Robert Brusca

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for March, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, showed an increase of [...]

U.S. Retail Sales Show Unexpected True Strength for March and in Q1

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/070413d.jpg" width="353">
The University of Michigan&#39;s consumer sentiment index has lost 11.6 points through mid-April to 85.3 from its January peak of 96.9 (Q1 1966 = 100). The reading of current conditions stands at 102.4, down from 111.3 in January, while expectations are at 74.3 from January&#39;s 87.6. These declines have come in roughly equal installments in February, March and early April.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070413e.jpg" width="353">
Consumers&#39; reading of personal finances has fallen to 112 in early April from 123 in January, but is actually up from 111 in March. A few more people have rising incomes and a few less have lower incomes, both helping this component. But a growing number of respondents are saying their purchasing power is suffering from higher prices, even though their income position looks better. Survey participants see buying conditions deteriorate for &quot;large household goods&quot;; even among those who say this is a &quot;good time to buy&quot; a rising number give the reason that prices will go up, so buy now before that happens.
The fall in the expectations component results from concern over general business conditions. Fewer people look for &quot;good times&quot; and more people look for &quot;bad times&quot;. However, they remained generally positive about their own personal finances: those looking to be &quot;better off&quot; did edge down by 1 percentage point from January but those expecting to be &quot;worse off&quot; fell by 2 points.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070413f.jpg" width="353">
Inflation and unemployment expectations both contributed to the deterioration in sentiment. Median inflation expectations rose to 3.3% from 3% in January, February and March; the mean is 4.1%. Both figures are the highs since the high energy price period last summer. The unemployment outlook worsened as the smallest number of people since the 2001 recession expect &quot;less unemployment&quot; while the number expecting &quot;more unemployment&quot; returned to 40%, a kind of threshold of concern that has recently coincided with high energy price periods and was last breached in August.
The University of Michigan survey is not seasonally adjusted.This mid-month survey was based on telephone interviews with about 304 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month-end.

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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">April (Prelim)</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
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<td class="firstcol">Consumer Sentiment</td>
<td>85.3</td>
<td>88.4</td>
<td>91.3</td>
<td>-2.4%</td>
<td>87.3</td>
<td>88.5</td>
<td>95.2</td>
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<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>102.4</td>
<td>103.5</td>
<td>106.7</td>
<td>-6.2%</td>
<td>105.1</td>
<td>105.9</td>
<td>105.6</td>
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<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>74.3</td>
<td>78.7</td>
<td>81.5</td>
<td>+1.2%</td>
<td>75.9</td>
<td>77.4</td>
<td>88.5</td>
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The University of Michigan's consumer sentiment index has lost 11.6 points through mid-April to 85.3 from its January peak of 96.9 (Q1 1966 = 100). The reading of current conditions stands at 102.4, down from 111.3 in January, while [...]

Michigan Consumer Sentiment Sags as Inflation Concern Rises

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<th scope="col" class="firstcol">The flows in the table below are the detail behind the trade headlines. In February the US trade deficit shrank by a small amount to -$58.44 billion from -$58.88 billion in January. If we look at the inflation adjusted flows for the quarter to date versus Q4 2006 there is a slight deterioration implying some subtraction from GDP due to trade flows in Q1 2007.</th>
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US Merchandise Real End-Use Trade Flows
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<tr class="even">
<td class="firstcol">Category</td>
<td>Current</td>
<td>Previous</td>
<td colspan="3">$SA % SAAR</td>
<td>MEMO:</td>
</tr>
<tr class="odd">
<td class="firstcol">Feb.07</td>
<td>MO %</td>
<td>MO %</td>
<td>3-MO</td>
<td>6-MO</td>
<td>Yr/Yr</td>
<td>Yr/Yr</td>
</tr>
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<td class="firstcol">Real Exports</td>
<td>-3.7%</td>
<td>1.7%</td>
<td>-9.7%</td>
<td>-0.7%</td>
<td>5.3%</td>
<td>10.3%</td>
</tr>
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<td class="firstcol">Food, Feed, &amp; Beverages</td>
<td>-2.5%</td>
<td>5.2%</td>
<td>24.7%</td>
<td>-12.4%</td>
<td>7.3%</td>
<td>-0.2%</td>
</tr>
<tr>
<td class="firstcol">Industrial&nbsp; Materials</td>
<td>-4.0%</td>
<td>1.8%</td>
<td>-16.4%</td>
<td>-0.7%</td>
<td>5.4%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>-5.7%</td>
<td>3.2%</td>
<td>-13.4%</td>
<td>-0.2%</td>
<td>3.1%</td>
<td>18.5%</td>
</tr>
<tr>
<td class="firstcol">Autos &amp; Parts</td>
<td>3.6%</td>
<td>-6.8%</td>
<td>8.4%</td>
<td>-5.1%</td>
<td>2.3%</td>
<td>13.6%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>-2.8%</td>
<td>3.7%</td>
<td>7.3%</td>
<td>7.2%</td>
<td>10.6%</td>
<td>7.6%</td>
</tr>
<tr>
<td class="firstcol">Other</td>
<td>-3.6%</td>
<td>-3.5%</td>
<td>-46.5%</td>
<td>-0.4%</td>
<td>14.9%</td>
<td>15.5%</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>
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<td class="firstcol">Real Imports</td>
<td>-1.9%</td>
<td>0.3%</td>
<td>0.5%</td>
<td>-3.8%</td>
<td>2.6%</td>
<td>4.0%</td>
</tr>
<tr>
<td class="firstcol">Food, Feeds, &amp; Beverages</td>
<td>0.5%</td>
<td>0.9%</td>
<td>6.9%</td>
<td>-0.4%</td>
<td>4.1%</td>
<td>5.8%</td>
</tr>
<tr>
<td class="firstcol">Industrial Materials</td>
<td>-7.7%</td>
<td>3.6%</td>
<td>-4.9%</td>
<td>-17.5%</td>
<td>-9.3%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>-0.9%</td>
<td>5.5%</td>
<td>6.8%</td>
<td>0.4%</td>
<td>11.4%</td>
<td>10.3%</td>
</tr>
<tr>
<td class="firstcol">Autos &amp; Parts</td>
<td>-0.4%</td>
<td>-7.2%</td>
<td>-2.9%</td>
<td>-3.9%</td>
<td>-1.7%</td>
<td>8.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>2.8%</td>
<td>-3.4%</td>
<td>1.8%</td>
<td>10.5%</td>
<td>13.5%</td>
<td>-1.0%</td>
</tr>
<tr>
<td class="firstcol">Other</td>
<td>0.2%</td>
<td>-2.6%</td>
<td>-3.8%</td>
<td>4.4%</td>
<td>5.8%</td>
<td>5.2%</td>
</tr>
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<td>The table above is a table of inflation adjusted merchandise trade for the end use commodity designations used to categorize trade flows. They show some slight deterioration in the quarter-to-date trade balance. But the real story in this report is export and import weakness. These flows are all inflation-adjusted so oil has a minimal impact even on industrial materials, the category that contains it. For the month we can see all export categories decline. The table also tells a tale of weak export trends. Export trends weaken overall and are outright negative in three of four categories in February. But broader export trends weaken too, and this is even more disturbing. Overall real export growth rates drop from 10.3% a year ago, to 5.3% Yr/Yr as of February 2007. Then they drop to -0.7% over six months and to -9.7% over the most recent three months (all expressed as annual rates of change). This pronounced slowdown in exports is disturbing. For imports the slowing is not as dramatic but still is clear: from a 4% pace a year ago to a Yr/Yr pace of 2.6% currently. Then the pace drops off to -3.8% over six months slightly rebounds to an anemic +0.5% over three months (all expressed at annual rates). <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070413a.jpg" width="353"> Meanwhile, over a fairly long period, the dollar has been falling. Weak US exports cannot be blamed on poor US competitiveness; US competitiveness has been improving. US export weakness suggests instead that growth overseas is weaker than what the IMF is saying in its recent WEO (World Economic Outlook). The weakness in export trends is quite apparent and does not seem to be the result of a normal statistical variation. The slowing seems real and economic instead of false and statistical in nature. For imports the slowing is more gradual and authentically fits in with the slowdown in the US economy, it may be this slowing that has transmitted weakness abroad and come back to haunt the US in the form of slower US exports abroad.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070413b.jpg" width="353">One thing about the world economy, for all its growth few regions have really developed much true domestic demand. US growth has been the lynchpin of world growth and as it has faded no other source of indigenous demand has cropped up. Japan has faltered, recent Germany&#146;s weakness is exaggerated by its VAT introduction. Still Germany does not show that much strength except from external orders and exports.There is no pick up in local demand of any significant degree. &nbsp;While everyone remains upbeat on Europe it has yet to show it can prosper without export-led growth. The strong euro may already be putting it to a test too strong for it to pass. Is that the message in weak US exports?</td>
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Key Trends In Producer Prices
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<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td> Mar-07</td>
<td colspan="4">PPI Trends By Type Of Good</td>
</tr>
<tr>
<td class="firstcol">PPI</td>
<td> 1-Mo (M/M)</td>
<td> 3-Mo, AR</td>
<td> 6-Mo, AR</td>
<td> 1-Yr</td>
<td> Yr-Ago</td>
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<tr>
<td class="firstcol">Total PPI</td>
<td> 1.0%</td>
<td> 6.9%</td>
<td> 5.2%</td>
<td> 3.1%</td>
<td> 3.6%</td>
</tr>
<tr>
<td class="firstcol"> Finished Consumer Gds</td>
<td>1.4%</td>
<td>8.6%</td>
<td>6.1%</td>
<td>3.5%</td>
<td>4.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer Foods</td>
<td>1.4%</td>
<td>18.7%</td>
<td>10.9%</td>
<td>7.9%</td>
<td> -1.2%</td>
</tr>
<tr>
<td class="firstcol">Finished Consumer Goods Excl Foods</td>
<td>1.3%</td>
<td>5.1%</td>
<td>4.3%</td>
<td>1.9%</td>
<td>6.6%</td>
</tr>
<tr>
<td class="firstcol">Nondurables less Food</td>
<td>1.9%</td>
<td>7.7%</td>
<td>5.7%</td>
<td>2.5%</td>
<td>9.1%</td>
</tr>
<tr>
<td class="firstcol">Consumer Nondur ex Food &amp; Energy</td>
<td>0.4%</td>
<td>5.9%</td>
<td>3.5%</td>
<td>2.3%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Durable Goods</td>
<td> -0.3%</td>
<td> -0.9%</td>
<td>1.0%</td>
<td>0.6%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">Finished Core Consumer Goods</td>
<td> 0.1%</td>
<td> 3.1%</td>
<td> 2.4%</td>
<td> 1.5%</td>
<td> 1.9%</td>
</tr>
<tr>
<td class="firstcol"> Capital Goods</td>
<td> -0.1%</td>
<td>1.9%</td>
<td>2.3%</td>
<td>2.0%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">Manufacturing Industries</td>
<td>0.0%</td>
<td>2.7%</td>
<td>2.5%</td>
<td>2.8%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">Nonmanufacturing Industries</td>
<td> -0.1%</td>
<td>1.4%</td>
<td>2.2%</td>
<td>1.6%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol"> Core PPI</td>
<td>0.0%</td>
<td>2.3%</td>
<td>2.3%</td>
<td>1.6%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">Memo: Finished Energy</td>
<td>3.6%</td>
<td>9.4%</td>
<td>8.0%</td>
<td>2.8%</td>
<td>15.7%</td>
</tr>
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<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<td>The PPI has two headlines each month. One for the overall PPI, and one for the core. The core is the measure that excludes food and energy and that markets follow most closely. This month neither headline gives a true picture of what is going on in the PPI itself. As good as it gets&#133; Inflation is neither as strong as the 1% headline on the PPI nor as docile as the 0% rise in the core. Not surprisingly, the truth lies in between. Core inflation is the measure we prefer and the Fed prefers. But the indicators that the Fed prefers to apply the core definition to are broader than the PPI: they are the PCE deflator or the CPI index. These measures include the services sector that the PPI leaves out. That sector has been much more inflation prone than the core goods sector that we can expose for examination in the PPI. So when you look at the core PPI you are usually seeing inflation as good as it gets.About that CPI signal&#133; The table above gives us several readings on the PPI. The headline&#145;s main trend statistics are presented in the top line of the table; the PPI core is in the line that is second from the bottom. But the line that is more useful to us in the middle, entitled &quot;finished core consumer goods&quot;. This is the part of the PPI that fits directly into the core CPI number that the Fed does care about. Notice that the core for the CPI at the producer level shows a rise of 0.1%. It is stronger than the PPI&#146;s overall core because it excludes capital goods where prices fell in the month.And the CPI trends? Don&#146;t ask&#133;. Even more troubling than this minor one-tick change for the core as it applies to consumer goods is the adverse trend for this CPI Core series at the producer level. Finished core consumer goods at the producer level (FCCPPI) show steadily accelerating inflation. This is despite the small 0.1% up tick in March. &nbsp;Inflation has stepped up from 1.5% over 12-months to 2.4% over six months to 3.1% over three months (all SAAR). This progression is disturbing. Within the FCCPPI we find conflicting trends. Nondurable goods excluding energy and food are up by 0.4% in March and have their own -- much higher -- inflation progression in train (see table). But durable goods are tempered. Indeed, durable goods prices fell in March and they are showing a mixed tendency to decelerate over the course of the past year (see table). </td>
<td><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070413c.jpg" width="353">The chart on the left looks at these trends using only the Yr/Yr tabulations Even so we can see that consumer durable goods inflation trends are turning lower. The upturn in nondurable core trends is also apparent as it turns higher. Capital goods trends are shown to hover at an inflation pace of about 2%. The core PPI, torn between these various trends, is in a slight downtrend itself.What&#146;s the point of a sullied point estimate? If I can make an obvious point here it is that with such disparate trends within the core PPI, it is obvious that the core is not very representative of its components. You can average (or weight-average) anything. But that does not make the resulting measure useful. We assert that the core inflation measure from the PPI is simply not useful in these circumstances. While we do need some assessment on the overall price level to tell what it is doing, (the Fed surely does) it should be clear that with important components moving in different directions final judgment depends on the weight applied to each. And since weighting is a controversial issue we would urge a great deal of caution in dealing with the trends core measures produce when components are flying every which way.&nbsp; If you peruse the chart on the left on component PPI Core trends you can see that this sort of trend convolution is not the norm. While the various core components often have differing rates of inflation, the direction is usually about the same even if the speed is not. Developments in PPI core inflation in early 2007 are odd indeed. On balance, the PPI is a report that can please no one. Inflation is still in a sort of twilight zone: too high to be comfortable but with yet enough moderation for the Fed to play along with it for a while &#150; if it so chooses. And there are plenty of convoluted &#150; or at least contrary - trends to choose from within the PPI core. What is most disturbing however is the knowledge that inflation in services tends to be stronger. That seems to imply that an uncomfortable CPI still lies ahead. The core goods portion of inflation has been the best behaved part of the CPI for some time.&nbsp; Inflation is now most troublesome in the services sector. As we move on to measures that include that sector next week with a goods sector inflation rate in hand that is itself a bit uncomfortable, disappointment seems to be the most likely result. Be prepared&#133;</td>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070413d.jpg" width="353">
The University of Michigan&#39;s consumer sentiment index has lost 11.6 points through mid-April to 85.3 from its January peak of 96.9 (Q1 1966 = 100). The reading of current conditions stands at 102.4, down from 111.3 in January, while expectations are at 74.3 from January&#39;s 87.6. These declines have come in roughly equal installments in February, March and early April.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070413e.jpg" width="353">
Consumers&#39; reading of personal finances has fallen to 112 in early April from 123 in January, but is actually up from 111 in March. A few more people have rising incomes and a few less have lower incomes, both helping this component. But a growing number of respondents are saying their purchasing power is suffering from higher prices, even though their income position looks better. Survey participants see buying conditions deteriorate for &quot;large household goods&quot;; even among those who say this is a &quot;good time to buy&quot; a rising number give the reason that prices will go up, so buy now before that happens.
The fall in the expectations component results from concern over general business conditions. Fewer people look for &quot;good times&quot; and more people look for &quot;bad times&quot;. However, they remained generally positive about their own personal finances: those looking to be &quot;better off&quot; did edge down by 1 percentage point from January but those expecting to be &quot;worse off&quot; fell by 2 points.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070413f.jpg" width="353">
Inflation and unemployment expectations both contributed to the deterioration in sentiment. Median inflation expectations rose to 3.3% from 3% in January, February and March; the mean is 4.1%. Both figures are the highs since the high energy price period last summer. The unemployment outlook worsened as the smallest number of people since the 2001 recession expect &quot;less unemployment&quot; while the number expecting &quot;more unemployment&quot; returned to 40%, a kind of threshold of concern that has recently coincided with high energy price periods and was last breached in August.
The University of Michigan survey is not seasonally adjusted.This mid-month survey was based on telephone interviews with about 304 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month-end.

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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">April (Prelim)</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
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<td class="firstcol">Consumer Sentiment</td>
<td>85.3</td>
<td>88.4</td>
<td>91.3</td>
<td>-2.4%</td>
<td>87.3</td>
<td>88.5</td>
<td>95.2</td>
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<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>102.4</td>
<td>103.5</td>
<td>106.7</td>
<td>-6.2%</td>
<td>105.1</td>
<td>105.9</td>
<td>105.6</td>
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<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>74.3</td>
<td>78.7</td>
<td>81.5</td>
<td>+1.2%</td>
<td>75.9</td>
<td>77.4</td>
<td>88.5</td>
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U.S. Trade Trends Fit of a Friday the 13th

UK trade data came out today for February, with the goods balance, -£6.8 billion, somewhat larger than the -£6.5 billion expected in at least two forecast surveys. Exports eased very slightly to -£18.4 billion from -£18.5 billion in [...]

U.S. Export and Import Prices: No Excitement but Uneven Trends

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411h.jpg" width="353">
The U.S. federal government ran a deficit of $96.3B during March, well ahead of last March&#39;s $85.3B and also larger than consensus forecasts of $89B.
This performance brought the fiscal-year-to-date deficit to $258.4B, down from $302.9B through March last year.
Summary data for the monthly budget, reported in the Monthly Treasury Statement, are available Haver&#39;s USECON database. Details are carried in the GOVFIN database.
The excess of the monthly deficit over the forecast amount may result from the acceleration into March of April payments for veterans&#39; benefits, supplemental security income and some Medicare outlays; these are ordinarily paid on the first day of each month, but are moved forward when the First falls on a weekend. April outlays will be commensurately reduced. Additionally, individual income tax refunds reached a record for a single month, $55.5B. The previous records were $52.4B in April 2004 and $52.2B in March last year. This is possibly due to earlier filing by taxpayers, and April and May refunds could turn out to be somewhat smaller.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411g.jpg" width="353">
In total, net revenues were $166.5B in March, up just 1.2% from March 2006; for the fiscal-year-to-date, they were 8.0% above the comparable period of fiscal 2006. Individual income tax receipts were $35.4B in March, down 9.8% from March 2006, but fiscal 2007-to-date saw $479.2B, up 10.8%. Corporate income taxes were $40.2B, a record for March and up 11.8% from a year ago. Social insurance taxes were $76.5B in the month, up 6.2% from a year ago.
The U.S. Government&#39;s net outlays grew 5.2% from March 2006, reaching $262.8B, with the cumulative total for the first six fiscal months up 2.9%. Defense outlays were $52.0B in the month, up 2.4% on the year earlier. Social security outlays (benefits and administrative costs) were $48.9B, up 5.9%. Net interest turned somewhat higher, reaching $21.1B, up 8.8% on March a year ago, while smaller amounts in previous months put the total for the fiscal year so far up only 2.5%.
This report gives an inconclusive read on the state of the budget, since key tax payments are going on this month and the timing of other tax filing seems to be changing from year to year. Major outlay patterns are also erratic from month to month. Nonetheless, overall, revenues are continuing to grow faster than outlays and the budget deficit is continuing to diminish.

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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E106021.HTM">US Government Budget</a>, Bil.$</th>
<th scope="col">Mar 2007</th>
<th scope="col">Feb 2007</th>
<th scope="col">Oct 2006 &nbsp;Mar 2007</th>
<th scope="col">Oct 2005 &nbsp;Mar 2006</th>
<th scope="col">FY 2006</th>
<th scope="col">FY 2005</th>
<th scope="col">FY 2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>-96.3</td>
<td>-120.0</td>
<td>-258.4</td>
<td>-302.9</td>
<td>-248.2</td>
<td>-318.7</td>
<td>-411.1</td>
</tr>
<tr>
<td class="firstcol">Net Revenues</td>
<td>166.5</td>
<td>120.3</td>
<td>1120.9</td>
<td>1037.6</td>
<td>11.8%</td>
<td>14.6%</td>
<td>5.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">8.0%</td>
<td>10.5%</td>
</tr>
<tr>
<td class="firstcol">Net Outlays</td>
<td>262.8</td>
<td>240.3</td>
<td>1379.3</td>
<td>1340.6</td>
<td>7.4%</td>
<td>7.9%</td>
<td>6.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">2.9%</td>
<td>8.7%</td>
</tr>
</tbody>
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The U.S. federal government ran a deficit of $96.3B during March, well ahead of last March's $85.3B and also larger than consensus forecasts of $89B. This performance brought the fiscal-year-to-date deficit to $258.4B, down from [...]

March/April Calendar Quirk, Big Refunds Raise March Budget Deficit. Year-to-Date Down $45 Billion

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411e.jpg" width="353">
France&#146;s trade deficit widened in February as imports outpaced exports. Import growth continues to look more vibrant than export growth as the trends are accelerating more uniformly across trade categories. 
Over the recent three months imports are growing at a pace of 7.5% nearly the same as the Yr/Yr pace. For exports the overall pace for three month is barely positive and well under the Yr/Yr growth rate of 5%. For the rest of imports growth rates are quite solid. For capital goods the pace of acceleration is quite clear with blow-off type growth over the last three months. That pace is sure to cool from the near 40% it currently posts. Motor vehicle imports are strong, running at a super strong 28% pace and 14% Yr/Yr. Other consumer goods however show weakness: imports at -6.4% for three months and they are steadily decelerating.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411f.jpg" width="353"> 
This is the mixed picture for France. Export growth is cooling. Imports are strong and seem to point to strong domestic demand. But consumer goods imports (non-auto) are very weak and do not signal that same type of domestic demand strength form the consumer. For the moment France is a bit enigmatic. 
After seeing export and import trends wither steadily throughout 2006 and early 2007 both exports and imports have sprung to life in February of 2007.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
French Trade Trends for Goods
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M%</td>
<td colspan="3">% SAAR</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Feb-07</td>
<td>Jan-07</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance*</td>
<td>-&#128;&#128; 2,702.00</td>
<td>-&#128;&#128; 2,612.00</td>
<td>-&#128;&#128; 2,565.67</td>
<td>-&#128;&#128; 2,185.83</td>
<td>-&#128;&#128; 2,245.17</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">All Exports</td>
<td>2.8%</td>
<td>-1.4%</td>
<td>0.2%</td>
<td>4.0%</td>
<td>5.1%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>1.3%</td>
<td>1.3%</td>
<td>-1.1%</td>
<td>18.9%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicles</td>
<td>4.8%</td>
<td>0.7%</td>
<td>2.8%</td>
<td>-1.8%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>0.5%</td>
<td>-4.3%</td>
<td>-6.2%</td>
<td>2.6%</td>
<td>3.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">IMPORTS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">All Imports</td>
<td>3.2%</td>
<td>-1.2%</td>
<td>7.5%</td>
<td>2.6%</td>
<td>7.6%</td>
</tr>
<tr>
<td class="firstcol">Capital goods</td>
<td>6.4%</td>
<td>2.6%</td>
<td>39.1%</td>
<td>10.8%</td>
<td>9.0%</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicles</td>
<td>3.0%</td>
<td>0.8%</td>
<td>28.2%</td>
<td>16.8%</td>
<td>14.0%</td>
</tr>
<tr>
<td class="firstcol">Consumer goods</td>
<td>2.0%</td>
<td>-1.9%</td>
<td>-6.4%</td>
<td>0.5%</td>
<td>6.2%</td>
</tr>
<tr>
<td colspan="6">*Bil. Euros; mo or period average</td>
</tr>
</tbody>
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Frances trade deficit widened in February as imports outpaced exports. Import growth continues to look more vibrant than export growth as the trends are accelerating more uniformly across trade categories. Over the recent three [...]

French Trade Deficit Widens

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<th scope="col" class="firstcol">The JOLTS report (Job Openings and Labor Turnover Survey) is not a front-line jobs report but it is a report economists like that reveals a lot about what is going on behind the scenes in the labor market. This month&#146;s report is mixed as it shows&nbsp;a slowing in hires and in openings but fewer separations and a steady quit rate with lower layoff tendencies. At the bottom of the table below I try to bring theses reading to life by placing them in their respective ranges and defining each as being in a set percent of its range. There I also present the current readings expressed as percentages of their own respective means and medians. In that way the relative merit of each category comes through a bit clearer.&nbsp; The table shows that layoffs and separations are quite low. Layoffs are at a series low, in fact. Quits are high. To an economist this a good sign since people do not quit jobs unless prospects are good. A high quit rate is a good sign of labor market strength. Job openings are high and higher in their range than is hiring (hiring is at the two-thirds mark in its range). This configuration makes me wonder about skill mixes and labor shortages.</th>
</tr>
</thead>

</table>
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<colgroup></colgroup>
<thead>
<tr>
JOLTS Summary Statistics for the Nation
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="5">National Statistics Since January of 2000</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Openings</td>
<td>Hires</td>
<td>Separation</td>
<td>Quit</td>
<td>Layoffs &amp; D</td>
<td>Other Separations</td>
</tr>
<tr>
<td class="firstcol">Feb-07</td>
<td>3.0</td>
<td>3.9</td>
<td>3.6</td>
<td>2.2</td>
<td>1.1</td>
<td>0.2</td>
</tr>
<tr>
<td class="firstcol">Jan-07</td>
<td>3.1</td>
<td>4.0</td>
<td>3.7</td>
<td>2.2</td>
<td>1.5</td>
<td>0.3</td>
</tr>
<tr>
<td class="firstcol">average</td>
<td>2.6</td>
<td>3.8</td>
<td>3.7</td>
<td>2.0</td>
<td>1.4</td>
<td>0.2</td>
</tr>
<tr>
<td class="firstcol">Median</td>
<td>2.6</td>
<td>3.8</td>
<td>3.7</td>
<td>2.0</td>
<td>1.4</td>
<td>0.2</td>
</tr>
<tr>
<td class="firstcol">Percentile</td>
<td>75.0%</td>
<td>66.7%</td>
<td>37.5%</td>
<td>83.3%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Range</td>
<td>1.2</td>
<td>0.9</td>
<td>0.8</td>
<td>0.6</td>
<td>0.7</td>
<td>0.1</td>
</tr>
<tr>
<td class="firstcol">Max</td>
<td>3.3</td>
<td>4.2</td>
<td>4.1</td>
<td>2.3</td>
<td>1.8</td>
<td>0.3</td>
</tr>
<tr>
<td class="firstcol">Min</td>
<td>2.1</td>
<td>3.3</td>
<td>3.3</td>
<td>1.7</td>
<td>1.1</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td colspan="7">Percent of</td>
</tr>
<tr>
<td class="firstcol">Median</td>
<td>117.6%</td>
<td>102.6%</td>
<td>97.3%</td>
<td>110.0%</td>
<td>78.6%</td>
<td>100.0%</td>
</tr>
<tr>
<td class="firstcol">Average</td>
<td>115.9%</td>
<td>103.4%</td>
<td>98.0%</td>
<td>108.1%</td>
<td>78.2%</td>
<td>86.8%</td>
</tr>
<tr class="odd">
<td colspan="7">Recovery period only</td>
</tr>
<tr>
<td class="firstcol">Percentile</td>
<td>75.0%</td>
<td>66.7%</td>
<td>37.5%</td>
<td>83.3%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Median</td>
<td>115.4%</td>
<td>100.0%</td>
<td>97.3%</td>
<td>104.8%</td>
<td>78.6%</td>
<td>100.0%</td>
</tr>
<tr>
<td class="firstcol">Average</td>
<td>113.5%</td>
<td>102.2%</td>
<td>97.9%</td>
<td>107.7%</td>
<td>78.6%</td>
<td>86.4%</td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Regional variances Regionally conditions can be and are quite different. Hiring has been strong in the Midwest, West and South, but it has lagged in the Northeast. Job openings are the highest in the South then the West followed by the Midwest with the Northeast decidedly trailing.But all regions see low layoffs. For three of them layoffs are at a cycle low. For the Midwest they are moderate in the lower one-third of its range. We know that a lot of auto company programs are trying to ease out high cost labor and that these firms concentrate in the Midwest.&nbsp; Still, the Midwest reading is quite moderate. The relatively high quit rates show strong local labor markets from the South across the Midwest to the West. But the Northeast has a low quit rate, a sign of a poor labor market since workers with jobs are reluctant to leave them.</th>
</tr>
</thead>

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<tr>
<td><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411a.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411b.jpg" width="353"> <img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411c.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411d.jpg" width="353"> </td>
</tr>
</table>
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<colgroup></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">JOLTS by Industry We can weight and array JOLTS data by industry. On this basis some odd things emerge as well as some very understandable ones. The construction sector is clearly under some pressure. Yet, the JOLTS figures show that job openings in the sector are at a recovery period high.&nbsp; At the same time, separations, quits and hires in the sector are at or nearly at recovery period lows. This raises some questions about what the job openings are - for what kinds of jobs and what pay. Hires are the relative strongest for Government, followed by other services. Manufacturing sector hires are above the midpoint, in their 60th percentile. Quits are moderate for government and fairly robust for manufacturing and services. On balance the JOLTS data show a still vibrant labor market. The high quit rates are quite indicative of strength and they transcend most regions (except the NE) and industries (except construction). The service sector is a very solid sector. Even manufacturing is far short of being called soft; it looks pretty well-off despite all the industry restructuring.&nbsp; &nbsp;In short the JOLTS report looks behind the scenes of the jobs data and finds that the underpinnings look pretty good.</th>
</tr>
</thead>

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<colgroup></colgroup>
<thead>
<tr>
JOLTS Rankings by Main Sectors
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="5">Major Job Sectors</td>
</tr>
<tr class="odd">
<td class="firstcol">Feb-07</td>
<td>Services</td>
<td>Manufacturing</td>
<td>Constructions</td>
<td>Government</td>
</tr>
<tr>
<td class="firstcol">Job Openings</td>
<td>67.8%</td>
<td>85.7%</td>
<td>100.0%</td>
<td>87.5%</td>
</tr>
<tr>
<td class="firstcol">Hires</td>
<td>79.7%</td>
<td>60.0%</td>
<td>0.0%</td>
<td>100.0%</td>
</tr>
<tr>
<td class="firstcol">Separations</td>
<td>57.4%</td>
<td>70.0%</td>
<td>4.0%</td>
<td>50.0%</td>
</tr>
<tr>
<td class="firstcol">Quits</td>
<td>89.0%</td>
<td>83.3%</td>
<td>0.0%</td>
<td>50.0%</td>
</tr>
</tbody>
</table>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411e.jpg" width="353">
France&#146;s trade deficit widened in February as imports outpaced exports. Import growth continues to look more vibrant than export growth as the trends are accelerating more uniformly across trade categories. 
Over the recent three months imports are growing at a pace of 7.5% nearly the same as the Yr/Yr pace. For exports the overall pace for three month is barely positive and well under the Yr/Yr growth rate of 5%. For the rest of imports growth rates are quite solid. For capital goods the pace of acceleration is quite clear with blow-off type growth over the last three months. That pace is sure to cool from the near 40% it currently posts. Motor vehicle imports are strong, running at a super strong 28% pace and 14% Yr/Yr. Other consumer goods however show weakness: imports at -6.4% for three months and they are steadily decelerating.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411f.jpg" width="353"> 
This is the mixed picture for France. Export growth is cooling. Imports are strong and seem to point to strong domestic demand. But consumer goods imports (non-auto) are very weak and do not signal that same type of domestic demand strength form the consumer. For the moment France is a bit enigmatic. 
After seeing export and import trends wither steadily throughout 2006 and early 2007 both exports and imports have sprung to life in February of 2007.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
French Trade Trends for Goods
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M%</td>
<td colspan="3">% SAAR</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Feb-07</td>
<td>Jan-07</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance*</td>
<td>-&#128;&#128; 2,702.00</td>
<td>-&#128;&#128; 2,612.00</td>
<td>-&#128;&#128; 2,565.67</td>
<td>-&#128;&#128; 2,185.83</td>
<td>-&#128;&#128; 2,245.17</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">All Exports</td>
<td>2.8%</td>
<td>-1.4%</td>
<td>0.2%</td>
<td>4.0%</td>
<td>5.1%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>1.3%</td>
<td>1.3%</td>
<td>-1.1%</td>
<td>18.9%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicles</td>
<td>4.8%</td>
<td>0.7%</td>
<td>2.8%</td>
<td>-1.8%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>0.5%</td>
<td>-4.3%</td>
<td>-6.2%</td>
<td>2.6%</td>
<td>3.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">IMPORTS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">All Imports</td>
<td>3.2%</td>
<td>-1.2%</td>
<td>7.5%</td>
<td>2.6%</td>
<td>7.6%</td>
</tr>
<tr>
<td class="firstcol">Capital goods</td>
<td>6.4%</td>
<td>2.6%</td>
<td>39.1%</td>
<td>10.8%</td>
<td>9.0%</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicles</td>
<td>3.0%</td>
<td>0.8%</td>
<td>28.2%</td>
<td>16.8%</td>
<td>14.0%</td>
</tr>
<tr>
<td class="firstcol">Consumer goods</td>
<td>2.0%</td>
<td>-1.9%</td>
<td>-6.4%</td>
<td>0.5%</td>
<td>6.2%</td>
</tr>
<tr>
<td colspan="6">*Bil. Euros; mo or period average</td>
</tr>
</tbody>
</table>
French Trade Deficit Widens 
by <a href="/comment/Brusca.html">Robert Brusca</a> April 11, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411g.jpg" width="353">
The U.S. federal government ran a deficit of $96.3B during March, well ahead of last March&#39;s $85.3B and also larger than consensus forecasts of $89B.
This performance brought the fiscal-year-to-date deficit to $258.4B, down from $302.9B through March last year.
Summary data for the monthly budget, reported in the Monthly Treasury Statement, are available Haver&#39;s USECON database. Details are carried in the GOVFIN database.
The excess of the monthly deficit over the forecast amount may result from the acceleration into March of April payments for veterans&#39; benefits, supplemental security income and some Medicare outlays; these are ordinarily paid on the first day of each month, but are moved forward when the First falls on a weekend. April outlays will be commensurately reduced. Additionally, individual income tax refunds reached a record for a single month, $55.5B. The previous records were $52.4B in April 2004 and $52.2B in March last year. This is possibly due to earlier filing by taxpayers, and April and May refunds could turn out to be somewhat smaller.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411h.jpg" width="353">
In total, net revenues were $166.5B in March, up just 1.2% from March 2006; for the fiscal-year-to-date, they were 8.0% above the comparable period of fiscal 2006. Individual income tax receipts were $35.4B in March, down 9.8% from March 2006, but fiscal 2007-to-date saw $479.2B, up 10.8%. Corporate income taxes were $40.2B, a record for March and up 11.8% from a year ago. Social insurance taxes were $76.5B in the month, up 6.2% from a year ago.
The U.S. Government&#39;s net outlays grew 5.2% from March 2006, reaching $262.8B, with the cumulative total for the first six fiscal months up 2.9%. Defense outlays were $52.0B in the month, up 2.4% on the year earlier. Social security outlays (benefits and administrative costs) were $48.9B, up 5.9%. Net interest turned somewhat higher, reaching $21.1B, up 8.8% on March a year ago, while smaller amounts in previous months put the total for the fiscal year so far up only 2.5%.
This report gives an inconclusive read on the state of the budget, since key tax payments are going on this month and the timing of other tax filing seems to be changing from year to year. Major outlay patterns are also erratic from month to month. Nonetheless, overall, revenues are continuing to grow faster than outlays and the budget deficit is continuing to diminish.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E106021.HTM">US Government Budget</a>, Bil.$</th>
<th scope="col">Mar 2007</th>
<th scope="col">Feb 2007</th>
<th scope="col">Oct 2006 &nbsp; Mar 2007</th>
<th scope="col">Oct 2005 &nbsp; Mar 2006</th>
<th scope="col">FY 2006</th>
<th scope="col">FY 2005</th>
<th scope="col">FY 2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>-96.3</td>
<td>-120.0</td>
<td>-258.4</td>
<td>-302.9</td>
<td>-248.2</td>
<td>-318.7</td>
<td>-411.1</td>
</tr>
<tr>
<td class="firstcol">Net Revenues</td>
<td>166.5</td>
<td>120.3</td>
<td>1120.9</td>
<td>1037.6</td>
<td>11.8%</td>
<td>14.6%</td>
<td>5.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">8.0%</td>
<td>10.5%</td>
</tr>
<tr>
<td class="firstcol">Net Outlays</td>
<td>262.8</td>
<td>240.3</td>
<td>1379.3</td>
<td>1340.6</td>
<td>7.4%</td>
<td>7.9%</td>
<td>6.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">2.9%</td>
<td>8.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

JOLTS Report Shows U.S. Economy’s Complexities

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070410c.jpg" width="353">
China&#39;s merchandise trade balance fell sharply in March to $84.7 billion from $108.0 billion in February. Exports fell by $23.4 billion and imports rose by $0.3 billion. As the data are not seasonally adjusted, the monthly ups and downs in the first quarter of the year are frequently affected by the variations in the dates of the Chinese New Year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070410d.jpg" width="353"> In spite of the decline in the March trade balance, the balance for the whole quarter was a record at $63.7 billion, $7.5 billion above the previous quarter and $30.7 above the first quarter of 2006. The first chart shows China&#39;s merchandise exports, imports and balances of trade in goods over the past five years on a quarterly basis.
The surplus with the US was $42 billion in the first quarter of this year, $2.6 billion above the previous quarter and $7.8 billion above the first quarter of 2006. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070410f.jpg" width="353">The growing surplus with the U.S. has been causing friction between China and the US over the last several years and has reached the point where the US has recently increased duties on Chinese coated paper and, just yesterday, filed two cases with the WTO (World Trade Organization) to reduce barriers to US goods and to criminalize piracy. The second chart shows the widening gap between China&#39;s exports to the US and its imports from the US.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070410e.jpg" width="353">
In contrast to the US, China has run a deficit with Japan as shown in the third chart. Until 2005, China also ran a deficit in goods with Germany. Since then, however, China has been recording a growing surplus with Germany as shown in the fourth chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGEPR/@P1/@P17/@P17.HTM">CHINA TRADE IN GOODS</a> &nbsp;(Bil US$)</th>
<th scope="col">Mar 07</th>
<th scope="col">Feb 07</th>
<th scope="col">Mar 06</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">Q1 07</th>
<th scope="col">Q4 06&nbsp;</th>
<th scope="col">Q1 06&nbsp;</th>
<th scope="col">Q/Q Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Export Total</td>
<td>84.7</td>
<td>108.0</td>
<td>76.5</td>
<td>-23.4</td>
<td>8.2</td>
<td>282.9</td>
<td>263.6</td>
<td>219.0</td>
<td>19.3</td>
<td>63.9</td>
<td>969.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;To US</td>
<td>16.8</td>
<td>21.4</td>
<td>16.9</td>
<td>-4.6</td>
<td>-0.1</td>
<td>58.2</td>
<td>54.7</td>
<td>47.9</td>
<td>3.5</td>
<td>10.3</td>
<td>203.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;To Germany</td>
<td>3.0</td>
<td>4.3</td>
<td>3.3</td>
<td>-1.3</td>
<td>-0.3</td>
<td>11.1</td>
<td>10.6</td>
<td>9.5</td>
<td>0.5</td>
<td>1.6</td>
<td>40.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;To Japan</td>
<td>7.1</td>
<td>9.3</td>
<td>7.5</td>
<td>-2.1</td>
<td>-0.4</td>
<td>25.1</td>
<td>23.8</td>
<td>22.3</td>
<td>1.3</td>
<td>2.8</td>
<td>91.8</td>
</tr>
<tr class="odd">
<td class="firstcol"> Imports Total </td>
<td>74.2</td>
<td>73.9</td>
<td>63.3</td>
<td>0.3</td>
<td>10.9</td>
<td>219.3</td>
<td>207.4</td>
<td>168.1</td>
<td>11.9</td>
<td>51.2</td>
<td>791.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;From US</td>
<td>6.1</td>
<td>4.9</td>
<td>4.8</td>
<td>1.3</td>
<td>1.6</td>
<td>16.3</td>
<td>15.4</td>
<td>13.8</td>
<td>0.9</td>
<td>2.5</td>
<td>59.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;From Germany</td>
<td>3.4</td>
<td>3.6</td>
<td>2.8</td>
<td>-0.2</td>
<td>0.6</td>
<td>10.2</td>
<td>10.3</td>
<td>8.7</td>
<td>-0.1</td>
<td>1.5</td>
<td>37.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;From Japan</td>
<td>10.9</td>
<td>10.8</td>
<td>9.2</td>
<td>0.1</td>
<td>1.7</td>
<td>32.3</td>
<td>30.4</td>
<td>27.2</td>
<td>1.9</td>
<td>5.1</td>
<td>115.8</td>
</tr>
<tr class="odd">
<td class="firstcol"> Balance Total </td>
<td>10.4</td>
<td>34.1</td>
<td>13.1</td>
<td>-23.6</td>
<td>-2.7</td>
<td>63.7</td>
<td>56.1</td>
<td>32.9</td>
<td>7.5</td>
<td>30.7</td>
<td>177.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;US</td>
<td>10.7</td>
<td>16.5</td>
<td>12.1</td>
<td>-5.8</td>
<td>-1.4</td>
<td>42.0</td>
<td>39.3</td>
<td>34.1</td>
<td>2.6</td>
<td>7.8</td>
<td>144.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Germany</td>
<td>-0.4</td>
<td>0.7</td>
<td>0.5</td>
<td>-1.1</td>
<td>-0.9</td>
<td>0.9</td>
<td>0.3</td>
<td>0.8</td>
<td>0.6</td>
<td>0.1</td>
<td>2.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Japan</td>
<td>-3.8</td>
<td>-1.5</td>
<td>-1.7</td>
<td>-2.3</td>
<td>-2.1</td>
<td>-7.2</td>
<td>-6.6</td>
<td>-4.9</td>
<td>-0.5</td>
<td>-2.3</td>
<td>-24.0</td>
</tr>
</tbody>
</table>
</body>
</html>

China's merchandise trade balance fell sharply in March to $84.7 billion from $108.0 billion in February. Exports fell by $23.4 billion and imports rose by $0.3 billion. As the data are not seasonally adjusted, the monthly ups and [...]

China's Trade Surplus Tumbles in March, but First Quarter Surplus Is Still A Record

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

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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.

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Charts of the Week: Tariff Truce, Tenuous Trust

Tom Moeller

250501F20.jpg

250501G20.jpg

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

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

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

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

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

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

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.

250501L5.jpg

250501M5.jpg

- 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

250501N.jpg

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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 2007

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