Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060417e.jpg" width="353">
The April Empire State Index of General Business Conditions fell sharply to 15.81 from a downwardly revised March reading of 29.03. The figures are reported by the Federal Reserve Bank of New York and Consensus expectations had been for a lesser decline to 23.9.
Since the series&#39; inception in 2001 there has been a 76% correlation between the index level and the three month change in factory sector industrial production.
Most of the index components fell in April with both orders &amp; shipments at roughly half last month&#39;s level. The employment index, however, only gave back some of its surge in March and landed at 17.41 versus a 12.45 1Q average.
Pricing pressure fell slightly m/m and was at the lowest since lowest level since last August.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060417d.jpg" width="353">
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 index of expectations for business conditions in six months improved following two months of decline and expectations for future capital spending rose but just slightly.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.

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<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">April</th>
<th scope="col">Mar</th>
<th scope="col">April &#39;05 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
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</thead>
<tbody>
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<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>15.81</td>
<td>29.03</td>
<td>5.09</td>
<td>15.56</td>
<td>28.79</td>
<td>15.98</td>
</tr>
</tbody>
</table>
</body>
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The April Empire State Index of General Business Conditions fell sharply to 15.81 from a downwardly revised March reading of 29.03. The figures are reported by the Federal Reserve Bank of New York and Consensus expectations had been [...]

Empire State Index Fell Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060417b.jpg" width="353">
During March, overall industrial output rose another 0.6% and added to a downwardly revised 0.5% February increase. Consensus expectations had been for a 0.5% gain.
Factory sector output rose 0.5% after a revised 0.2% February decline that was initially reported as no change.
Motor vehicles &amp; parts production rebounded 1.5% (2.7% y/y) after a 1.1% February drop. Excluding motor vehicles, factory output increased 0.4% (5.0% y/y) but a slight increase initially reported for February was revised to a slight 0.1% decline. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060417c.jpg" width="353">
Output of computers, communication equipment and semiconductors increased 2.7% (23.2% y/y) as output of communications equipment rose 2.2% (29.6% y/y) and semiconductor production surged 3.5% (24.0% y/y). Factory output excluding both autos &amp; high tech rose 0.3% (3.7% y/y) after the revised 0.1% February decline. For 1Q, this measure of output rose 5.2% (AR).
Output of primary metals was unchanged (3.4% y/y) but machinery output rebounded 1.4% (5.2%) following two consecutive months of sharp decline. Electrical equipment &amp; appliance output likewise rebound from a February drop with a 0.7% increase (9.4% y/y). Output of furniture &amp; related products rose but the 0.4% (-1.2% y/y) increase followed a 0.6% rise during February that was half the gain initially reported.
Nondurables output recovered 0.3% (1.8% y/y) following a 0.3% February drop. Apparel output surged 2.1% (6.3% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060417a.jpg" width="353">
Total capacity utilization rose to 81.3% but utilization during February was revised lower. Factory sector utilization rose to 80.4% from 80.2% the prior month. During the last twenty years there has been a 36% correlation between the level of factory sector utilization and the y/y change in &quot;core&quot; producer prices. There also has been a 37% correlation with the change in core consumer prices.
Industrial capacity grew 0.1% (1.9% y/y) and the annual rate of growth is up from 1.3% last year and 0.3% during 2004. Factor sector capacity grew 0.2% (2.4% y/y) compared to 1.6% growth last year and 0.2% growth during 2004. Much of that growth has been in the high tech sector. Excluding high tech, factory sector capacity is up just 0.8% versus a 0.5% gain last year and a 0.2% decline the year prior.
Productivity Growth: Causes and Consequences from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2006/el2006-02.pdf"> here</a>.
A Leaner, More Skilled U.S. Manufacturing Workforce from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/current_issues/ci12-2.pdf"> here</a>.

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</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Industrial Production</td>
<td>0.6%</td>
<td>0.5%</td>
<td>3.6%</td>
<td>3.2%</td>
<td>4.1%</td>
<td>0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.5%</td>
<td>-0.2%</td>
<td>4.8%</td>
<td>3.9%</td>
<td>4.8%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Consumer Goods</td>
<td>0.4%</td>
<td>0.7%</td>
<td>1.8%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Business Equipment</td>
<td>0.8%</td>
<td>0.2%</td>
<td>10.8%</td>
<td>9.1%</td>
<td>9.3%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>81.3%</td>
<td>81.0%</td>
<td>79.9% (3/05)</td>
<td>80.1%</td>
<td>78.6%</td>
<td>75.7%</td>
</tr>
</tbody>
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During March, overall industrial output rose another 0.6% and added to a downwardly revised 0.5% February increase. Consensus expectations had been for a 0.5% gain. Factory sector output rose 0.5% after a revised 0.2% February decline [...]

Industrial Production Rose Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060417b.jpg" width="353">
During March, overall industrial output rose another 0.6% and added to a downwardly revised 0.5% February increase. Consensus expectations had been for a 0.5% gain.
Factory sector output rose 0.5% after a revised 0.2% February decline that was initially reported as no change.
Motor vehicles &amp; parts production rebounded 1.5% (2.7% y/y) after a 1.1% February drop. Excluding motor vehicles, factory output increased 0.4% (5.0% y/y) but a slight increase initially reported for February was revised to a slight 0.1% decline. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060417c.jpg" width="353">
Output of computers, communication equipment and semiconductors increased 2.7% (23.2% y/y) as output of communications equipment rose 2.2% (29.6% y/y) and semiconductor production surged 3.5% (24.0% y/y). Factory output excluding both autos &amp; high tech rose 0.3% (3.7% y/y) after the revised 0.1% February decline. For 1Q, this measure of output rose 5.2% (AR).
Output of primary metals was unchanged (3.4% y/y) but machinery output rebounded 1.4% (5.2%) following two consecutive months of sharp decline. Electrical equipment &amp; appliance output likewise rebound from a February drop with a 0.7% increase (9.4% y/y). Output of furniture &amp; related products rose but the 0.4% (-1.2% y/y) increase followed a 0.6% rise during February that was half the gain initially reported.
Nondurables output recovered 0.3% (1.8% y/y) following a 0.3% February drop. Apparel output surged 2.1% (6.3% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060417a.jpg" width="353">
Total capacity utilization rose to 81.3% but utilization during February was revised lower. Factory sector utilization rose to 80.4% from 80.2% the prior month. During the last twenty years there has been a 36% correlation between the level of factory sector utilization and the y/y change in &quot;core&quot; producer prices. There also has been a 37% correlation with the change in core consumer prices.
Industrial capacity grew 0.1% (1.9% y/y) and the annual rate of growth is up from 1.3% last year and 0.3% during 2004. Factor sector capacity grew 0.2% (2.4% y/y) compared to 1.6% growth last year and 0.2% growth during 2004. Much of that growth has been in the high tech sector. Excluding high tech, factory sector capacity is up just 0.8% versus a 0.5% gain last year and a 0.2% decline the year prior.
Productivity Growth: Causes and Consequences from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2006/el2006-02.pdf"> here</a>.
A Leaner, More Skilled U.S. Manufacturing Workforce from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/current_issues/ci12-2.pdf"> here</a>.

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</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Industrial Production</td>
<td>0.6%</td>
<td>0.5%</td>
<td>3.6%</td>
<td>3.2%</td>
<td>4.1%</td>
<td>0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.5%</td>
<td>-0.2%</td>
<td>4.8%</td>
<td>3.9%</td>
<td>4.8%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Consumer Goods</td>
<td>0.4%</td>
<td>0.7%</td>
<td>1.8%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Business Equipment</td>
<td>0.8%</td>
<td>0.2%</td>
<td>10.8%</td>
<td>9.1%</td>
<td>9.3%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>81.3%</td>
<td>81.0%</td>
<td>79.9% (3/05)</td>
<td>80.1%</td>
<td>78.6%</td>
<td>75.7%</td>
</tr>
</tbody>
</table>
Empire State Index Fell Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 17, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060417e.jpg" width="353">
The April Empire State Index of General Business Conditions fell sharply to 15.81 from a downwardly revised March reading of 29.03. The figures are reported by the Federal Reserve Bank of New York and Consensus expectations had been for a lesser decline to 23.9.
Since the series&#39; inception in 2001 there has been a 76% correlation between the index level and the three month change in factory sector industrial production.
Most of the index components fell in April with both orders &amp; shipments at roughly half last month&#39;s level. The employment index, however, only gave back some of its surge in March and landed at 17.41 versus a 12.45 1Q average.
Pricing pressure fell slightly m/m and was at the lowest since lowest level since last August.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060417d.jpg" width="353">
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 index of expectations for business conditions in six months improved following two months of decline and expectations for future capital spending rose but just slightly.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.

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</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">April &#39;05 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>15.81</td>
<td>29.03</td>
<td>5.09</td>
<td>15.56</td>
<td>28.79</td>
<td>15.98</td>
</tr>
</tbody>
</table>
 Household Confidence in Japan Weakens, but Still High by Historical Standards 
by <a href="/comment/Curley.html">Louise Curley</a> April 17, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060417f.jpg" width="353">
The March decline in consumer confidence among Japanese households is, in all likelihood, a non event. Confidence among Japanese households of two or more persons on a non seasonally adjusted basis (the headline measure) fell from 49.8 in February to 47.9 in March.However, the monthly series, which has been in existence only since April 2004, has consistently shown a decline in the last month of each quarter as shown in the first chart. Seasonally adjusted data are available only on a quarterly basis and are based on the unadjusted quarterly data going back to the second quarter of 1982. On this basis, confidence in the first quarter of 2006 was 48.2, up from 47.9 in the fourth quarter of 2005.
<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060417g.jpg" width="353"> Confidence is measured by a diffusion index. Expected changes in confidence are rated as follows: better (1), slightly better (.75), the same (.50), slightly worse (.25) and worse (0). The index is a weighted average of the expected changes. The March value of the index at 47.9 implies that there are more households who are less confident that conditions will remain the same or become slightly worse than those who are confident that conditions will be the same or will improve.However, the level of the index is probably less important than its trend. During the entire time in which the index has been available it very rarely has been above the 50 level. This may or may not be an indication that Japanese households are always overly pessimistic. What is important is whether the households are becoming more or less confident. As the attached chart shows, the improvement in confidence that has taken place since the fourth quarter, 2001 low point of 33, has reached a point where it is now among the highest levels recorded. (In the attached chart, which includes the recent monthly data and the historical quarterly data, the latter have been smoothed by using the &quot;interpolate&quot; option under Tools.)

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<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/JAPAN/@J8/@J806/@J806.HTM">Japan:</a></th>
<th scope="col">Mar 06</th>
<th scope="col">Feb 06</th>
<th scope="col">Jan 06</th>
<th scope="col">Dec 05</th>
<th scope="col">M/M %</th>
<th scope="col">2004</th>
<th scope="col">2003&nbsp;</th>
<th scope="col">2002&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Confidence (2 or more person households, nsa)</td>
<td>47.9</td>
<td>49.8</td>
<td>9.5</td>
<td>46.5</td>
<td>-3.82</td>
<td>47.3</td>
<td>45.6</td>
<td>37.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Q1 06</td>
<td>Q4 05</td>
<td>Q1 05</td>
<td>Q/Q %</td>
<td>Y/Y %</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Consumer Confidence (2 or more person households, sa)</td>
<td>48.2</td>
<td>42.9</td>
<td>45.5</td>
<td>12.3</td>
<td>5.9</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body>
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Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060414a.jpg" width="353">
This past week, the Federal Reserve Board published significant revisions to its data on commercial paper outstandings. The total amount of paper issued by all businesses is little changed, but several categories were reorganized or redefined. These changes give a much better description of this source of short-term corporate finance. The new data begin in 2001. The history for some series, including the total, has been linked, as explained below. The monthly data we discuss here are contained in Haver&#39;s main USECON database. The &quot;old&quot; data are still available in our storage place for old data, USARC06. Current weekly data reside in our basic WEEKLY database. The old pre-revision weekly data are not archived.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060414b.jpg" width="353">
The commercial paper market historically was best known as an alternative market funding source for nonfinancial corporations, at times when bank loans were seen as too expensive or possibly not available due to tight monetary policy. Finance companies, especially those affiliated with major auto companies and well-known consumer-credit lenders have also long issued paper. In recent years, usage of commercial paper has changed. In the mid-1990s, nonfinancial corporate issues were nearly 30% of total paper outstanding. This share began to drop precipitously just before the recession of 2001 and has stabilized but not recovered. In the March data, the nonfinancial segment constituted a mere 7.8% of the total, the lowest ever in the 37-year history of the data. These data were little revised in the Fed&#39;s new reorganization, and we have connected them directly to the former series.
Financial companies have also altered their approach to the market. Some paper is backed by companies&#39; general financial resources. Other commercial paper is backed by specific loans, including automobile and credit card debt. In the reorganization of the data, the Fed has pulled out this so-called &quot;asset-backed&quot; paper into a completely separate category. See in the second graph how rapidly that has expanded, particularly in just the past year. It grew 25% across 2005, and in the following three months has accelerated further to 28.3% growth in March over the year-ago month.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060414c.jpg" width="353">
Conventional finance company paper also continues to grow. Users, according to the Fed&#39;s flow-of-funds data (in Haver&#39;s FFUNDS database) include bank holding companies and so-called funding corporations, popularly known as hedge funds. Foreign issues have stepped up notably as well. This latter development is evident directly from the commercial paper data. In the third graph, we added foreign issuers and domestic issues for which the parent company is foreign. This sum has been climbing steeply, while domestic paper from U.S.-owned firms has risen only modestly since 2003 and remains well below its pre-recession level.
Note that all of these financial series, while titled similarly as before the Fed&#39;s new revisions, look very different. Probably the separation of all the asset-backed paper is a main reason. Also, some paper is now classified as backed by letters-of-credit, heretofore a minuscule item, but which now stands at about $30 billion. The Fed has additionally been more exacting, pulling out items where an issuer&#39;s domicile or industry is not clearly identified. So several series have been added which are titled &quot;other&quot;.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Seasonally Adj, Bil.$</th>
<th scope="col">Mar 2006</th>
<th scope="col">Feb 2006</th>
<th scope="col">Dec 2005</th>
<th scope="col">Dec 2004</th>
<th scope="col">Dec 2003</th>
<th scope="col">Dec 2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,705.1</td>
<td>1,687.5</td>
<td>1,631.0</td>
<td>1,375.7</td>
<td>1,260.7</td>
<td>1,341.2</td>
</tr>
<tr>
<td class="firstcol">Nonfinancial Companies</td>
<td>134.2</td>
<td>134.6</td>
<td>132.2</td>
<td>119.7</td>
<td>104.0</td>
<td>147.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Financial Companies</td>
<td>692.5</td>
<td>690.9</td>
<td>667.3</td>
<td>595.2</td>
<td>519.7</td>
<td>522.9</td>
</tr>
<tr>
<td class="firstcol">Asset-Backed</td>
<td>878.2</td>
<td>861.9</td>
<td>831.3</td>
<td>660.7</td>
<td>637.0</td>
<td>670.7</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">Memo: Financial + Asset-Backed</td>
<td>1,570.7</td>
<td>1,552.8</td>
<td>1,499.0</td>
<td>1,256.0</td>
<td>1,156.8</td>
<td>1,194.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Old &quot;Financial Companies&quot;</td>
<td>1,578.7</td>
<td>1,559.8</td>
<td>1,513.7</td>
<td>1,268.2</td>
<td>1,160.3</td>
<td>1,193.5</td>
</tr>
</tbody>
</table>
</body>
</html>

This past week, the Federal Reserve Board published significant revisions to its data on commercial paper outstandings. The total amount of paper issued by all businesses is little changed, but several categories were reorganized or [...]

Commercial Paper Shows Rapid Growth: Consumer-Credit-Backed Paper and Foreign Issuers Increase Their Share in [...]

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060413e.jpg" width="353">
As in the Continental countries we discussed here yesterday, business in the UK is showing some signs of picking up. The British Chambers of Commerce Quarterly Economic Survey, the largest business survey in the UK, showed modest gains in nearly every one of its components for Q1 in both manufacturing and services segments.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060413f.jpg" width="353">
For Q1-2006 estimates of home sales (that is, domestic sales) by manufacturing firms ticked up 2 points to 15% from 13% in Q4; this reading is also very slightly higher than the 14% of Q1 2005. These survey results are percent-balances, that is, the proportion of companies reporting gains minus the proportion with declines. An advance in export sales was greater, to 23% from 12% in Q4, although the breadth of sales gains remains below the 26% of Q1 2005. Manufacturers feel somewhat comfortable with their general business pace, as a net of 43% look for improvement in turnover in the next 12 months. Profits are another matter, however, with a drop to 21% in confidence about increasing profits over the coming year, compared with 34% a year ago. Price pressures from raw materials and overhead costs are indicated by a rising number of manufacturing companies; labor costs, though, are a source of concern at the smallest number of firms since mid-2004.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060413g.jpg" width="353">
More service-sector firms than manufacturers are pleased with their current domestic sales pace, with a net of 22% reporting sales increases, up from 18% in Q4. This does, however, represent some slippage from Q1-2005, at 23%. After outright declines during 2001 and 2003, export sales are now expanding at an increasing number of service-producing companies, and some 29% report gains in Q1; this compares to 13% a year ago and just 10% for all of 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060413h.jpg" width="353"> The Chambers of Commerce background information tells that about 20% of service companies engage in exporting. Service firms are generally more confident about the upcoming sales than are manufacturers; in Q1, 51% of them indicated satisfaction with their outlook for the year ahead. But, like manufacturers, they are worried about profits growth, with just 33% looking for increases. This is better than the four most recent quarters, but lower than 38% in Q1 2005. Their cost pressures resemble manufacturers&#39;, with upward forces on overhead expenses and raw materials, but a diminishing number experiencing rising labor costs.
The survey overall thus shows gains in basic business activity, but concern over profitability. Despite this uneasiness over profits, activity at both manufacturing and service companies is climbing, and in the coming year more firms look forward to gains in plant and equipment investment and employment.

<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/UK/@U9/@U906/@U906.HTM">UK BCC Survey</a> &nbsp;% Balances</th>
<th scope="col">Q1 2006</th>
<th scope="col">Q4 2005</th>
<th scope="col">Q1 2005</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Manufacturing:&nbsp; Home Sales</td>
<td>15</td>
<td>13</td>
<td>14</td>
<td>12</td>
<td>19</td>
<td>7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Export Sales</td>
<td>23</td>
<td>12</td>
<td>26</td>
<td>17</td>
<td>17</td>
<td>4</td>
</tr>
<tr class="odd">
<td class="firstcol">Turnover Confidence</td>
<td>43</td>
<td>43</td>
<td>47</td>
<td>44</td>
<td>45</td>
<td>43</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Employment</td>
<td>2</td>
<td>7</td>
<td>5</td>
<td>6</td>
<td>12</td>
<td>-3</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">Services:&nbsp; Home Sales</td>
<td>22</td>
<td>18</td>
<td>23</td>
<td>17</td>
<td>32</td>
<td>21</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Export Sales</td>
<td>29</td>
<td>10</td>
<td>13</td>
<td>10</td>
<td>12</td>
<td>1</td>
</tr>
<tr>
<td class="firstcol">Turnover Confidence</td>
<td>51</td>
<td>47</td>
<td>54</td>
<td>48</td>
<td>51</td>
<td>46</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment</td>
<td>12</td>
<td>11</td>
<td>14</td>
<td>12</td>
<td>19</td>
<td>9</td>
</tr>
</tbody>
</table>
</body>
</html>

As in the Continental countries we discussed here yesterday, business in the UK is showing some signs of picking up. The British Chambers of Commerce Quarterly Economic Survey, the largest business survey in the UK, showed modest [...]

UK Business Showing Tentative Pick-Up, According to BCC Q1 Survey

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060413j.jpg" width="353">
Total business inventories slipped marginally during February following an upwardly revised 0.6% gain during the prior month. Consensus expectations had been for a 0.3% increase for February.
Retail inventories reversed the prior month&#39;s downwardly revised 0.3% increase. Motor vehicle inventories fell 0.7% (0.0% y/y). Retail inventories less autos also fell marginally (+3.5% y/y) and January accumulation was revised down to 0.3% from 0.5%. Furniture inventories rose a strong 0.7% (6.6% y/y) and the prior month&#39;s gain was revised up but general merchandise inventories fell by 0.6% (+2.3% y/y) after a downwardly revised 0.4% decline during January. Apparel inventories rose 0.3% (2.3% y/y after a 0.4% January decline.
Wholesale inventories rose 0.8% due to a 1.0% gain in nondurables, lifted by broad based strength. Durables rose 0.6% (6.6% y/y). During the last ten years there has been a 67% correlation between the y/y change in wholesale inventories and the change in imports of nonpetroleum goods.
Factory sector inventories slipped 0.4% after an upwardly revised 1.1% January gain.
The inventory to sales ratio for total business rose modestly to 1.26 from an upwardly revised 1.25 during January.

<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">Business Inventories</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.0%</td>
<td>0.6%</td>
<td>3.7%</td>
<td>4.5%</td>
<td>7.9%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>-0.3%</td>
<td>0.3%</td>
<td>2.4%</td>
<td>2.7%</td>
<td>6.7%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>-0.0%</td>
<td>0.3%</td>
<td>3.5%</td>
<td>4.5%</td>
<td>7.1%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.8%</td>
<td>0.2%</td>
<td>6.2%</td>
<td>7.1%</td>
<td>9.8%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.4%</td>
<td>1.1%</td>
<td>3.2%</td>
<td>4.4%</td>
<td>7.7%</td>
<td>-1.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

Total business inventories slipped marginally during February following an upwardly revised 0.6% gain during the prior month. Consensus expectations had been for a 0.3% increase for February. Retail inventories reversed the prior [...]

U.S. Business Inventories Slipped

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060413k.jpg" width="353">
During March, the U.S. federal government again posted a deeper budget deficit versus the same month last year. The deficit of $85.5B versus last March&#39;s deficit of $71.2B pulled the FY06 to date budget deficit of $303.0B deeper versus 294.6B during the first six months of FY05.
Net revenues surged 45.8% m/m, made up for most of the February collapse and rose 10.5% during the first six months of this fiscal year versus FY05. The rate of gain in individual income tax receipts (44% of total receipts), however, slowed to 8.5% y/y though the gain in corporate income taxes (10% of total receipts) remained strong at 30.5% during fiscal year 06&#39;s first six months.
The improved job market raised employment taxes (36% of total receipts) 7.2% y/y and estate &amp; gift taxes surged by 16.2% y/y. 
U.S. net outlays jumped during March by 13.7% versus last March and the growth in FYTD outlays rose to 8.7%, the highest in nearly three years. Defense spending (19% of total outlays) surged 16.1% y/y and for the first six months of FY06 rose 8.9% from &#39;05. The growth in Medicare spending (12% of total outlays) also jumped to 46.0% y/y and lifted FYTD growth to 15.5% while spending on social security (21% of total outlays) remained strong at 5.7%.

<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/@E1/@E106/@E10602/@E10602.HTM">US Government Finance</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col">FY 2005</th>
<th scope="col">FY 2004</th>
<th scope="col">FY 2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$-85.5B</td>
<td>$-119.2B</td>
<td>$-71.2B (3/05)</td>
<td>$-318.3B</td>
<td>$-412.7B</td>
<td>$-377.6B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Net Revenues</td>
<td>$164.6B</td>
<td>$112.9B</td>
<td>10.6%</td>
<td>14.5%</td>
<td>5.5%</td>
<td>-3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Outlays</td>
<td>$250.0B</td>
<td>$232.1B</td>
<td>13.7%</td>
<td>7.8%</td>
<td>6.2%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

During March, the U.S. federal government again posted a deeper budget deficit versus the same month last year. The deficit of $85.5B versus last March's deficit of $71.2B pulled the FY06 to date budget deficit of $303.0B deeper [...]

U.S. Budget Deficit Deeper The Last Two Months

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

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

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Andrew Cates

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

250501Z1.jpg

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

250501Z2.jpg

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

250501Z3.jpg

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

250501Z4.jpg

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

250501Z5.jpg

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

250501Z6.jpg

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

<iframe style="border-radius:12px" src="https://open.spotify.com/embed/episode/3PzXXKrkHcwtOLipohEdnB?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Tariff Truce, Tenuous Trust

250501F20.jpg

250501G20.jpg

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.

250501H20.jpg

250501I20.jpg

- 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

250501J5.jpg

250501K5.jpg

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: April 2006

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