annual rate versus the 12 to 13% rates of positive growth this past spring.
 Growth in import prices will slow further given the recent rise in the foreign exchange value of the dollar. During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a reduced 47% against a broader basket of currencies.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081114e.jpg" width="353">
Capital goods import prices fell 0.2% after two months of no change. On a three-month basis prices fell at a 0.9% annual rate after a 5% to 6% rate of increase earlier this year. Less the lower prices of computers, capital goods prices ticked 0.1% lower but three month growth was just 1.1% after 9% growth earlier this year. Prices of computers, peripherals &amp; accessories were down at a 6.8% rate during the last three months.
Finally, prices for nonauto consumer goods ticked up 0.1% and the 0.4% rate of increase during the last three months is down from the 5.9% peak earlier this year. Durable goods prices overall rose at a 1.2% rate during the last three months versus a 6.2% rate of increase earlier this year.
Total export prices fell another 1.9% due to an 8.7% (+5.7% y/y) decline in agricultural prices which followed a 0.1% September uptick. Nonagricultural export prices slumped another 1.2% (+4.0% y/y), the third consecutive monthly decline.

<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/@E807/@E807.HTM">Import/Export Prices (NSA, %)</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>-4.7</td>
<td>-3.3</td>
<td>6.7</td>
<td>4.2</td>
<td>4.9</td>
<td>7.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-16.7</td>
<td>-10.2</td>
<td>13.1</td>
<td>11.6</td>
<td>20.6</td>
<td>37.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>-0.9</td>
<td>-0.9</td>
<td>5.0</td>
<td>2.7</td>
<td>1.7</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">Export- All Commodities</td>
<td>-1.9</td>
<td>-0.8</td>
<td>4.2</td>
<td>4.9</td>
<td>3.6</td>
<td>3.2</td>
</tr>
</tbody>
</table>


</html>

Total U.S. import prices fell another 4.7% last month following the little-revised 3.3% September drop. Consensus expectations had been for a 4.4% drop during October. Petroleum prices cratered another 16.7% and this month imported [...]

U.S. Import Prices Fell Again; Oil & Nonoil Prices Lower

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081114d.jpg" align="left" border="0" height="265" width="353">
The decline in US, UK and EMU GDP growth is all occurring at
once. Yr/Yr GDP growth is in a slowing down mode with the slowing at a
rather severe pace. We can see that the degree of slowdown and the low
pace of growth are both comparable to the decelerations in 2000-2001.
At that time the decelerating came from a higher pace of growth to
start with. 
 

While the US is being made the &#8216;poster boy of the downturn&#8217; in
terms of being the cause of this recession, the data show us that the
persisting sharp slowing in growth began in EMU as its currency rose
above level that growth in that region could tolerate.. The decline in
the UK growth rate came later and has been synchronous with the decline
in the US growth but UK growth has fallen harder- from a higher initial
pace. 
 

The US suffered worse in the earlier cycle, around the year
2000, as its growth dropped from an above European pace to a below
European pace at the trough. But the US economy subsequently had a
recovery phase that was quite robust pushing US growth above the growth
rates in EMU and the UK from 2003 &#8211; 2006. Then US growth began to get
erratic. But the ongoing cyclical weakness in the US did not start
again until nearly four quarters after EMU&#8217;s GDP began to make its
ongoing turn for the worse at the of 2006. EMU Yr/Yr growth peaked late
in 2006 at 3.3% and has since then been steadily eroding. 
 

Right now the UK, EMU and the US (Japan, and many others, too)
are engulfed n a synchronous downturn. And it has begun to create
tensions. 
 

In the US, the automakers are in trouble as unit auto sales
slipped to just above a 10mu unit rate last month an extremely low pace
that implies crushing overhead costs from fixed business charges. .
With a huge number of jobs linked to the auto sector, the US is
concerned that GM, Ford and Chrysler are in such straights. And with a
bailout plan that has been used to help financial firms there is now a
clamoring in the US to help the auto makers. But in Europe auto sales
are weak too; there sales have fallen for six months running. The
European Commission warned it would contest any U.S. bailout for the
sector that broke state aid rules. Insurers in Europe have withdrawn
credit protection for auto suppliers that protected them in the event
of bankruptcies of the US auto makers. Asian and European automakers
are feeling the pinch but still are not in the desperate circumstances
that US car makers face. 
 
The EU Threat 

"We are in the process of analyzing the &lt;US&gt;
plan. The plan has not yet been presented yet. Of course, if it is
illegal state aid, we will act at a WTO level," Commission President
Jose Manuel Barroso has said. So the lines are drawn. The risk is
protectionism and its ability to create a deep downward spiral since it
is hard to imagine that the US would let a European protest stand in
the way of supporting the automakers. And if the US did that the
Europeans surely would gain some WTO sanctioned recourse to retaliate
and that is how the mess gets out of hand. 
 

So yes, economies are weak. Financial sectors are strained.
Central banks are cutting rates. There have been some assistance plans.
In the US where import penetration is the most freely allowed, the US
automakers are feeling the pinch. As US lawmakers argue about remedies
for the &#8216;Big Three&#8217; European&#8217;s plan a surprise attack of their own
through WTO. If you think the only risk here is the economic downturn
and the financial sector, you are fooling yourself. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Euro-Area
and main G-10 country GDP Results</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Quarter over quarter-Saar</td>
<td colspan="4">Year/Year</td>
</tr>
<tr>
<td class="firstcol">GDP</td>
<td>Q3-08</td>
<td>Q2-08</td>
<td>Q1-08</td>
<td>Q3-08</td>
<td>Q2-08</td>
<td>Q1-08</td>
<td>Q4-07</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU-15</td>
<td>-0.8%</td>
<td>-0.7%</td>
<td>2.7%</td>
<td>0.7%</td>
<td>1.4%</td>
<td>2.1%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.6%</td>
<td>-1.1%</td>
<td>1.6%</td>
<td>0.6%</td>
<td>1.2%</td>
<td>2.0%</td>
<td>2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-2.1%</td>
<td>-1.7%</td>
<td>5.7%</td>
<td>0.8%</td>
<td>1.9%</td>
<td>2.7%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-2.0%</td>
<td>-1.8%</td>
<td>2.1%</td>
<td>-0.9%</td>
<td>-0.2%</td>
<td>0.4%</td>
<td>0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">The Netherlands</td>
<td>0.1%</td>
<td>0.0%</td>
<td>1.3%</td>
<td>1.6%</td>
<td>2.9%</td>
<td>3.7%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>-2.1%</td>
<td>0.0%</td>
<td>1.1%</td>
<td>0.3%</td>
<td>1.5%</td>
<td>2.4%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">US</td>
<td>-0.3%</td>
<td>2.8%</td>
<td>0.9%</td>
<td>0.8%</td>
<td>2.1%</td>
<td>2.5%</td>
<td>2.3%</td>
</tr>
</tbody>
</table>
</body></html>

The decline in US, UK and EMU GDP growth is all occurring at once. Yr/Yr GDP growth is in a slowing down mode with the slowing at a rather severe pace. We can see that the degree of slowdown and the low pace of growth are both [...]

Europe's GDP and the Auto Sector Woes

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081114a.jpg" width="353">
The Commerce Department reported this morning that retail sales dropped 2.8% last month after little revised declines during September and August. The decline exceeded Consensus expectations for a 2.0% drop. Lower vehicle sales, and lower prices for the fuel used to power them, accounted for most of last month&#39;s sales&#39; decline. But there was notable weakness elsewhere. The retail sales data are contained in Haver&#39;s USECON database.
Motor vehicle &amp; parts sales dropped 5.5% after the 4.8% plunge during September. As a result of these outsized declines, sales last month were roughly one quarter the year-ago level. The drop mirrors the 34.2% y/y drop reported last week in unit sales of motor vehicles.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081114b.jpg" width="353">
Sales at gasoline service stations dropped 12.7% month-to-month (+0.4% y/y) as gasoline prices fell 17.6% m/m to an average of $3.05 per gallon. Another downward leg is in store for November retail sales given that gasoline prices already have fallen 27% from their October average to $2.22.
Retail sales less autos and gasoline are on a steep downward trend as well. These sales fell 0.5% which marked the third consecutive monthly decline. For nonauto sales alone, the 3.8% three-month decline is the largest in the series&#39; history which extends back to the 1960s.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081114c.jpg" width="353">
Sales at furniture and electronics &amp; appliance stores fared the worst over the latest three months. They dropped 2.4% during October (-9.7% y/y) and were off 7.2% over the last three months alone. Furniture store sales fell 2.5% during October (-13.5% y/y), for their fourth consecutive monthly drop, and sales of electronics &amp; appliance stores were off by 2.3% (-5.6% y/y). They&#39;re down by 6.6% over the last three months.
Apparel store sales hardly did much better, down 1.4% last month (-4.0% y/y) and they were off 5.7% during the last three. Sales at general merchandise stores have done little better. With their 0.4% decline last month (+2.3% y/y) they posted a 1.7% three-month drop.
And people aren&#39;t dining out much either. Restaurant &amp; drinking place sales did rise 0.3% last month, but the y/y gain of 3.9% compares to 5.2% growth last year and 6.0%+ growth during the prior three years. They&#39;re curtailing spending even as they eat at home. Grocery store sales during the last three months rose just 0.4% after a 4.8% gain during all of last year. Finally, consumers restrained their on-line shopping. Sales of nonstore retailers (mostly electronic shopping) fell 1.8% last month +1.4% y/y) and sales were off 4.2% during the last three months.
Sales of building materials and garden equipment fell 0.4% (-1.5% y/y), their fourth down month in the last five.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a> (%)</td>
<td>-2.8</td>
<td>-1.3</td>
<td>-0.7</td>
<td>-4.1</td>
<td>4.1</td>
<td>5.8</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>-2.2</td>
<td>-0.5</td>
<td>-1.1</td>
<td>1.0</td>
<td>4.5</td>
<td>6.8</td>
<td>7.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Less Gasoline</td>
<td>-0.5</td>
<td>-0.6</td>
<td>-0.8</td>
<td>1.0</td>
<td>4.1</td>
<td>6.2</td>
<td>6.4</td>
</tr>
</tbody>
</table>
</body>
</html>

The Commerce Department reported this morning that retail sales dropped 2.8% last month after little revised declines during September and August. The decline exceeded Consensus expectations for a 2.0% drop. Lower vehicle sales, and [...]

U.S. Retail Sales Drop With Gasoline Prices, Vehicle & Most Other Sales

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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: November 2008

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