Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050318a.jpg" width="353">
Import prices rose 0.8% last month and about matched Consensus expectations for a 0.7% rise. The prior month&#39;s increase was revised down slightly due to a lessened gain in petroleum prices but the estimated rise in nonpetroleum prices was revised higher.
Petroleum prices jumped 3.9% on top of the 3.4% surge the prior month. So far in March the price of Brent Crude oil has averaged $52.15 per barrel, up 14.2% versus the $45.66 averaged last month.
Other than oil, import prices continued to move moderately higher. Prices for nonauto consumer goods rose 0.2% (1.0% y/y) though prices in most categories were little changed. Capital goods prices also were unchanged m/m (-0.6% y/y) but lower computer prices (-0.4% m/m, -6.8% y/y) accounted for most of the weakness. Excluding computers capital goods prices rose 0.2% (2.5% y/y) and contrasted with price deflation in excess of 2% early in 2002.
Export prices were unchanged last month as a 0.9% decline (-8.2% y/y) in agricultural prices offset a 0.1% (4.7% y/y) gain in nonagricultural export prices.
<a href="http://www.bos.frb.org/economic/neer/neer2002/neer102a.pdf">Exchange Rates and the Prices of Manufacturing Products Imported into the United States</a> is a 2002 article from the Federal Reserve Bank of New England.

<table border="0" cellspacing="0" width="100%">
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<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">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>0.8%</td>
<td>0.7%</td>
<td>6.1%</td>
<td>5.6%</td>
<td>2.9%</td>
<td>-2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>3.9%</td>
<td>3.4%</td>
<td>26.6%</td>
<td>30.4%</td>
<td>21.0%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.9%</td>
<td>2.6%</td>
<td>1.1%</td>
<td>-2.4%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.0%</td>
<td>0.9%</td>
<td>3.4%</td>
<td>3.9%</td>
<td>1.6%</td>
<td>-1.0%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Faded Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 18, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050318b.jpg" width="353">
The preliminary March reading of consumer sentiment from the University of Michigan fell to 92.9. The 1.3% m/m fall was similar to the declines logged during the prior two months. Consensus expectations had been for a slight rise to 94.8. During the last ten years there has been a 75% correlation between the level of consumer sentiment and the y/y change in real PCE.
The reading of current conditions fell for the second month. The 1.7% decline was led by a 6.0% drop (-7.3% y/y) in the sentiment of families earning more than $50,000 per year. Sentiment in families earning less than $50,000 per year rose 7.0% (0.8% y/y).
Consumer expectations slipped 0.9% (-5.9% y/y) for the third consecutive monthly decline as the expected change in real income fell 4.7% (-8.0% y/y).
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.
Reexamining the Consumption-Wealth Relationship: The Role of Uncertainty from the Federal Reserve Bank of New York is Available <a href="http://www.newyorkfed.org/research/staff_reports/sr202.html"> here</a>.

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<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">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>92.9</td>
<td>94.1</td>
<td>-3.0%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>107.3</td>
<td>109.2</td>
<td>0.5%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>83.6</td>
<td>84.4</td>
<td>-5.9%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
</table>
Italian Trade Renews Expansion, but Sustains First Annual Deficit in 12 Years 
by <a href="/comment/Stone.html">Carol Stone</a> March 18, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050318c.jpg" width="353">
Italy&#39;s merchandise trade accounts have turned to a deficit position, with the total balance for 2004 in deficit for the first time since 1992. In January, reported today by Italy&#39;s National Institute of Statistics, the deficit was &#128;554 million, seasonally adjusted, nearly the same as December&#39;s &#128;609 million. Exports eased &#128;168 million, while imports were off &#128;223 million. Longer trends in exports and imports indicate that adverse developments on both sides of the trade accounts generated the deficit.
Exports drifted downward from late 2001 until early last spring. This slack was reflected in shipments to customers elsewhere in the EU and also to non-EU areas; see the accompanying graph. By type of product, all three major categories were flat: consumer goods, investment goods and intermediate products. The latter two have rebounded in recent months, while consumer goods exports remain sluggish.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050318d.jpg" width="353">
Imports didn&#39;t expand in that 2001-2003 period, but they did stay steady as exports declined, and they have run up rapidly since last April. The surge in energy prices is an obvious driver of this growth, but notably, consumer, investment and intermediate goods categories have all participated, nearly equally. It will be interesting in coming months to see if the continuing pressure on energy prices will eventually eat into demand for other goods and services, in Italy, but also among Italy&#39;s trading partners.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/ITALY/ITALY.HTM">Italy: Trade</a></th>
<th scope="col">Jan 2005</th>
<th scope="col">Dec 2004</th>
<th scope="col">Nov 2004</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Trade Balance, Months SA, Mil.Euros</td>
<td>-554</td>
<td>-609</td>
<td>-170</td>
<td>-1513</td>
<td>+2751</td>
<td>+8815</td>
</tr>
<tr>
<td class="firstcol">Exports, NSA, Yr/Yr % Chg </td>
<td>11.0</td>
<td>18.7</td>
<td>15.3</td>
<td>7.7</td>
<td>-2.0</td>
<td>-1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports, NSA, Yr/Yr % Chg</td>
<td>7.4</td>
<td>20.5</td>
<td>19.1</td>
<td>9.4</td>
<td>0.3</td>
<td>-1.1</td>
</tr>
<tr>
<td class="firstcol">Energy, NSA, % of Imports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">EU25, Months SA, Mil.Euros</td>
<td>-490</td>
<td>-486</td>
<td>-117</td>
<td>-2799</td>
<td>-197</td>
<td>+1045</td>
</tr>
<tr class="odd">
<td class="firstcol">Non-EU25, Months SA, Mil.Euros</td>
<td>-64</td>
<td>-123</td>
<td>-53</td>
<td>+1288</td>
<td>+2949</td>
<td>+7772</td>
</tr>
</tbody>
</table>
</body>
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Import prices rose 0.8% last month and about matched Consensus expectations for a 0.7% rise. The prior month's increase was revised down slightly due to a lessened gain in petroleum prices but the estimated rise in nonpetroleum prices [...]

Imported Price Inflation Up

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/050317c.jpg" width="353">
Canada&#39;s overall financial condition improved markedly in 2004, according to National Balance Sheet data report today by Statistics Canada. Total assets grew 5.7% and nonfinancial assets also grew 5.7%, both more than in 2003. Nonfinancial assets include buildings, equipment, consumer durable goods and the value of land; this sum is also known as &quot;national wealth&quot;. Total liabilities expanded by 5.1%, more than the year before, but less than assets. So the difference, a measure of net worth for the entire economy, grew by 6.9% to nearly C$4.4 trillion. These data are all contained in Haver&#39;s CANSIM database.
Total assets in Canada have grown more rapidly than total liabilities since the middle of 1999, as seen in the first chart. Growth of both slowed with sagging share values and the slowdown in activity during 2001, but assets have remained on a stronger uptrend than liabilities. Nonfinancial assets have increased at a higher rate than liabilities since 2002.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050317d.jpg" width="353">
These overall relationships in the Canadian economy and financial system have an interesting relationship to the value of the Canadian currency. The second chart shows a substantial 92% correlation between the ratio of net worth to total liabilities and an index of the Canadian dollar against six other currencies. This ratio may be seen as an indication of leverage: how big is the role of debt in financing macroeconomic activity the nation. It seems intuitive that such a fundamental measure of economic conditions might influence the currency value. In the last couple of years, the weakness of the US dollar may have dominated as a determinant of the exchange rate. Even so, through the 15-year history of the balance sheet data, it is fascinating that the Canadian dollar weakened as long as net worth deteriorated relative to borrowing, but has tended higher since that ratio turned upward in 1999.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CANADA.HTM">Canada</a> Billions Canadian $</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Assets</td>
<td>12,865.0</td>
<td>12,171.0</td>
<td>11,789.5</td>
<td>11,240.1</td>
<td>10,636.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>5.7</td>
<td>3.2</td>
<td>4.9</td>
<td>5.7</td>
<td>7.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Nonfinancial Assets (National Wealth)</td>
<td>4,420.8</td>
<td>4,182.2</td>
<td>3,977.6</td>
<td>3,747.6</td>
<td>3,559.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>5.7</td>
<td>5.1</td>
<td>6.1</td>
<td>5.3</td>
<td>5.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Liabilities*</td>
<td>8,495.4</td>
<td>8,084.8</td>
<td>7,883.4</td>
<td>7,572.1</td>
<td>7,174.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>5.1</td>
<td>2.6</td>
<td>4.1</td>
<td>5.5</td>
<td>6.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Worth (Assets - Liabilities)</td>
<td>4,369.5</td>
<td>4,086.2</td>
<td>3,906.1</td>
<td>3,668.0</td>
<td>3,461.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>6.9</td>
<td>4.6</td>
<td>6.5</td>
<td>6.0</td>
<td>7.9</td>
</tr>
</tbody>
</table>
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Canada's overall financial condition improved markedly in 2004, according to National Balance Sheet data report today by Statistics Canada. Total assets grew 5.7% and nonfinancial assets also grew 5.7%, both more than in 2003. [...]

Canadian Asset Growth Outstrips Liabilities in 2004, A Fundamental Improvement Supporting Currency Value

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050317e.jpg" width="353">
The Philadelphia Fed&#39;s Index of General Business Conditions in the manufacturing sector fell in March to 11.4 from an unrevised 23.9 in February. Consensus expectations had been for a reading of 20.0. The latest was the lowest reading since July 2003.
During the last ten years there has been a 69% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 52% correlation with q/q growth in real GDP.
The shipments index fell a hard 9.1 points. The number of employees fell 2.2 points and the index level is half what it was last summer but new orders rose again off the January low. During the last ten years there has been a 64% 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.
The separate index of expected business conditions in six months improved moderately to the highest level this year.
The prices paid index fell again, to the lowest level since November 2003. During the last ten years there has been a 75% correlation between the prices paid index and the three month growth in the intermediate goods PPI. The correlation with the finished goods PPI has been 50% and with the CPI it&#39;s been 43%.
The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0305.html">here</a>.

<table border="0" cellspacing="0" width="100%">
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<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">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>11.4</td>
<td>23.9</td>
<td>27.5</td>
<td>28.1</td>
<td>10.6</td>
<td>7.7</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>29.7</td>
<td>43.5</td>
<td>49.6</td>
<td>51.3</td>
<td>16.8</td>
<td>12.3</td>
</tr>
</tbody>
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The Philadelphia Fed's Index of General Business Conditions in the manufacturing sector fell in March to 11.4 from an unrevised 23.9 in February. Consensus expectations had been for a reading of 20.0. The latest was the lowest reading [...]

Philadelphia Fed Activity Index Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050317b.jpg" width="353">
The Conference Board reported that the Composite Index of Leading Economic Indicators ticked 0.1% higher in February following an unrevised 0.3% decline the prior month. Six-month growth in the leaders remained negative at -0.2%. Growth in the leaders deeper than -2.5% preceded past US recessions.
The breadth of one month gain amongst the 10 components of the leading index improved markedly to 60% from a downwardly revised 25% in January. Fewer claims for unemployment insurance and higher stock prices were the main positive contributors to last month&#39;s leading index increase.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators recovered 0.4% following a downwardly revised 0.6% decline in January. Six-month growth in the index was 3.3% and during the last ten years there has been an 84% correlation between six month growth in the coincident indicators and two quarter growth in real GDP.
The lagging indicators rose 0.4% and have been moving higher for most of the last year versus declines during the prior three years. Higher C&amp;I loans account for much of the gain.
The ratio of the coincident to the lagging indicators which measures actual economic performance relative to excess rose 0.5% (3.1% y/y).
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">6-Month Chg</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>0.1%</td>
<td>-0.3%</td>
<td>-0.2%</td>
<td>3.0%</td>
<td>1.3%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.4%</td>
<td>-0.6%</td>
<td>3.3%</td>
<td>2.6%</td>
<td>0.4%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.4%</td>
<td>1.0%</td>
<td>1.0%</td>
<td>-2.0%</td>
<td>-1.9%</td>
<td>-2.3%</td>
</tr>
</tbody>
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</body>
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The Conference Board reported that the Composite Index of Leading Economic Indicators ticked 0.1% higher in February following an unrevised 0.3% decline the prior month. Six-month growth in the leaders remained negative at -0.2%. [...]

Leading Indicators Tick Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050317a.jpg" width="353">
Initial claims for unemployment insurance fell 10,000 to 318,000 last week after a revised 18,000 increase the prior week. Consensus expectations had been for 317,000 claims.
The latest figure covers the survey period for March nonfarm payrolls and claims were up 15,000 (5.0%) from the February period.
During the last ten years there has been a (negative) 75% correlation between the level of initial claims for unemployment insurance and the monthly change in payroll employment. There has been a (negative) 66% correlation with the level of continuing claims.
The four week moving average of initial claims rose to 316,500 (-7.5% y/y).
Continuing claims for unemployment insurance fell 48,000 from the prior week and the insured rate of unemployment remained at 2.1%.
Federal Reserve Board Chairman Alan Greenspan&#39;s testimony titled Future of the Social Security program and economics of retirement can be found <a href="http://www.federalreserve.gov/boarddocs/testimony/2005/20050315/default.htm"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">03/12/05</th>
<th scope="col">03/05/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>318</td>
<td>328</td>
<td>-4.5%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,647</td>
<td>-14.0%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
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Initial claims for unemployment insurance fell 10,000 to 318,000 last week after a revised 18,000 increase the prior week. Consensus expectations had been for 317,000 claims. The latest figure covers the survey period for March [...]

Initial Claims for Unemployment Insurance Lower

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050317e.jpg" width="353">
The Philadelphia Fed&#39;s Index of General Business Conditions in the manufacturing sector fell in March to 11.4 from an unrevised 23.9 in February. Consensus expectations had been for a reading of 20.0. The latest was the lowest reading since July 2003.
During the last ten years there has been a 69% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 52% correlation with q/q growth in real GDP.
The shipments index fell a hard 9.1 points. The number of employees fell 2.2 points and the index level is half what it was last summer but new orders rose again off the January low. During the last ten years there has been a 64% 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.
The separate index of expected business conditions in six months improved moderately to the highest level this year.
The prices paid index fell again, to the lowest level since November 2003. During the last ten years there has been a 75% correlation between the prices paid index and the three month growth in the intermediate goods PPI. The correlation with the finished goods PPI has been 50% and with the CPI it&#39;s been 43%.
The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0305.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/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>11.4</td>
<td>23.9</td>
<td>27.5</td>
<td>28.1</td>
<td>10.6</td>
<td>7.7</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>29.7</td>
<td>43.5</td>
<td>49.6</td>
<td>51.3</td>
<td>16.8</td>
<td>12.3</td>
</tr>
</tbody>
</table>
Initial Claims for Unemployment Insurance Lower 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 17, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050317a.jpg" width="353">
Initial claims for unemployment insurance fell 10,000 to 318,000 last week after a revised 18,000 increase the prior week. Consensus expectations had been for 317,000 claims.
The latest figure covers the survey period for March nonfarm payrolls and claims were up 15,000 (5.0%) from the February period.
During the last ten years there has been a (negative) 75% correlation between the level of initial claims for unemployment insurance and the monthly change in payroll employment. There has been a (negative) 66% correlation with the level of continuing claims.
The four week moving average of initial claims rose to 316,500 (-7.5% y/y).
Continuing claims for unemployment insurance fell 48,000 from the prior week and the insured rate of unemployment remained at 2.1%.
Federal Reserve Board Chairman Alan Greenspan&#39;s testimony titled Future of the Social Security program and economics of retirement can be found <a href="http://www.federalreserve.gov/boarddocs/testimony/2005/20050315/default.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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">03/12/05</th>
<th scope="col">03/05/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>318</td>
<td>328</td>
<td>-4.5%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,647</td>
<td>-14.0%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
Leading Indicators Tick Higher 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 17, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050317b.jpg" width="353">
The Conference Board reported that the Composite Index of Leading Economic Indicators ticked 0.1% higher in February following an unrevised 0.3% decline the prior month. Six-month growth in the leaders remained negative at -0.2%. Growth in the leaders deeper than -2.5% preceded past US recessions.
The breadth of one month gain amongst the 10 components of the leading index improved markedly to 60% from a downwardly revised 25% in January. Fewer claims for unemployment insurance and higher stock prices were the main positive contributors to last month&#39;s leading index increase.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators recovered 0.4% following a downwardly revised 0.6% decline in January. Six-month growth in the index was 3.3% and during the last ten years there has been an 84% correlation between six month growth in the coincident indicators and two quarter growth in real GDP.
The lagging indicators rose 0.4% and have been moving higher for most of the last year versus declines during the prior three years. Higher C&amp;I loans account for much of the gain.
The ratio of the coincident to the lagging indicators which measures actual economic performance relative to excess rose 0.5% (3.1% y/y).
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">6-Month Chg</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>0.1%</td>
<td>-0.3%</td>
<td>-0.2%</td>
<td>3.0%</td>
<td>1.3%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.4%</td>
<td>-0.6%</td>
<td>3.3%</td>
<td>2.6%</td>
<td>0.4%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.4%</td>
<td>1.0%</td>
<td>1.0%</td>
<td>-2.0%</td>
<td>-1.9%</td>
<td>-2.3%</td>
</tr>
</tbody>
</table>
Canadian Asset Growth Outstrips Liabilities in 2004, A Fundamental Improvement Supporting Currency Value 
by <a href="/comment/Stone.html">Carol Stone</a> March 17, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050317c.jpg" width="353">
Canada&#39;s overall financial condition improved markedly in 2004, according to National Balance Sheet data report today by Statistics Canada. Total assets grew 5.7% and nonfinancial assets also grew 5.7%, both more than in 2003. Nonfinancial assets include buildings, equipment, consumer durable goods and the value of land; this sum is also known as &quot;national wealth&quot;. Total liabilities expanded by 5.1%, more than the year before, but less than assets. So the difference, a measure of net worth for the entire economy, grew by 6.9% to nearly C$4.4 trillion. These data are all contained in Haver&#39;s CANSIM database.
Total assets in Canada have grown more rapidly than total liabilities since the middle of 1999, as seen in the first chart. Growth of both slowed with sagging share values and the slowdown in activity during 2001, but assets have remained on a stronger uptrend than liabilities. Nonfinancial assets have increased at a higher rate than liabilities since 2002.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050317d.jpg" width="353">
These overall relationships in the Canadian economy and financial system have an interesting relationship to the value of the Canadian currency. The second chart shows a substantial 92% correlation between the ratio of net worth to total liabilities and an index of the Canadian dollar against six other currencies. This ratio may be seen as an indication of leverage: how big is the role of debt in financing macroeconomic activity the nation. It seems intuitive that such a fundamental measure of economic conditions might influence the currency value. In the last couple of years, the weakness of the US dollar may have dominated as a determinant of the exchange rate. Even so, through the 15-year history of the balance sheet data, it is fascinating that the Canadian dollar weakened as long as net worth deteriorated relative to borrowing, but has tended higher since that ratio turned upward in 1999.

<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/CANADA.HTM">Canada</a> Billions Canadian $</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Assets</td>
<td>12,865.0</td>
<td>12,171.0</td>
<td>11,789.5</td>
<td>11,240.1</td>
<td>10,636.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>5.7</td>
<td>3.2</td>
<td>4.9</td>
<td>5.7</td>
<td>7.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Nonfinancial Assets (National Wealth)</td>
<td>4,420.8</td>
<td>4,182.2</td>
<td>3,977.6</td>
<td>3,747.6</td>
<td>3,559.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>5.7</td>
<td>5.1</td>
<td>6.1</td>
<td>5.3</td>
<td>5.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Liabilities*</td>
<td>8,495.4</td>
<td>8,084.8</td>
<td>7,883.4</td>
<td>7,572.1</td>
<td>7,174.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>5.1</td>
<td>2.6</td>
<td>4.1</td>
<td>5.5</td>
<td>6.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Worth (Assets - Liabilities)</td>
<td>4,369.5</td>
<td>4,086.2</td>
<td>3,906.1</td>
<td>3,668.0</td>
<td>3,461.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>6.9</td>
<td>4.6</td>
<td>6.5</td>
<td>6.0</td>
<td>7.9</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/050316f.jpg" width="353">
UK labor market data published today show further evidence of strength in the UK economy. The unemployment rate remained steady at 4.7% for the 3 months surrounding December (i.e., November, December and January), the lowest since the third quarter of 1975, nearly 30 years ago. The related &quot;claimant count&quot; was 813,300 in February, the lowest since June 1975.
Employment rose. The labor force measure, the number of people saying they have jobs, rose 46,000 to 28.57 million, a new high. This too is a 3-month centered moving average for December, compared to the November figure. The count of jobs in Q4 rose 126,000 to 30.53 million, reversing a dip in Q3.
Analysts today said they believe that the firm employment figures are not likely to prompt immediate monetary tightening by the Bank of England, since wage rates remained moderate. The average earnings index (AEI) for January (a 3-month moving average ending in January) was up 4.4% on a year ago, the same as the December figure. Despite some forecasts for a reduction to 4.2%, analysts based their expectation of steady monetary policy on a threshold of 4.5% that the Bank is said to use for consideration of interest rate increases.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050316g.jpg" width="353">
These wage rates and employment are linked, as seen in the second graph. Correlation over the last 10 years of the AEI with the year-on-year growth in workforce jobs has been positive and a notable 69% for the employment data with a two-quarter lead. Thus, as employment growth picks up, wages might be expected to accelerate some six months later; similarly, if employment growth slows, wage gains should diminish over time as well. This positive relationship with employment appearing to move ahead of wages suggests that the UK labor market is demand driven. A supply-oriented market would have wage movements leading employment.

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</table>
<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/UK/UK.HTM">United Kingdom:</a> All seasonally adjusted</th>
<th scope="col">Feb 2005</th>
<th scope="col">Jan 2005</th>
<th scope="col">Dec 2005</th>
<th scope="col">Nov 2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Unemployment Rate (%)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>4.7*</td>
<td>4.7*</td>
<td>4.7</td>
<td>5.0</td>
<td>5.2</td>
</tr>
<tr>
<td class="firstcol">Claimant Count (thous.)</td>
<td>813</td>
<td>814</td>
<td>824</td>
<td>832</td>
<td>854</td>
<td>933</td>
<td>947</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment (mil.)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>28.57*</td>
<td>28.52*</td>
<td>28.44</td>
<td>28.18</td>
<td>27.91</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Change</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>+46K</td>
<td>+30K</td>
<td>+0.9%</td>
<td>+0.9%</td>
<td>+0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Workforce Jobs</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>30.53 (Q4)</td>
<td>30.45</td>
<td>30.25</td>
<td>29.91</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Change</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>+126K vs. Q3</td>
<td>+0.7</td>
<td>+1.1</td>
<td>+0.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Earnings Index &quot;Headline Rate&quot;**</td>
<td>&nbsp;</td>
<td>4.4</td>
<td>4.4</td>
<td>4.2</td>
<td>4.3</td>
<td>3.4</td>
<td>3.5</td>
</tr>
</tbody>
</table>
</body>
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UK labor market data published today show further evidence of strength in the UK economy. The unemployment rate remained steady at 4.7% for the 3 months surrounding December (i.e., November, December and January), the lowest since the [...]

UK Unemployment Rate Holds to 30-Year Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050316e.jpg" width="353">
The National Association of Home Builders&#39; (NAHB) Composite Housing Market Index held at 69 in March versus an upwardly revised level in February.
Each of the index components held about at the February levels including the indexes of current and prospective sales which both were up solidly versus last last year.
During the last twenty years, annual changes in the composite index had an 83% correlation with the change in new home sales. There&#39;s been an 86% correlation with the change in single family housing starts.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the National Association of Home Builders using this <a href="http://www.nahb.org">link</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>69</td>
<td>69</td>
<td>66</td>
<td>68</td>
<td>64</td>
<td>61</td>
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The National Association of Home Builders' (NAHB) Composite Housing Market Index held at 69 in March versus an upwardly revised level in February. Each of the index components held about at the February levels including the indexes of [...]

NAHB Housing Market Index Stable

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

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

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Andrew Cates

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

250501Z1.jpg

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

250501Z2.jpg

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

250501Z3.jpg

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

250501Z4.jpg

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

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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

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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: March 2005

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Imported Price Inflation Up

Canadian Asset Growth Outstrips Liabilities in 2004, A Fundamental Improvement Supporting Currency Value

Philadelphia Fed Activity Index Fell

Leading Indicators Tick Higher

Initial Claims for Unemployment Insurance Lower

Philadelphia Fed Activity Index Fell

UK Unemployment Rate Holds to 30-Year Low

NAHB Housing Market Index Stable