Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050617b.jpg" width="353">
The 1Q05 US current account deficit deepened to another record of $195.1B, or 6.4% of GDP. Consensus expectations had been for a deficit of $189.0B. Trade account deterioration was estimated to have subtracted 0.7 percentage points from 1Q growth in real GDP, an estimate which may be increased. Earlier estimates of the current account deficit were deepened slightly for 2004. 
The deficit in merchandise trade deteriorated to $186.3B from a revised $182.2B in 4Q. Exports grew 2.4% (10.3% y/y) and imports rose 2.3% (15.9% y/y).
The surplus on services improved for the second consecutive quarter to $14.6B, the highest level since 4Q03 but remained down from the annual peak in 1997 of $89.8B. Exports of services grew 4.3% in 1Q (12.7% y/y and imports rose 2.9% (12.1% y/y).
From the capital account, US foreign direct investment abroad dropped sharply to $32.2B following a 4Q surge while foreign direct investment in the US slipped to $28.8B.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">US Int&#39;l Balance of Payments</a></th>
<th scope="col">1Q &#39;05</th>
<th scope="col">4Q &#39;04</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account Deficit</td>
<td>$195.1B</td>
<td>$188.4B</td>
<td>$146.1B</td>
<td>$668.1B</td>
<td>$519.7B</td>
<td>$475.2B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Goods/Services/Income Deficit</td>
<td>$168.0B</td>
<td>$166.0B</td>
<td>$123.8B</td>
<td>$587.1B</td>
<td>$448.5B</td>
<td>$411.2B</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>2.1%</td>
<td>5.0%</td>
<td>13.8%</td>
<td>14.9%</td>
<td>6.8%</td>
<td>-3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>1.9%</td>
<td>6.3%</td>
<td>19.4%</td>
<td>18.1%</td>
<td>7.3%</td>
<td>1.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Unilateral Transfers Deficit</td>
<td>$27.1B</td>
<td>$22.4B</td>
<td>$22.3B</td>
<td>$80.9B</td>
<td>$71.2B</td>
<td>$64.0B</td>
</tr>
</tbody>
</table>
</body>
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The 1Q05 US current account deficit deepened to another record of $195.1B, or 6.4% of GDP. Consensus expectations had been for a deficit of $189.0B. Trade account deterioration was estimated to have subtracted 0.7 percentage points [...]

U.S. Current Account Deficit Another Record

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050617a.jpg" width="353">
The Index of General Business Conditions in the manufacturing sector from the Philadelphia Fed went negative in June for the first month in just over two years. The 9.5 point m/m decline to -2.2 added to declines earlier this year which have lowered the index 27.6 points since December. Consensus expectations had been for a positive reading of 10.0 in June.
During the last ten years there has been a 68% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 50% correlation with q/q growth in real GDP.
The new orders index dropped 12.5 points to the lowest level in two years and shipments also fell hard to 6.6 versus a high near 40 about one year ago. The index covering the number of employees rose slightly to 7.1 but that is down versus last year&#39;s high of 22.9. During the last ten years there has been a 64% correlation between the employment index and the three month growth in factory payrolls.
The business conditions index reflects a separate survey question, not the sub indexes.
The separate index of expected business conditions in six months improved versus a downwardly revised May level.
The prices paid index fell sharply for the second month and at 23.5 is down 43 points from the January high. During the last ten years there has been a 75% correlation between the prices paid index and the three month growth in the intermediate goods PPI. The correlation with the finished goods PPI has been 50% and with the CPI it&#39;s been 43%.
The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0605.html">here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">General Activity Index</td>
<td>-2.2</td>
<td>7.3</td>
<td>30.0</td>
<td>28.1</td>
<td>10.6</td>
<td>7.7</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>23.5</td>
<td>30.9</td>
<td>50.8</td>
<td>51.3</td>
<td>16.8</td>
<td>12.3</td>
</tr>
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The Index of General Business Conditions in the manufacturing sector from the Philadelphia Fed went negative in June for the first month in just over two years. The 9.5 point m/m decline to -2.2 added to declines earlier this year [...]

Philadelphia Fed Index Negative

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050617a.jpg" width="353">
The Index of General Business Conditions in the manufacturing sector from the Philadelphia Fed went negative in June for the first month in just over two years. The 9.5 point m/m decline to -2.2 added to declines earlier this year which have lowered the index 27.6 points since December. Consensus expectations had been for a positive reading of 10.0 in June.
During the last ten years there has been a 68% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 50% correlation with q/q growth in real GDP.
The new orders index dropped 12.5 points to the lowest level in two years and shipments also fell hard to 6.6 versus a high near 40 about one year ago. The index covering the number of employees rose slightly to 7.1 but that is down versus last year&#39;s high of 22.9. During the last ten years there has been a 64% correlation between the employment index and the three month growth in factory payrolls.
The business conditions index reflects a separate survey question, not the sub indexes.
The separate index of expected business conditions in six months improved versus a downwardly revised May level.
The prices paid index fell sharply for the second month and at 23.5 is down 43 points from the January high. During the last ten years there has been a 75% correlation between the prices paid index and the three month growth in the intermediate goods PPI. The correlation with the finished goods PPI has been 50% and with the CPI it&#39;s been 43%.
The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0605.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-2.2</td>
<td>7.3</td>
<td>30.0</td>
<td>28.1</td>
<td>10.6</td>
<td>7.7</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>23.5</td>
<td>30.9</td>
<td>50.8</td>
<td>51.3</td>
<td>16.8</td>
<td>12.3</td>
</tr>
</tbody>
</table>
U.S. Current Account Deficit Another Record 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 17, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050617b.jpg" width="353">
The 1Q05 US current account deficit deepened to another record of $195.1B, or 6.4% of GDP. Consensus expectations had been for a deficit of $189.0B. Trade account deterioration was estimated to have subtracted 0.7 percentage points from 1Q growth in real GDP, an estimate which may be increased. Earlier estimates of the current account deficit were deepened slightly for 2004. 
The deficit in merchandise trade deteriorated to $186.3B from a revised $182.2B in 4Q. Exports grew 2.4% (10.3% y/y) and imports rose 2.3% (15.9% y/y).
The surplus on services improved for the second consecutive quarter to $14.6B, the highest level since 4Q03 but remained down from the annual peak in 1997 of $89.8B. Exports of services grew 4.3% in 1Q (12.7% y/y and imports rose 2.9% (12.1% y/y).
From the capital account, US foreign direct investment abroad dropped sharply to $32.2B following a 4Q surge while foreign direct investment in the US slipped to $28.8B.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">US Int&#39;l Balance of Payments</a></th>
<th scope="col">1Q &#39;05</th>
<th scope="col">4Q &#39;04</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account Deficit</td>
<td>$195.1B</td>
<td>$188.4B</td>
<td>$146.1B</td>
<td>$668.1B</td>
<td>$519.7B</td>
<td>$475.2B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Goods/Services/Income Deficit</td>
<td>$168.0B</td>
<td>$166.0B</td>
<td>$123.8B</td>
<td>$587.1B</td>
<td>$448.5B</td>
<td>$411.2B</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>2.1%</td>
<td>5.0%</td>
<td>13.8%</td>
<td>14.9%</td>
<td>6.8%</td>
<td>-3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>1.9%</td>
<td>6.3%</td>
<td>19.4%</td>
<td>18.1%</td>
<td>7.3%</td>
<td>1.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Unilateral Transfers Deficit</td>
<td>$27.1B</td>
<td>$22.4B</td>
<td>$22.3B</td>
<td>$80.9B</td>
<td>$71.2B</td>
<td>$64.0B</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Improved 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 17, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050617c.jpg" width="353">
The University of Michigan&#39;s preliminary reading of consumer sentiment in June improved a sharp 9.1% versus May to 94.8. Sentiment rose to the highest level since January. Consensus expectations had been for a level of 88.7.
During the last ten years there has been a 74% correlation between the level of consumer sentiment and the y/y change in real PCE, although the correlation has fallen in recent years.
Consumer expectations surged a sharp 12.6% following five months of decline.
The reading of current economic conditions also rose 5.2% to the highest level since January.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<table border="0" cellspacing="0" width="100%">
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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">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>94.8</td>
<td>86.9</td>
<td>-0.8%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>110.4</td>
<td>104.9</td>
<td>3.5%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>84.8</td>
<td>75.3</td>
<td>-4.2%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
</table>
April Machinery Orders Jump in Japan; Foreign Sector and Domestic Manufacturing Lead 
by <a href="/comment/Stone.html">Carol Stone</a> June 17, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050617d.jpg" width="353">
Orders received by Japan&#39;s machinery industry rebounded sharply in April, according to data reported yesterday and today by the Japanese Cabinet Office. Total orders, seasonally adjusted, were up 14.8% in the month, after three successive declines. These order flows are very erratic, as seen in the chart, and we have plotted a 6-month moving average to show the trend. This measure increased 2.2% from March. April orders were 8.3% ahead of April 2004.
A broad division of these orders into domestic and foreign sources indicates that Japanese industry is still led by external demand. Foreign orders were up 31.3% in April and 18.3% over a year ago. These have a loose negative correlation with the value of the yen, as might be expected (see second graph). And while the yen has strengthened against the dollar (and therefore against the Chinese yuan), it has remained weak relative to the euro, at least until very recently. Taking account other currencies as well, a weighted &quot;effective&quot; exchange rate published by the Bank of Japan has been basically flat for the last three years, and therefore largely a neutral force on total foreign demand for Japanese products.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050617e.jpg" width="353">
Domestic orders are creeping upward. Machinery orders from private non-manufacturing industries are also basically flat. However, manufacturing industry orders for machines are rising. This sector was up 14.4% in April alone, reaching &yen;511 billion, the largest single month since May 1997. These orders are volatile, too, and such a jump and level are likely unsustainable in the near term. Even so, this sign of firmer domestic demand in Japan is encouraging.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/JAPAN/JAPAN.HTM">Japan</a>(Billion &yen;)</th>
<th scope="col">Apr 2005</th>
<th scope="col">Mar 2005</th>
<th scope="col">Year Ago (Yr/Yr)</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Total Orders*</td>
<td>2,421.6</td>
<td>2,109.5</td>
<td>2,243.7</td>
<td>2,202.7</td>
<td>2,113.1</td>
<td>1,836.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; % Change</td>
<td>14.8</td>
<td>-2.4</td>
<td>8.3</td>
<td>4.2</td>
<td>15.0</td>
<td>-10.9</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>1,380.4</td>
<td>1,320.5</td>
<td>1,347.0</td>
<td>1,323.5</td>
<td>1,295.6</td>
<td>1,217.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; % Change</td>
<td>4.5</td>
<td>-4.7</td>
<td>2.6</td>
<td>2.2</td>
<td>6.4</td>
<td>-14.8</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>915.0</td>
<td>696.9</td>
<td>781.4</td>
<td>770.4</td>
<td>708.4</td>
<td>521.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; % Change</td>
<td>31.3</td>
<td>2.9</td>
<td>18.1</td>
<td>8.8</td>
<td>35.9</td>
<td>-0.7</td>
</tr>
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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/050616d.jpg" width="353">
Foreign trade for Italy has swung from a comfortable surplus two years ago to a persistent and increasing deficit. The April figures, reported today, show a shortfall of &#128;784 million following on March&#39;s &#128;872 million. This deterioration came despite notable increases in exports, amounting to more than a million euros in the past year, including double-digit yearly percentage gains in several recent months. Imports have obviously gone up more than exports, growing &#128;2.2 billion in the past year. More significantly, the accompanying graph shows that Italy was traditionally in an overall surplus trade position, which reached as high as &#128;3.6 billion in mid-1996.
As seen in the table below, energy is a major ingredient in the move to a trade deficit. The balance there was -&#128;3.3 billion in April, &#128;1.0 billion bigger than the year-ago amount and the largest in the history of these particular data, which go back to 1991.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050616e.jpg" width="353">
But energy is not the only factor. Similar shifts have occurred in intra-Euro-Zone trade, which illustrates the result of growth in imports that outstrips growth in exports. Also, in non-Euro countries, the trade position with China is moving gradually toward a larger deficit. This latter is a more modest phenomenon, but it contrasts distinctly with the experience elsewhere in Asia: trade with Japan is moving to smaller deficits as imports from there tend downward irregularly. Trade with Asian NICs remains generally in modest surplus, with the occasional monthly deficit. Trade with other regions, such as the United States, seems to be maintaining former patterns.
These changes toward a trade deficit for Italy are not of great magnitude. But the move to persisting deficit for a nation long in surplus is notable. It highlights some key sensitivities in today&#39;s global economy: energy imports and merchandise flows from China. At the same time, it also highlights the increasing volume of two-way trade with neighboring nations. These patterns are likely to be hallmarks of every nation&#39;s business in the days ahead.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/ITALY/ITALY.HTM">Italy</a> (SA, Millions of &#128;)</th>
<th scope="col">Apr 2005</th>
<th scope="col">Mar 2005</th>
<th scope="col">Apr 2004</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Balance</td>
<td>-784</td>
<td>-872</td>
<td>+183</td>
<td>-126</td>
<td>+229</td>
<td>+735</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>24,282</td>
<td>24,086</td>
<td>23,048</td>
<td>23,391</td>
<td>21,721</td>
<td>22,153</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>25,066</td>
<td>24,958</td>
<td>22,865</td>
<td>23,517</td>
<td>21,491</td>
<td>21,418</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">Balance on Energy (NSA)</td>
<td>-3,258</td>
<td>-2,976</td>
<td>-2,221</td>
<td>-2,438</td>
<td>-2,209</td>
<td>-2,203</td>
</tr>
</tbody>
</table>
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Foreign trade for Italy has swung from a comfortable surplus two years ago to a persistent and increasing deficit. The April figures, reported today, show a shortfall of 784 million following on March's 872 million. This [...]

Italy's Trade Accounts Shift to Deficit; Dynamics of Global Business Alter Long-Running Surplus Position

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050616b.jpg" width="353">
The National Association of Home Builders&#39; (NAHB) Composite Housing Market Index rose to 71 in June, returning to the record high level reached last December.
During the last twenty years, annual changes in the composite index had an 83% correlation with the change in new home sales. There&#39;s been an 86% correlation with the change in single family housing starts.
For the second month, all of the June index components improved. The index for current sales of single family homes was up 4.1% y/y and the index gauging expected sales in six months increased 5.3% y/y.
Traffic of prospective home buyers rose nearly to the record high level.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>71</td>
<td>70</td>
<td>68</td>
<td>68</td>
<td>64</td>
<td>61</td>
</tr>
</tbody>
</table>
</body>
</html>

The National Association of Home Builders' (NAHB) Composite Housing Market Index rose to 71 in June, returning to the record high level reached last December. During the last twenty years, annual changes in the composite index had an [...]

NAHB Housing Market Index At Record High

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050616a.jpg" width="353">
Housing starts edged 0.2% higher to 2.009M units in May following a downwardly revised 9.4% gain in April.Consensus expectations had been for 2.041M starts.
Single-family starts rose 4.7% m/m on top of the downwardly revised 5.0% increase during April. An 8.0% (3.8% y/y) increase single family starts in the Northeast recovered all of the prior month&#39;s decline but the level has been trending sideways-to-lower since late last year. Single family starts in the Midwest jumped 22.0% (4.1% y/y) and starts in the West surged 19.1 (-6.9% y/y). Weakness last month was in the South where a 7.8% (+10.0% y/y) decline reversed half of the prior month&#39;s surge.
Multi family starts reversed nearly all of the prior month&#39;s gain with a 19.3% decline.
Building permits fell 4.6% and have been slightly lower this year.

<table border="0" cellspacing="0" width="100%">

</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/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>2,009</td>
<td>2,005</td>
<td>1.8%</td>
<td>1,950</td>
<td>1,854</td>
<td>1,7 10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,704</td>
<td>1,627</td>
<td>3.3%</td>
<td>1,604</td>
<td>1,505</td>
<td>1,363</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>305</td>
<td>378</td>
<td>-6.2%</td>
<td>345</td>
<td>349</td>
<td>347</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,050</td>
<td>2,148</td>
<td>-3.7%</td>
<td>2,058</td>
<td>1,8 88</td>
<td>1,749</td>
</tr>
</tbody>
</table>
</body>
</html>

Housing starts edged 0.2% higher to 2.009M units in May following a downwardly revised 9.4% gain in April.Consensus expectations had been for 2.041M starts. Single-family starts rose 4.7% m/m on top of the downwardly revised 5.0% [...]

Housing Starts Edged Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050616c.jpg" width="353">
Initial claims for unemployment insurance remained about flat last week, rising 1,000 to 333,000 from an upwardly revised level the week prior. Consensus expectations had been for 328,000 claims.
During the last ten years there has been a (negative) 75% correlation between the level of initial claims for unemployment insurance and the monthly change in payroll employment. There has been a (negative) 65% correlation with the level of continuing claims.
The four week moving average of initial claims increased modestly to 335,000 (-2.7% y/y).
Continuing claims for unemployment insurance jumped 58,000 following a deepened 9,000 decline the prior week.
The insured unemployment rate increased slightly to 2.1% after seven weeks at 2.0%.
The latest Beige Book from the Federal Reserve Board covering regional economic conditions is available <a href="http://www.federalreserve.gov/fomc/beigebook/2005/20050615/default.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">06/11/05</th>
<th scope="col">06/04/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>333</td>
<td>332</td>
<td>-2.3%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,641</td>
<td>-9.1%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance remained about flat last week, rising 1,000 to 333,000 from an upwardly revised level the week prior. Consensus expectations had been for 328,000 claims. During the last ten years there has [...]

Initial Unemployment Insurance Claims Flat

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050616c.jpg" width="353">
Initial claims for unemployment insurance remained about flat last week, rising 1,000 to 333,000 from an upwardly revised level the week prior. Consensus expectations had been for 328,000 claims.
During the last ten years there has been a (negative) 75% correlation between the level of initial claims for unemployment insurance and the monthly change in payroll employment. There has been a (negative) 65% correlation with the level of continuing claims.
The four week moving average of initial claims increased modestly to 335,000 (-2.7% y/y).
Continuing claims for unemployment insurance jumped 58,000 following a deepened 9,000 decline the prior week.
The insured unemployment rate increased slightly to 2.1% after seven weeks at 2.0%.
The latest Beige Book from the Federal Reserve Board covering regional economic conditions is available <a href="http://www.federalreserve.gov/fomc/beigebook/2005/20050615/default.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">06/11/05</th>
<th scope="col">06/04/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>333</td>
<td>332</td>
<td>-2.3%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,641</td>
<td>-9.1%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
Housing Starts Edged Higher 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 16, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050616a.jpg" width="353">
Housing starts edged 0.2% higher to 2.009M units in May following a downwardly revised 9.4% gain in April.Consensus expectations had been for 2.041M starts.
Single-family starts rose 4.7% m/m on top of the downwardly revised 5.0% increase during April. An 8.0% (3.8% y/y) increase single family starts in the Northeast recovered all of the prior month&#39;s decline but the level has been trending sideways-to-lower since late last year. Single family starts in the Midwest jumped 22.0% (4.1% y/y) and starts in the West surged 19.1 (-6.9% y/y). Weakness last month was in the South where a 7.8% (+10.0% y/y) decline reversed half of the prior month&#39;s surge.
Multi family starts reversed nearly all of the prior month&#39;s gain with a 19.3% decline.
Building permits fell 4.6% and have been slightly lower this year.

<table border="0" cellspacing="0" width="100%">

</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/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>2,009</td>
<td>2,005</td>
<td>1.8%</td>
<td>1,950</td>
<td>1,854</td>
<td>1,7 10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,704</td>
<td>1,627</td>
<td>3.3%</td>
<td>1,604</td>
<td>1,505</td>
<td>1,363</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>305</td>
<td>378</td>
<td>-6.2%</td>
<td>345</td>
<td>349</td>
<td>347</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,050</td>
<td>2,148</td>
<td>-3.7%</td>
<td>2,058</td>
<td>1,8 88</td>
<td>1,749</td>
</tr>
</tbody>
</table>
NAHB Housing Market Index At Record High 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 16, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050616b.jpg" width="353">
The National Association of Home Builders&#39; (NAHB) Composite Housing Market Index rose to 71 in June, returning to the record high level reached last December.
During the last twenty years, annual changes in the composite index had an 83% correlation with the change in new home sales. There&#39;s been an 86% correlation with the change in single family housing starts.
For the second month, all of the June index components improved. The index for current sales of single family homes was up 4.1% y/y and the index gauging expected sales in six months increased 5.3% y/y.
Traffic of prospective home buyers rose nearly to the record high level.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>71</td>
<td>70</td>
<td>68</td>
<td>68</td>
<td>64</td>
<td>61</td>
</tr>
</tbody>
</table>
Italy's Trade Accounts Shift to Deficit; Dynamics of Global Business Alter Long-Running Surplus Position 
by <a href="/comment/Stone.html">Carol Stone</a> June 16, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050616d.jpg" width="353">
Foreign trade for Italy has swung from a comfortable surplus two years ago to a persistent and increasing deficit. The April figures, reported today, show a shortfall of &#128;784 million following on March&#39;s &#128;872 million. This deterioration came despite notable increases in exports, amounting to more than a million euros in the past year, including double-digit yearly percentage gains in several recent months. Imports have obviously gone up more than exports, growing &#128;2.2 billion in the past year. More significantly, the accompanying graph shows that Italy was traditionally in an overall surplus trade position, which reached as high as &#128;3.6 billion in mid-1996.
As seen in the table below, energy is a major ingredient in the move to a trade deficit. The balance there was -&#128;3.3 billion in April, &#128;1.0 billion bigger than the year-ago amount and the largest in the history of these particular data, which go back to 1991.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050616e.jpg" width="353">
But energy is not the only factor. Similar shifts have occurred in intra-Euro-Zone trade, which illustrates the result of growth in imports that outstrips growth in exports. Also, in non-Euro countries, the trade position with China is moving gradually toward a larger deficit. This latter is a more modest phenomenon, but it contrasts distinctly with the experience elsewhere in Asia: trade with Japan is moving to smaller deficits as imports from there tend downward irregularly. Trade with Asian NICs remains generally in modest surplus, with the occasional monthly deficit. Trade with other regions, such as the United States, seems to be maintaining former patterns.
These changes toward a trade deficit for Italy are not of great magnitude. But the move to persisting deficit for a nation long in surplus is notable. It highlights some key sensitivities in today&#39;s global economy: energy imports and merchandise flows from China. At the same time, it also highlights the increasing volume of two-way trade with neighboring nations. These patterns are likely to be hallmarks of every nation&#39;s business in the days ahead.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/ITALY/ITALY.HTM">Italy</a> ( SA, Millions of &#128;)</th>
<th scope="col">Apr 2005</th>
<th scope="col">Mar 2005</th>
<th scope="col">Apr 2004</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Balance</td>
<td>-784</td>
<td>-872</td>
<td>+183</td>
<td>-126</td>
<td>+229</td>
<td>+735</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>24,282</td>
<td>24,086</td>
<td>23,048</td>
<td>23,391</td>
<td>21,721</td>
<td>22,153</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>25,066</td>
<td>24,958</td>
<td>22,865</td>
<td>23,517</td>
<td>21,491</td>
<td>21,418</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">Balance on Energy (NSA)</td>
<td>-3,258</td>
<td>-2,976</td>
<td>-2,221</td>
<td>-2,438</td>
<td>-2,209</td>
<td>-2,203</td>
</tr>
</tbody>
</table>
</body>
</html>

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.

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

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Charts of the Week: Tariff Truce, Tenuous Trust

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

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

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

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

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

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

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

U.S. Light Vehicle Sales Fall in April

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

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

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

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

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

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

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

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

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

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

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

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

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

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

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

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

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

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

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

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

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

Economy in Brief: June 2005

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U.S. Current Account Deficit Another Record

Philadelphia Fed Index Negative

Philadelphia Fed Index Negative

Italy's Trade Accounts Shift to Deficit; Dynamics of Global Business Alter Long-Running Surplus Position

NAHB Housing Market Index At Record High

Housing Starts Edged Higher

Initial Unemployment Insurance Claims Flat

Initial Unemployment Insurance Claims Flat