Robert Brusca

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The inflation picture looks worse than the inflation reality. The chart
above shows headline inflation seemingly 'soaring' off to the races
running at a 1.6% Yr/Yr pace. Notice the scale and the push is a bit
less daunting. For 3-mo headline inflation the pace is at 2% which is
the ECB's speed limit. But in reality inflation's upsurge has all been
due to a push from oil prices that has sent goods prices soaring at 9%
annual rate over three-months. Oil has since stabilized. Service sector
inflation is hovering between 1% and 1.5%. 
Moreover, core inflation in the zone is steady
and low. The core rate is at 0.9% Yr/Yr and has accelerated to 1.4%
over three months as energy prices have spurted. But there is no steady
acceleration involved nor does the Euro-economy look like it is
overheating- far from it.
The euro-area however is still growing. There is not
serious sign of an economic set-back. Yet forward-looking confidence
indicators have begun to crumble as UK consumer confidence fell by 10
points, and the Zew readings for Germany and Switzerland each have
taken a giant step backward on the weakness in their expectations
components. Still the Zew current reading for Germany continued to
advance as expectations were slashed back sharply. 
On balance it is not a situation that seems very
hospitable to inflation. Current trends do not look that daunting; the
environment is not inflation friendly. The sole inflation rating force
in the Zone is the ongoing weakness in the euro itself and for that to
become an issue the zone will have to get much stronger.


<table cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" colspan=8>Trends in HICP</th>
</tr></thead>
<tr class="grey3">
<td>&nbsp;</td>
<td colspan=3>% mo/mo</td>
<td colspan=3>% saar</td>
<td>&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>May-10</td>
<td>Apr-10</td>
<td>Mar-10</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Yr
Ago</td>
</tr>
<tr>
<td class="firstcol">EMU</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.4%</td>
<td style="color:red;">2.0%</td>
<td style="color:red;">1.6%</td>
<td style="color:red;">1.6%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Core</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.2%</td>
<td style="color:red;">1.4%</td>
<td>0.8%</td>
<td>0.9%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">Goods</td>
<td>0.1%</td>
<td>0.8%</td>
<td>1.4%</td>
<td style="color:red;">9.9%</td>
<td style="color:red;">3.3%</td>
<td style="color:red;">1.9%</td>
<td>-1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.2%</td>
<td>1.1%</td>
<td style="color:red;">2.0%</td>
<td>1.3%</td>
<td>2.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan=8>HICP</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.1%</td>
<td>-0.2%</td>
<td>0.6%</td>
<td style="color:red;">1.9%</td>
<td>1.1%</td>
<td style="color:red;">1.2%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>0.7%</td>
<td style="color:red;">2.1%</td>
<td style="color:red;">1.9%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>0.3%</td>
<td style="color:red;">2.6%</td>
<td style="color:red;">1.7% </td>
<td style="color:red;">1.6%</td>
<td>0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK</td>
<td>-0.2%</td>
<td>0.5%</td>
<td>0.4%</td>
<td>2.9%</td>
<td style="color:red;">4.0%</td>
<td style="color:red;">3.4%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.3%</td>
<td style="color:red;">1.7%</td>
<td>1.0%</td>
<td style="color:red;">1.8%</td>
<td>-0.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan=8>Core:xFE&amp;A</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.4%</td>
<td>-0.5%</td>
<td>0.4%</td>
<td style="color:red;">1.1%</td>
<td>0.4%</td>
<td>0.6%</td>
<td>1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>-0.1%</td>
<td style="color:red;">0.9%</td>
<td>0.8%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>0.3%</td>
<td style="color:red;">2.6%</td>
<td>1.3%</td>
<td>1.5%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK</td>
<td>0.1%</td>
<td>0.3%</td>
<td>0.4%</td>
<td>2.9%</td>
<td style="color:red;">3.1%</td>
<td style="color:red;">2.8%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>0.1%</td>
<td style="color:red;">0.4%</td>
<td>-0.4%</td>
<td>0.3%</td>
<td>0.9%</td>
</tr>

</table>

</html>

The inflation picture looks worse than the inflation reality. The chart above shows headline inflation seemingly 'soaring' off to the races running at a 1.6% Yr/Yr pace. Notice the scale and the push is a bit less daunting. For 3-mo [...]

EMU Rate Is Tepid On The Month But Headline Rate Continues Trend Acceleration

Tom Moeller

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<a href="/comment/100616g_big.png" name="modal" ><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100616g.png"></a>Pricing pressures continued
to ease last month. Thanks to lower food &amp; energy prices, the
May producer price index fell 0.3% (+5.1% y/y) after a 0.1% April slip.
Consensus expectations had been for a 0.5% decline. Nevertheless, the
y/y gain in prices of 5.1% remained the highest since October 2008.

Finished energy prices fell 1.5% (+16.7% y/y) after a 0.8% April
decline. Not seasonally adjusted gasoline prices slipped in May (+31.2%
y/y) and home heating oil prices reversed most of their April increase
(+44.8% y/y). Finally, natural gas prices fell for the third straight
month (+0.7% y/y) but electricity prices rose (2.0%
y/y).&nbsp;&nbsp;&nbsp;
Finished food prices slipped for the second
consecutive month (+5.7% y/y) led by lower vegetable (+38.1% y/y) and
egg prices (+3.8% y/y). These declines were countered by higher beef
prices (14.5% y/y) which were strong for the fourth straight
month.&nbsp;&nbsp;&nbsp;
The
second consecutive 0.2% increase in finished producer prices less food
&amp; energy prices beat Consensus expectations for a 0.1% uptick.
Still, the 1.3% y/y increase remained the weakest since October 2006.
Finished consumer goods prices less food &amp; energy rose 0.3%,
still leaving the 1.9% y/y increase nearly half the annual gains during
the last two years. Finished durables prices rose 0.3% (0.6% y/y) while
core finished consumer nondurable goods prices rose an increased 0.4%
(2.8% y/y). Capital equipment price inflation remained tame (0.6% y/y)
versus annual gains between 1.0% and 3.0% back to 2004.

Intermediate goods prices continued firm with a 0.4% gain (8.4% y/y).
Core prices rose a diminished 0.3% but the 6.1% y/y gain was the
strongest since October 2008. The strength continued to reflect
increases in the price of steel (32.4% y/y) &amp; aluminum (16.1%
y/y).

Price pressures eased last month at the earliest stage of processing.
Crude materials prices fell 2.8% along with a 1.6% decline in core
prices. The decline was led by lower scrap copper prices and lower iron
&amp; steel scrap prices, but they have doubled y/y.
The producer price data is
available in Haver's USECON database. More detailed
data is in the PPI and in the PPIR
databases.
<a href="/comment/100616h_big.png" name="modal" ><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100616h.png"></a><a href="/comment/100616i_big.png" name="modal" ><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100616i.png "></a>

<table cellspacing="0" width="100%">
<thead>

<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a>(%)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">May y/y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr></thead><tbody>
<tr>
<td class="firstcol">Finished Goods</td>
<td>-0.3</td>
<td>-0.1</td>
<td>0.7</td>
<td>5.1</td>
<td>-2.5</td>
<td>6.4</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol"> Less Food
&amp; Energy</td>
<td>0.2</td>
<td>0.2</td>
<td>0.1</td>
<td>1.3</td>
<td>2.6</td>
<td>3.4</td>
<td>2.0</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>0.4</td>
<td>0.8</td>
<td>0.6</td>
<td>8.4</td>
<td>-8.4</td>
<td>10.3</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less Food
&amp; Energy</td>
<td>0.3</td>
<td>1.1</td>
<td>0.7</td>
<td>6.1</td>
<td>-4.2</td>
<td>7.4</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">Crude Goods</td>
<td>-2.8</td>
<td>-1.2</td>
<td>3.2</td>
<td>21.5</td>
<td>-30.3</td>
<td>21.4</td>
<td>11.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Less Food
&amp; Energy</td>
<td>-1.6</td>
<td>4.0</td>
<td>6.0</td>
<td>41.2</td>
<td>-23.5</td>
<td>14.8</td>
<td>15.6</td>
</tr>
</tbody>
</table>
</html>

Pricing pressures continued to ease last month. Thanks to lower food & energy prices, the May producer price index fell 0.3% (+5.1% y/y) after a 0.1% April slip. Consensus expectations had been for a 0.5% decline. Nevertheless, the [...]

U.S. PPI Declines For Second Month With Lower Food & Energy Prices

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<a href="/comment/100616d_big.png" name="modal" ><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100616d.png"></a>The recovery in industrial output due to improved
final demand and inventory replenishment continued last month. Overall
production rose 1.2% after a little revised 0.7% increase during April.
It's up at an 8.1% annual rate so far this year. These gains understate
the degree of improvement following last year's recession. In the
factory sector alone output rose 0.9% during the last two months and it
has risen at a 9.5% rate so far this year.&nbsp;&nbsp;
Strength in output last month was
across-the-board amongst major industry groupings. In individual
industries, output of motor vehicles rose 5.5% last month and by more
than one-third y/y. Output of computers also posted a firm 1.4%
increase (14.3% y/y) while machinery output rose 1.9% (13.3% y/y).
Output of appliances and furniture slipped after
a strong April (+3.6% y/y). The level of production was one-third below
the 2005 peak. Apparel output rose just 0.5% last month (7.9% y/y) and
remained off by two-thirds from 1994 as production has moved out of the
country.
Capacity utilization rose further to
74.7%, its highest level since November 2008. In the factory sector
alone, utilization rose to 71.5%, the highest level since November 2008
and up from the 2009 low of 65.1%.
The industrial production data are
available in Haver's USECON database.
<a href="/comment/100616e_big.png" name="modal" ><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100616e.png"></a>
<a href="/comment/100616f_big.png" name="modal" ><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100616f.png"></a>

<table cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Industrial Production (SA,%)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">May y/y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr></thead>
<tr class="grey2">
<td class="firstcol">Total Output</td>
<td>1.2</td>
<td>0.7</td>
<td>0.3</td>
<td>7.6</td>
<td>-9.7</td>
<td>-2.2</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>0.9</td>
<td>0.9</td>
<td>1.2</td>
<td>7.9</td>
<td>-11.3</td>
<td>-3.2</td>
<td>1.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer
Goods</td>
<td>1.1</td>
<td>0.0</td>
<td>0.4</td>
<td>6.3</td>
<td>-5.2</td>
<td>-2.6</td>
<td>0.9</td>
</tr>
<tr>
<td class="firstcol">Business
Equipment</td>
<td>1.3</td>
<td>1.7</td>
<td>1.1</td>
<td>10.1</td>
<td>-12.4</td>
<td>-1.1</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction
Supplies</td>
<td>0.7</td>
<td>3.0</td>
<td>2.4</td>
<td>3.9</td>
<td>-17.8</td>
<td>-6.3</td>
<td>-2.0</td>
</tr>
<tr>
<td class="firstcol">Materials</td>
<td>1.4</td>
<td>0.8</td>
<td>-0.1</td>
<td>9.2</td>
<td>-10.9</td>
<td>-1.9</td>
<td>2.0</td>
</tr>
<tr class="odd">
<td class="firstcol" class="firstcol">Utilities</td>
<td>4.8</td>
<td>-1.3</td>
<td>-6.2</td>
<td>4.2</td>
<td>-2.5</td>
<td>0.3</td>
<td>3.4</td>
</tr>
<tr class="grey2">
<td class="firstcol">Capacity Utilization
(%)</td>
<td>74.7</td>
<td>73.7</td>
<td>73.1</td>
<td>68.5(May '09)</td>
<td>70.1</td>
<td>77.5</td>
<td>80.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Factory Utilization</td>
<td>71.5</td>
<td>70.8</td>
<td>70.1</td>
<td>65.3</td>
<td>66.8</td>
<td>75.1</td>
<td>79.0</td>
</tr>

</table>

</html>

The recovery in industrial output due to improved final demand and inventory replenishment continued last month. Overall production rose 1.2% after a little revised 0.7% increase during April. It's up at an 8.1% annual rate so far [...]

U.S. Industrial Production Is Strong Again

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<a href="/comment/100616a_big.png" name="modal" ><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100616a.png"></a>If there was any question
that the government's program to stimulate housing was a success, it
should be laid to rest now that it's ended. May housing starts
plummeted 10% m/m to 593,000 (AR), the lowest level since December. The
April level was revised down modestly. The latest figure was well short
of Consensus expectations for 648,000 starts but despite the decline,
starts remain up 21.5% from the low in January 2009. 

Starts of single-family homes fell 17.2% from April to 468,000, the
lowest level in twelve months. In the South, single-family starts fell
by one-quarter (+10.1% y/y) while starts in the Midwest dropped 10.9%
(+15.5% y/y). In the Northeast starts fell a lesser 1.7% (+54.1 y/y)
and were off 2.0% (+11.1 y/y) in the West.

Activity in the the multi-family sector continued to improve and starts
of apartments, condominiums &amp; town houses jumped by one-third
to 125,000, the highest level in twelve months. 

Building permits during fell 5.9% to the lowest level in one-year.
Permits to build a single-family home repeated their April decline and
fell roughly 10.0% (+3.1% y/y). Permits to build
multi-family homes increased 9.7% and were 26.0% higher than the low
last July.
The housing starts
figures can be found in Haver's USECON database.
&nbsp;
<a href="/comment/100616b_big.png" name="modal" ><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100616b.png"></a>
<a href="/comment/100616c_big.png" name="modal" ><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100616c.png"></a>

<table cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Housing
Starts (000s, SAAR)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">May y/y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr></thead><tbody>
<tr>
<td class="firstcol">Total</td>
<td>593</td>
<td>659</td>
<td>634</td>
<td>7.8%</td>
<td>554</td>
<td>900</td>
<td>1,342</td>
</tr>
<tr class="odd">
<td class="firstcol">Single-Family</td>
<td>468</td>
<td>565</td>
<td>535</td>
<td>15.3</td>
<td>442</td>
<td>616</td>
<td>1,036</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>125</td>
<td>94</td>
<td>99</td>
<td>-13.2</td>
<td>112</td>
<td>284</td>
<td>306</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>574</td>
<td>610</td>
<td>685</td>
<td>4.4</td>
<td>583</td>
<td>896</td>
<td>1,392</td>
</tr>
</tbody>
</table>

</html>

If there was any question that the government's program to stimulate housing was a success, it should be laid to rest now that it's ended. May housing starts plummeted 10% m/m to 593,000 (AR), the lowest level since December. The [...]

U.S. Housing Starts Decline, Erasing Year's Increase

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<a href="/comment/100615m.png" name="modal"><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100615m.png"></a>
The seasonally adjusted and working day adjusted EMU trade balance
improved in April widening to &#128;1.39Bln surplus. Still, the trend is for
the surplus to shrink. Growth rates show that exports and imports are
building on the earlier strong rates of growth, getting successively
larger over more recent periods- even with this month's backtracking. 
Export and import categories are off across the
board this month with one exception, a monthly rise in the export value
of raw materials 
The chart above shows a pattern for the surplus
is that it is slowly deteriorating after peaking early in 2009. This is
interesting because if European growth gets weak we would expect this
pattern to reverse and to produce surpluses as growth slows and as
imports slow down as domestic demand weakens. But, we also expect
Europe to stave off surplus reduction because the euro is weak and the
increase in competitiveness should expand exports and retard imports.
The fact of the ongoing current surplus deterioration suggests that
there is a J-Curve at work. The rise in the surplus this month may hint
that we have reached the end of the J-curve effect. So, let's look at
how that works. 
The J-curve refers to the tendency for traded
goods prices to react first to the change in the exchange rate and for
trade volumes to react later. There is a timing asymmetry; in fact,
there are probably several of them. For example, with the euro's fall
in value there is not necessarily an immediate impact on export prices.
Export prices are denominated in euros based on their euro-area costs.
But export volumes eventually will respond positively to the exchange
rate drop because unchanged euro-based export prices will translate
them into much lower foreign currency prices. 
Initially nothing happens to export prices.
Secondly, the volume sold overseas eventually grows as overseas buyers
respond to lower prices expressed in their domestic currency. Thirdly,
eventually European exporters might even RAISE their euro prices to
increase their profits more immediately, and blunt the degree of
competitiveness improvement. But these latter two effects are second
and third round occurrences. The initial effect on exports and export
prices is that nothing much happens due to the exchange rate change. 
Import prices, however, are under pressure from
the very start of the currency weakening. The minute that the euro
falls, foreign prices expressed in euro currency terms are adjusted up.
For example $70/bbl oil that used to cost &#128; &nbsp;53.85 at &#128;&nbsp;1.30 will require
&#128;&nbsp;58.33 at &#128;&nbsp;1.20. So the terms of trade (PX/PM) move sharply against a
country as a first step after a currency drop. That means that the
ratio drops as import prices rise faster then export prices (...and all
other things the same, that will widen the trade deficit). But
eventually because demand elasticities (demand responsiveness) are
greater than one in absolute value, the percentage drop in import
volumes will surpass the percentage rise in import prices, bringing
about a drop in the value of imports and a rise in the trade surplus. 
And, as discussed above, eventually the drop in
foreign currency prices for exports will spur export volumes to expand
in foreign markets. Both of these effects argue for an expanded
surplus, eventually. But the immediate impact is that surplus gets
smaller because price effects take place before demand impacts play
out. The deterioration in the terms of trade is the dominant
first-round effect and that creates the J-curve, a move in the wrong
direction before a move in the right direction. Right now the
combination of the J-curve effects driving up import prices up and
stronger recovery growth sucking in imports is wining the battle
against strong exports driven by a strong overseas recovery. As a
result the surplus is shrinking. This is the first round, or the start
of the J-curve effect, It is temporary and with the euro's drop slowing
the one month rise in the trade surplus could be a hint of things to
come. 
Weaker growth in EMU could stem the ongoing rise
in imports too, but so will the eventual response to higher import
prices as the euro has fallen. One of theses effects will do it by
enhancing growth; the other by retarding it. There will be little
confusion about which effect is winning out. Either way, we expect
Europe's surplus to return for good and for this declining phase in the
surplus to prove temporary. Perhaps the rise in the monthly surplus is
the start of that process.



<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th colspan=7 scope="col">Euro-Area
Trade trends for goods</th>
</tr></thead>

<td>&nbsp;</td>
m/m%
% Saar
<td>&nbsp;</td>


<td>&nbsp;</td>
Apr-10
Mar-10
3M
6M
12M
12M
Ago

<tr>
<td class="firstcol">Balance*</td>
<td>&#128;&nbsp;1,397 </td>
<td>&#128;&nbsp;(26)</td>
<td>&#128;&nbsp;(1,435)</td>
<td>&#128;&nbsp;1,870 </td>
<td>&#128;&nbsp;(3,931)</td>
<td>&#128;&nbsp;219
</td>
</tr>
<tr class="even">
<td class="firstcol" colspan=7>Exports</td>
</tr>
<tr>
<td class="firstcol">All
Exp</td>
<td style="color:red;">-2.4%</td>
<td>9.8%</td>
<td>51.2%</td>
<td>27.2%</td>
<td>17.4%</td>
<td style="color:red;">-24.3%</td>
</tr>
<tr>
<td class="firstcol">Food
and Drinks</td>
<td style="color:red;">-2.9%</td>
<td>6.2%</td>
<td>22.4%</td>
<td>19.2%</td>
<td>7.9%</td>
<td style="color:red;">-10.0%</td>
</tr>
<tr>
<td class="firstcol">Raw
materials</td>
<td>0.8%</td>
<td>6.5%</td>
<td>54.5%</td>
<td>39.3%</td>
<td>31.6%</td>
<td style="color:red;">-25.3%</td>
</tr>
<tr>
<td class="firstcol">Other</td>
<td style="color:red;">-2.4%</td>
<td>10.1%</td>
<td>53.6%</td>
<td>27.6%</td>
<td>17.8%</td>
<td style="color:red;">-25.3%</td>
</tr>
<tr>
<td class="firstcol">
MFG</td>
<td style="color:red;">-4.8%</td>
<td>12.1%</td>
<td>43.9%</td>
<td>21.2%</td>
<td>14.8%</td>
<td style="color:red;">-23.4%</td>
</tr>
<tr class="even">
<td class="firstcol" colspan=7>IMPORTS</td>
</tr>
<tr>
<td class="firstcol">All IMP</td>
<td style="color:red;">-3.5%</td>
<td>12.2%</td>
<td>49.0%</td>
<td>32.7%</td>
<td>17.3%</td>
<td style="color:red;">-25.1%</td>
</tr>
<tr>
<td class="firstcol">Food
and Drinks</td>
<td style="color:red;">-2.4%</td>
<td>5.5%</td>
<td style="color:red;">-4.4%</td>
<td>11.0%</td>
<td style="color:red;">-1.8%</td>
<td style="color:red;">-4.9%</td>
</tr>
<tr>
<td class="firstcol">Raw
materials</td>
<td style="color:red;">-5.0%</td>
<td>22.9%</td>
<td>96.7%</td>
<td>68.8%</td>
<td>40.0%</td>
<td style="color:red;">-37.9%</td>
</tr>
<tr>
<td class="firstcol">Other</td>
<td style="color:red;">-3.5%</td>
<td>12.1%</td>
<td>51.5%</td>
<td>32.7%</td>
<td>17.8%</td>
<td style="color:red;">-25.7%</td>
</tr>
<tr>
<td class="firstcol">
MFG</td>
<td style="color:red;">-5.1%</td>
<td>12.6%</td>
<td>31.9%</td>
<td>28.4%</td>
<td>14.1%</td>
<td style="color:red;">-21.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan=7>*Eur
mlns; mo or period average (SA, WDA)</td>
</tr>



</html>

The seasonally adjusted and working day adjusted EMU trade balance improved in April widening to 1.39Bln surplus. Still, the trend is for the surplus to shrink. Growth rates show that exports and imports are building on the earlier [...]

EMU Exports And Imports Hit A One-Month Backtrack But Is The Surplus Really On A Sustained Declining Trend?

Louise Curley

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<a href="/comment/100615k.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100615k.png"></a>
<a href="/comment/100615l.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100615l.png"></a>

While
German analysts and institutional investors who participate in the ZEW
Survey have become less negative about current conditions, they have
become much more concerned about the economic outlook six months
ahead.&nbsp; The percentage excess of those looking for improvement
over those looking for deterioration dropped to 28.7% in June from 45.8
% in May.&nbsp; The June value is close to the long term average of
27.4%, as seen in the first chart.&nbsp; The sovereign debt crisis
in the Euro Area and the plans to improve government imbalances through
stringent budgetary measures have, no doubt, been responsible for much
of the sharp change in sentiment.
Increases in industrial production and exports and
declines in the unemployment rate have resulted in a less negative
appraisal of current condition.&nbsp; The pessimists among the
German financial community exceeded the optimists by 7.9% in June, down
from an excess of pessimist of 21.6% in May.&nbsp; German financial
types tend to be pessimistic about current conditions.&nbsp; Over
the entire period from December 1991 to the present, the average
appraisal of current conditions is minus 32.4%, as seen in the second
chart.
Last month, the participants in the survey were
optimistic about the outlook for profits.&nbsp; The balance of
people between those expecting increases in profits and those expecting
decreases in profits rose for the Automotive, Chemical/Pharmaceutical,
Steel, Machinery, Consumption/Trade, Construction, Utilities, Service,
Telecommunication and Information Technology industries.&nbsp; Only
Banking and Insurance industries were expected to do poorly.&nbsp;
This month the balances between the people expecting increases in
profits and those expecting decreases in profits have changed
dramatically.
Only in the&nbsp; Automotive,
Chemical/Pharmaceutical and Machinery industries have the balances of
opinion increased.&nbsp;&nbsp; In all other cases, expectations
are for a deceleration in profit growth, and in the case of the
consumption/trade industry, the participants expect a decline in
profits, as can be seen in the table
below.&nbsp;&nbsp;&nbsp;


<table widt="100% cellspacing="0">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup><thead>
<tr>
<th scope="col">&nbsp;</th>
<th scope="col">Jun 10</th>
<th scope="col">May 10</th>
<th scope="col">Apr 10&nbsp;</th>
<th scope="col">Mar 10</th>
<th scope="col">Feb 10</th>
<th scope="col">Jan 10</th>
<th scope="col">Dec 09</th>
<th scope="col">Nov 09&nbsp;</th>
</tr></thead>
<tr>
<td class="firstcol">Macroeconomic Expectation 6 mo
Ahead (%Bal)</td>
<td>28.7</td>
<td>45.8</td>
<td>53.0</td>
<td>44.5</td>
<td>45.1</td>
<td>47.2</td>
<td>50.4</td>
<td>51.1</td>
</tr>
<tr>
<td class="firstcol">Current Economic
Conditions (%Bal)</td>
<td>-7.9</td>
<td>-21.6</td>
<td>-39.2</td>
<td>-51.9</td>
<td>-54.8</td>
<td>-56.6</td>
<td>-60.6</td>
<td>-65.6</td>
</tr>
<tr class="even">
<td colspan=9 class="firstcol">Responding Increase - Decrease in
Profits&nbsp; (%Bal)</td>

</tr>
<tr>
<td class="firstcol">Banking</td>
<td>5.6</td>
<td>18.2</td>
<td>28.2</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr class="grey1">
<td class="firstcol">Insurance</td>
<td>4.9</td>
<td>13.7</td>
<td>15.8</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Automotive</td>
<td>32.9</td>
<td>29.1</td>
<td>3.1</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr class="grey1">
<td class="firstcol">Chemical/Pharmaceutical</td>
<td>59.4</td>
<td>56.4</td>
<td>48.2</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Steel</td>
<td>43.7</td>
<td>46.7</td>
<td>37.2</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr class="grey1">
<td class="firstcol">Electronics</td>
<td>48.0</td>
<td>48.5</td>
<td>41.2</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Machinery</td>
<td>63.4</td>
<td>61.2</td>
<td>52.1</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr class="grey1">
<td class="firstcol">Consumption/Trade</td>
<td>-9.1</td>
<td>0.4</td>
<td>-2.3</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>0.4</td>
<td>11.0</td>
<td>10.4</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr class="grey1">
<td class="firstcol">Utilities</td>
<td>0.8</td>
<td>21.5</td>
<td>20.5</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Service</td>
<td>19.6</td>
<td>29.4</td>
<td>30.6</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr class="grey1">
<td class="firstcol">Telecommunications</td>
<td>6.2</td>
<td>10.8</td>
<td>7.8</td>
<td colspan=5>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Information Technology</td>
<td>38.9</td>
<td>46.0</td>
<td>45.3</td>
<td colspan=5>&nbsp;</td>
</tr>

</table>

</html>

While German analysts and institutional investors who participate in the ZEW Survey have become less negative about current conditions, they have become much more concerned about the economic outlook six months ahead. The percentage [...]

Confidence Among German Investors And Analysts Down Sharply

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<a href="/comment/100615h_big.png" name="modal"><img class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100615h.png" align="left"></a> U.S. gasoline prices
slipped again last week. The pump price of regular gasoline of
$2.70 per gallon prices was down three cents w/w but that still left
prices up more than three-quarters since the December 2008 low.
Continuing the earlier reversal, the spot market price for a gallon of
regular gasoline rose yesterday to $2.02 which was the highest level in
four weeks. The figures are reported by the U.S. Department of Energy
and can be found in Haver's WEEKLY &amp;
DAILY databases.
Also
moving up was the average price for a barrel of light sweet crude (WTI)
to $73.41 last week. Nevertheless the price remained down from the high
of $84.23 averaged during April. Yesterday crude prices moved higher to
$75.12 per barrel, up from the May 24th low of $66.88.
U.S. natural gas prices also have strengthened
recently to an average $4.75 per mmbtu (33.4% y/y), the highest level
since early-March. Nevertheless, prices remained down from a high of
$6.50 early in January.

Demand for gasoline fell 1.0% last week versus one year ago and that
compares to a 2.0% increase last month. The demand for residual fuel
oil increased 4.8% while distillate demand surged 12.1% y/y. That's
improved from a 12.3% decline during February. Inventories of crude oil
and petroleum products slipped in early June but still were up sharply
from the early-2010 low.
The
energy price data can be found in Haver's WEEKLY database
while the daily figures are in DAILY. The gasoline
demand figures are in OILWKLY.

<a href="/comment/100615i_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100615i.png"></a><a href="/comment/100615j_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100615j.png"></a>

<table cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM" ;="">Weekly Prices</a></th>
<th scope="col">06/14/10</th>
<th scope="col">06/07/10</th>
<th scope="col">05/31/10</th>
<th scope="col">y/y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr></thead>
<tbody>
<tr>
<td class="firstcol">Retail
Regular Gasoline ($ per Gallon, Regular)</td>
<td>2.70</td>
<td>2.73</td>
<td>2.73</td>
<td>1.1%</td>
<td>2.35</td>
<td>3.25</td>
<td>2.80</td>
</tr>
<tr class="odd">
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>73.41</td>
<td>72.89</td>
<td>71.13</td>
<td>3.6%</td>
<td>61.39</td>
<td>100.16</td>
<td>72.25</td>
</tr>
<tr>
<td class="firstcol">Natural Gas Price ($/mmbtu)</td>
<td>4.75</td>
<td>4.46</td>
<td>4.18</td>
<td>33.6%</td>
<td>3.95</td>
<td>8.88</td>
<td>6.97</td>
</tr>
</tbody>
</table>
</html>

U.S. gasoline prices slipped again last week. The pump price of regular gasoline of $2.70 per gallon prices was down three cents w/w but that still left prices up more than three-quarters since the December 2008 low. Continuing the [...]

U.S. Gasoline Prices Slip But Crude Oil Prices Rise

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

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

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Andrew Cates

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

250501Z1.jpg

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

250501Z2.jpg

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

250501Z3.jpg

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

250501Z4.jpg

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

250501Z5.jpg

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

250501Z6.jpg

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

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Charts of the Week: Tariff Truce, Tenuous Trust

250501F20.jpg

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

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

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

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

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

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

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

U.S. Light Vehicle Sales Fall in April

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

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

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

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

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

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

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

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

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

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

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

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

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

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

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

Carol Stone, CBE

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

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

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

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

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

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

Economy in Brief: June 2010

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