Tom Moeller

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The Empire State Factory Index of General Business Conditions slipped to
-1.98 during June after modest improvement to 3.09 in May. The latest figure
from the Federal Reserve Bank of New York was its lowest level since January
2013, remaining well under the 27.41 peak reached last September. The latest
compared to expectations for improvement to 5.4 in the Action Economics Forecast
Survey.

Based on these figures, Haver Analytics calculates a seasonally adjusted
index that is compatible to the ISM series. The adjusted figure eased m/m to
51 .9 and remained below the peak of 55.4 twelve months ago. A rising level
of activity is indicated by a figure above 50. Since inception in 2001,
the business conditions index has had a 68% correlation with the change in real
GDP.

Movement in the component series remained mixed. Deterioration in new orders,
shipments, and inventories was offset by improvement in unfilled orders and
delivery times. Employment also recovered most of its May decline, though
remaining well below the May 2014 peak of 20.88. During the last ten years,
there has been a 72% correlation between the index level and the m/m change in
factory sector payrolls. The average workweek index improved to its highest
level in three months.

The prices paid index remained near its lowest level since July 2012.
Fourteen percent of respondents reported paying higher prices, down from 79% in
mid-2008. Five percent realized lower prices. During the last ten years, there
has been a 70% correlation between the index and the 3-month change in the
intermediate goods PPI.

Looking ahead, the Empire State index of expected business conditions in
six months declined to 25.84 and roughly matched its three-year low. New
orders, shipments, employment, inventories and capital spending each fell
sharply. The index of expected prices paid declined modestly to the lowest level
since the middle of 2009.

The Empire State figures are diffusion indexes which are calculated by
subtracting the percent of respondents reporting poorer business conditions from
those reporting improvement. Thus, they have a good correlation with growth in
the series covered. The data is available in Haver's SURVEYS database.
The ISM-adjusted headline index is calculated by Haver Analytics. The series
dates back to 2001. The Consensus expectation figure can be found in Haver's AS1REPNA
database.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Empire State Manufacturing
 Survey</th>
 <th scope="col" >Jun</th>
 <th scope="col" >May</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Jun'14</th>
 <th scope="col" >2014</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >General Business Conditions Index (ISM
 Adjusted, &gt;50=Increasing Activity, SA)</td>
 <td >51.9</td>
 <td >52.1</td>
 <td >51.7</td>
 <td >55.4</td>
 <td >52.4</td>
 <td >50.0</td>
 <td >51.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >General Business Conditions (Diffusion
 Index, %, SA)</td>
 <td >-1.98</td>
 <td >3.09</td>
 <td >-1.19</td>
 <td >18.16</td>
 <td >11.83</td>
 <td >3.87</td>
 <td >4.22</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;New Orders</td>
 <td >-2.12</td>
 <td >3.85</td>
 <td >-6.00</td>
 <td >16,63</td>
 <td >7.89</td>
 <td >1.16</td>
 <td >1.46</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Shipments</td>
 <td >12.01</td>
 <td >14.94</td>
 <td >15.23</td>
 <td >15.57</td>
 <td >12.09</td>
 <td >4.52</td>
 <td >11.20</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Unfilled Orders</td>
 <td >-4.81</td>
 <td >-11.46</td>
 <td >-11.70</td>
 <td >-1.08</td>
 <td >-9.03</td>
 <td >-8.74</td>
 <td >-8.83</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Delivery Time</td>
 <td >-1.92 </td>
 <td >-10.42</td>
 <td >-4.26</td>
 <td >1.08</td>
 <td >-5.17</td>
 <td >-3.52</td>
 <td >-0.30</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Inventories</td>
 <td >1.92</td>
 <td >7.29</td>
 <td >2.13</td>
 <td >9.68</td>
 <td >-1.80</td>
 <td >-5.73</td>
 <td >-2.91</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Number of Employees</td>
 <td >8.65</td>
 <td >5.21</td>
 <td >9.57</td>
 <td >10.75</td>
 <td >10.85</td>
 <td >3.73</td>
 <td >8.62</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Prices Paid</td>
 <td >9.62</td>
 <td >9.38</td>
 <td >19.15</td>
 <td >7.20</td>
 <td >20.90</td>
 <td >21.53</td>
 <td >24.71</td>
 </tr>
 </tbody>
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The Empire State Factory Index of General Business Conditions slipped to -1.98 during June after modest improvement to 3.09 in May. The latest figure from the Federal Reserve Bank of New York was its lowest level since January 2013, [...]

Empire State Factory Sector Index Eases

Robert Brusca

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EMU exports rose as imports fell in April, propelling the trade surplus to a gain over its March level. The surplus is now at a new high in this cycle. EMU exports are showing sequentially stronger growth rates with export growth over the last three months posting a huge 25.6% annual rate of gain. Both manufacturing and nonmanufacturing exports rose strongly over the last three months. Manufacturing exports had been gaining strength steadily before the three-month jump while nonmanufacturing exports made their three-month jump out of nowhere.

On the import side, EMU flows have been lagging export growth, sequentially. But import growth had been stepping up before imports spurted over the last three months, growing at a 20.6% annual rate. Like for exports, the import flow of nonmanufacturers has been sluggish until the last three months when it soared at a 48.4% annual rate. Imports of manufactured goods have been steady near a 10% annualized growth rate over the sequential horizon. 

If the manufactures data are more stable and reliable, there is a sign of an economic pick-up in these flows. But the spurt over the three months ended in April is not correlated with any other data pick up in the euro area. That spurt remains an anomaly.

Looking at country performance, German export growth is picking up from its year-over-year pace of 7.5%. France is picking up as well. The U.K. is seeing export growth pick up from its 4.2% year-over-year decline. Dutch exports growth rates, too, are back in the black after showing net declines over 12 months. Finland shows sharp declines in exports on all horizons. Portugal shows exports holding to strong rates of growth with year-over-year growth at 9.1%.

On balance, EMU members all show a sharp bulge in exports over three months. While the U.K. is in EU, it is not an EMU member, and its exports are tepid over three months. 

With Greece hanging in the balance and looking like it really might default, the story of the euro area has never been more precarious. The Bundesbank took the opportunity to say that a strong euro would undermine growth in the region. Maybe it is worried that Greece might depart and that a euro without Greece will be stronger?


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EMU exports rose as imports fell in April, propelling the trade surplus to a gain over its March level. The surplus is now at a new high in this cycle. EMU exports are showing sequentially stronger growth rates with export growth over [...]

EMU Trade Surplus Expands in April

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The overall Final Demand Producer Price Index rebounded 0.5% during
May (-1.1% y/y) following an unrevised 0.4% April decline. It was the largest
increase since September 2012. A 0.4% rise was expected in the Action Economics
Forecast Survey. Prices excluding food &amp; energy matched expectations and
gained 0.1% (0.6% y/y) following a 0.2% decline.

Final demand goods prices (35% of the total index) recovered 1.3%
(-4.3% y/y). The rise was led by a 5.9% surge in energy prices (-19.5% y/y), a
record for the series which dates back to 2009. Gasoline prices jumped 17.0%
(-31.3% y/y) and heating oil prices rose 11.5% (-32.1% y/y). The gains were
offset by a 1.6% decline in natural gas costs (-17.7% y/y) and a 0.3% slip
(+1.3% y/y) in electric power prices. Food prices increased 0.8% (-3.3% y/y),
the first increase in six months. It was led by a 42.9% surge in egg prices
(1.8% y/y) and a 1.4% rise in dairy product costs (-14.2% y/y). Beef &amp; veal
prices rose 0.6% (12.3% y/y) and pasta product prices fell 2.1% (+8.4% y/y).

Final demand goods prices excluding food &amp; energy increased 0.2% (0.5%
y/y) led by a 2.7% rise in apparel prices (3.2% y/y). Passenger car prices
gained 0.4% (1.3% y/y) and light truck costs rose 0.6% (3.3% y/y). Furniture
prices declined 0.2% (-0.4% y/y).

Final demand services costs (63% of the total index) were unchanged
(0.6% y/y). Transportation of passengers prices fell 0.4% (-4.3% y/y) but trade
services costs rose 0.6% (0.5% y/y).

Final demand construction prices (2.0% of the index) nudged 0.1%
higher (1.8% y/y) for the third straight month.

Prices for intermediate demand rebounded 1.0% (-7.0% y/y) following a 1.1% fall.

The PPI data are contained in Haver's USECON database with further
detail in PPI and PPIR. The expectations figures are available in
the AS1REPNA database.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Producer Price Index (SA, %)</th>
 <th scope="col" >May</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >May Y/Y</th>
 <th scope="col" >2014</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Final Demand</td>
 <td >0.5</td>
 <td >-0.4</td>
 <td >0.2</td>
 <td >-1.1</td>
 <td >1.6</td>
 <td >1.3</td>
 <td >1.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Excluding Food &amp; Energy</td>
 <td >0.1</td>
 <td >-0.2</td>
 <td >0.2</td>
 <td >0.6</td>
 <td >1.7</td>
 <td >1.5</td>
 <td >1.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp; Goods</td>
 <td >1.3</td>
 <td >-0.7</td>
 <td >0.3</td>
 <td >-4.3</td>
 <td >1.3</td>
 <td >0.8</td>
 <td >1.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 Foods</td>
 <td >0.8</td>
 <td >-0.9</td>
 <td >-0.8</td>
 <td >-3.3</td>
 <td >3.2</td>
 <td >1.7</td>
 <td >3.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 Energy</td>
 <td >5.9</td>
 <td >-2.9</td>
 <td >1.5</td>
 <td >-19.5</td>
 <td >-1.0</td>
 <td >-0.8</td>
 <td >0.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp; Goods Excluding
 Food &amp; Energy</td>
 <td >0.2</td>
 <td >-0.1</td>
 <td >0.2</td>
 <td >0.5</td>
 <td >1.5</td>
 <td >1.1</td>
 <td >1.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Services</td>
 <td >0.0</td>
 <td >-0.1</td>
 <td >0.1</td>
 <td >0.6</td>
 <td >1.8</td>
 <td >1.6</td>
 <td >1.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; Construction</td>
 <td >0.1</td>
 <td >0.1</td>
 <td >0.1</td>
 <td >1.8</td>
 <td >3.0</td>
 <td >1.8</td>
 <td >2.9</td>
 </tr>
 <tr>
 <td class="firstcol" >Intermediate Demand - Processed Goods</td>
 <td >1.0</td>
 <td >-1.1</td>
 <td >-0.1</td>
 <td >-7.0</td>
 <td >0.6</td>
 <td >0.0</td>
 <td >0.5</td>
 </tr>
 </tbody>
 </table>
 
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The overall Final Demand Producer Price Index rebounded 0.5% during May (-1.1% y/y) following an unrevised 0.4% April decline. It was the largest increase since September 2012. A 0.4% rise was expected in the Action Economics Forecast [...]

U.S. Producer Price Rebound Driven by Energy; Core Nudges Higher

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Industrial production in the euro area has slowed to a crawl as ex-construction output rose by just 0.1% in April after a 0.4% decrease in March. Manufacturing output rose by a stronger 0.3% after a 0.2% March decline. Despite these short-term irregularities, the EMU industrial sector appears to be on a solid path with consistent expansion.

In the quarter to date, the headline series is rising at a 0.8% annual rate while manufacturing is sprinting ahead at a 3.1% annual rate. Manufacturing in the new quarter is hot despite lethargy over the last two months.

Sequential growth rates show that IP has picked up from growing by 0.7% over 12 months to advance at a 2.7% pace over three months and six months. That is a much steadier picture of Europe's industrial expansion.

In contrast, manufacturing is output is accelerating from growth of 0.8% over 12 months to 3.2% over six months to 4.6% over three months. Consumer goods output of durables and nondurables both are showing progressive acceleration. Capital goods output also is steadily accelerating. Intermediate goods output is growing but not accelerating. These are strong profiles

In the quarter to date, overall manufacturing, consumer durable goods and capital goods output are leading the way higher. On balance, the industrial sector, especially manufacturing, is looking much more solid despite some waffling in the past two months. 

Turning to the individual members, there are IP decline in April in six of 11 early reporting members. There were declines in five of these members in March and in three of them in February. In the quarter to date, five of 11 members show IP falling on balance. But the latest quarter-to-date calculation is a thin one as we are only one month into the new quarter. 

When we look at the difference between the monthly data and the sequential data (three-month, six-month and 12-month), we see that monthly weakness is really not a good indicator of broader weakness. Over three months, only two of 11 countries have IP declines. Over six months, three of 11 countries have IP declines. Apparently EMU countries have a great deal of variability in monthly IP, but over broader periods IP is steadily rising. And the sequential growth rates show that Finland has negative sequential growth rates across the board. While Malta has IP up over 12 months, it is lower on balance over three months and six months. The sequential weakness among EMU members is dominated by these two economies.

From these trends, we judge the country level data to be supporting the overall EMU reports on IP trends. Despite some very rough monthly numbers, IP in the EMU is steadily advancing. The big four EMU economics are showing the way ahead as of them only France shows a negative sequential growth rate over the last year (for year-over-year growth). The EMU manufacturing sector seems to have found its legs.


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Industrial production in the euro area has slowed to a crawl as ex-construction output rose by just 0.1% in April after a 0.4% decrease in March. Manufacturing output rose by a stronger 0.3% after a 0.2% March decline. Despite these [...]

Euro Area IP Slows to a Crawl in April But Holds to Solid Trends

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Overall retail sales including food services &amp; drinking places during May
strengthened 1.2% (1.0% y/y) following gains of 0.2% and 1.5%. The April and
March results were revised up from little-change and 1.1%. The May increase
matched expectations in the Action Economics Forecast Survey. Sales excluding
autos improved 1.0% (-0.1% y/y) following an unrevised 0.1% April uptick and a
1.0% March gain, revised from 0.7%. The gain outpaced expectations for a 0.8%
rise. During the last ten years, there has been a 92% correlation between the
y/y change in retail sales and the change in real GDP. Sales in the retail
control group exclude autos, gasoline, building materials &amp; food services.
They align with the consumer spending estimates in the GDP accounts. Sales in
this grouping gained 0.7% (2.0% y/y) after a 0.1% April uptick and a 0.9% March
increase, revised from no change and 0.5%, respectively.
A 2.0% jump in auto sales (5.0% y/y) bolstered the rise in overall retail
spending. It followed a 0.7% increase and a 3.5% surge during the prior two
months. The latest gain compares to a 7.8% improvement (6.3% y/y) in unit
vehicle sales. Sales of building materials rose 2.1% (1.9% y/y) following a 0.4%
decline. Sales of gasoline service station jumped 3.7% (-19.4% y/y) with higher
prices after a 0.6% dip.
Sales of clothing and accessories improved 1.5% (2.3% y/y) after a slight
decline. Nonstore retailers also showed strength with a 1.4% rise (6.0% y/y) on
top of three months of strong improvement. General merchandise store sales
followed with a 0.8% rise (-0.4% y/y) which made for a 0.7% April decline. Also
on the list of strength was a 0.8% rise (7.5% y/y) in sporting goods store
sales. Finally, furniture &amp; home furnishing store sales added 0.8% (4.1%
y/y) to earlier monthly increases of 1.3% and 2.4%. Restaurant &amp; drinking
place sales notched just 0.1% higher but they're up 7.8% y/y. Sales of
electronics &amp; appliance stores also ticked just 0.1% higher (-3.4% y/y)
following seven months of decline. 
In the nondiscretionary sales categories, health &amp; personal care store
sales fell 0.3% (+1.2% y/y) following a 0.4% increase. Food &amp; beverage store
sales improved 0.2% (2.3% y/y) and made up the prior month's decline.
The retail sales figures are available in Haver's USECON database. The
Action Economics figures are in the AS1REPNA database.
<table class="centered" border="0" cellspacing="0" width="1871">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="1126">Retail Spending (%)</th>
 <th scope="col" width="105">May</th>
 <th scope="col" width="106">Apr</th>
 <th scope="col" width="106">Mar</th>
 <th scope="col" width="106">May Y/Y</th>
 <th scope="col" width="106">2014</th>
 <th scope="col" width="106">2013</th>
 <th scope="col" width="106">2012</th>
 </tr>
 </thead>
 <tbody>
 <tr class="grey2">
 <td class="firstcol" width="1126">Total Retail Sales &amp; Food
 Services</td>
 <td align="center" width="105">1.2</td>
 <td align="center" width="106">0.2</td>
 <td align="center" width="106">1.5</td>
 <td align="center" width="106">1.0</td>
 <td align="center" width="106">3.9</td>
 <td align="center" width="106">3.7</td>
 <td align="center" width="106">5.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1126">&nbsp;&nbsp;Excluding Autos</td>
 <td align="center" width="105">1.0</td>
 <td align="center" width="106">0.1</td>
 <td align="center" width="106">&nbsp;1.0</td>
 <td align="center" width="106">-0.1</td>
 <td align="center" width="106">3.1</td>
 <td align="center" width="106">2.7</td>
 <td align="center" width="106">4.1</td>
 </tr>
 <tr>
 <td class="firstcol" width="1126">&nbsp; Non-Auto Less Gasoline, Building
 Supplies &amp; Food Services</td>
 <td align="center" width="105">0.7</td>
 <td align="center" width="106">0.1</td>
 <td align="center" width="106">0.9</td>
 <td align="center" width="106">2.0</td>
 <td align="center" width="106">3.3</td>
 <td align="center" width="106">2.7</td>
 <td align="center" width="106">3.6</td>
 </tr>
 <tr class="grey2">
 <td class="firstcol" width="1126">Retail Sales</td>
 <td align="center" width="105">1.4</td>
 <td align="center" width="106">0.1</td>
 <td align="center" width="106">1.6</td>
 <td align="center" width="106">0.1</td>
 <td align="center" width="106">3.7</td>
 <td align="center" width="106">3.8</td>
 <td align="center" width="106">4.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1126">&nbsp;&nbsp;Motor Vehicle &amp; Parts</td>
 <td align="center" width="105">2.0</td>
 <td align="center" width="106">0.7</td>
 <td align="center" width="106">3.5</td>
 <td align="center" width="106">5.0</td>
 <td align="center" width="106">7.5</td>
 <td align="center" width="106">8.3</td>
 <td align="center" width="106">9.0</td>
 </tr>
 <tr>
 <td class="firstcol" width="1126">&nbsp;Retail Less Autos</td>
 <td align="center" width="105">1.2</td>
 <td align="center" width="106">-0.0</td>
 <td align="center" width="106">1.1</td>
 <td align="center" width="106">-1.4</td>
 <td align="center" width="106">2.6</td>
 <td align="center" width="106">2.6</td>
 <td align="center" width="106">3.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1126">&nbsp;&nbsp;Gasoline Stations</td>
 <td align="center" width="105">3.7</td>
 <td align="center" width="106">-0.6</td>
 <td align="center" width="106">1.1</td>
 <td align="center" width="106">-19.4</td>
 <td align="center" width="106">-2.7</td>
 <td align="center" width="106">-0.7</td>
 <td align="center" width="106">4.3</td>
 </tr>
 <tr class="grey2">
 <td class="firstcol" width="1126">Food Service &amp; Drinking Places
 Sales</td>
 <td align="center" width="105">0.1</td>
 <td align="center" width="106">1.1</td>
 <td align="center" width="106">0.8</td>
 <td align="center" width="106">7.8</td>
 <td align="center" width="106">6.2</td>
 <td align="center" width="106">3.4</td>
 <td align="center" width="106">5.9</td>
 </tr>
 </tbody>
</table>
&nbsp;
U.S. Import Prices Decline Despite Petroleum Price
Increase 
by <a href="http://haver.com/comment/Moeller.html">Tom Moeller</a>&nbsp;
June 11, 2015
Import prices declined 0.3% (-10.7% y/y) last month following a 0.2% March
fall, revised from -0.3%. The Action Economics Forecast Survey anticipated a
0.2% rise.
Prices of petroleum imports increased 1.0% (-47.0% y/y) after a 1.6% rise.
Nonpetroleum import prices, however, were off 0.4% (-2.7% y/y) for a second
month. Industrial materials prices excluding petroleum continued downward by
1.1% (-8.6% y/y), about the same as during the prior three months. Building
materials prices declined 1.1% (-3.4% y/y). Prices amongst the other end-use
categories also continued to fall. Food, feed &amp; beverage prices declined
0.9% (-2.4% y/y) and autos &amp; parts prices were unchanged (-1.9% y/y).
Nonauto consumer goods prices slipped 0.1% (-0.8% y/y) while capital goods
prices were off 0.3% (-1.3% y/y).
Export prices also continued weak. Their 0.7% decline followed a 0.1% uptick.
No change had been expected. Agricultural export prices declined 0.8% (-15.6%
y/y) while non-agricultural prices were off 0.7% (-5.3% y/y). Overall industrial
materials &amp; supplies prices declined 1.5% (-14.2% y/y), reflecting a 5.6%
decline (-35.8% y/y) in petroleum prices. That was accompanied by a 0.8% drop
(-14.7% y/y) in foods, feeds &amp; beverage prices. Prices excluding foods and
fuels edged 0.2% lower (-1.9% y/y), down for the eighth straight month. Capital
goods export prices were off 0.3% (+0.3% y/y) and prices excluding computers
&amp; peripheral slipped 0.1% (+0.9% y/y). Nonauto consumer goods prices fell
0.3 (-2.2% y/y) but autos &amp; parts prices ticked 0.1% higher (0.1% y/y).
The import and export price series can be found in Haver's USECON
database. Detailed figures, including the industrial materials excluding
petroleum imports and the fuel &amp; lubricant export items mentioned above, are
available in the USINT database. The expectations figure from the Action
Economics Forecast Survey is in the AS1REPNA database.
<table class="centered" border="0" cellspacing="0" width="1871">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="836"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export
 Prices (NSA, %)</a></th>
 <th scope="col" width="147">May</th>
 <th scope="col" width="147">Apr</th>
 <th scope="col" width="147">Mar</th>
 <th scope="col" width="147">May Y/Y</th>
 <th scope="col" width="147">2014</th>
 <th scope="col" width="148">2013</th>
 <th scope="col" width="148">2012</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="836">Imports - All Commodities</td>
 <td align="center" width="147"></td>
 <td align="center" width="147">-0.3</td>
 <td align="center" width="147">-0.2</td>
 <td align="center" width="147">-10.7</td>
 <td align="center" width="147">-1.1</td>
 <td align="center" width="148">-1.1</td>
 <td align="center" width="148">0.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="836">&nbsp;&nbsp;Petroleum</td>
 <td align="center" width="147"></td>
 <td align="center" width="147">&nbsp;1.0</td>
 <td align="center" width="147">1.6</td>
 <td align="center" width="147">-47.0</td>
 <td align="center" width="147">-5.6</td>
 <td align="center" width="148">-2.6</td>
 <td align="center" width="148">-0.3</td>
 </tr>
 <tr>
 <td class="firstcol" width="836">&nbsp;&nbsp;Nonpetroleum</td>
 <td align="center" width="147"></td>
 <td align="center" width="147">-0.4</td>
 <td align="center" width="147">-0.4</td>
 <td align="center" width="147">-2.7</td>
 <td align="center" width="147">0.1</td>
 <td align="center" width="148">-0.6</td>
 <td align="center" width="148">0.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="836">Exports - All Commodities</td>
 <td align="center" width="147"></td>
 <td align="center" width="147">-0.7</td>
 <td align="center" width="147">0.1</td>
 <td align="center" width="147">-6.3</td>
 <td align="center" width="147">-0.5</td>
 <td align="center" width="148">-0.4</td>
 <td align="center" width="148">0.4</td>
 </tr>
 <tr>
 <td class="firstcol" width="836">&nbsp;&nbsp;Agricultural</td>
 <td align="center" width="147"></td>
 <td align="center" width="147">-0.8</td>
 <td align="center" width="147">-1.7</td>
 <td align="center" width="147">-5.6</td>
 <td align="center" width="147">-2.7</td>
 <td align="center" width="148">1.6</td>
 <td align="center" width="148">2.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="836">&nbsp;&nbsp;Nonagricultural</td>
 <td align="center" width="147"></td>
 <td align="center" width="147">-0.7</td>
 <td align="center" width="147">0.2</td>
 <td align="center" width="147">-5.3</td>
 <td align="center" width="147">-0.3</td>
 <td align="center" width="148">-0.7</td>
 <td align="center" width="148">0.1</td>
 </tr>
 </tbody>
</table>

&nbsp;
U.S. Initial Unemployment Insurance Claims Meander Lower 
by <a href="http://haver.com/comment/Moeller.html">Tom Moeller</a>&nbsp;&nbsp;June
11, 2015
Initial claims for unemployment insurance claims fell to 276,000 during the
week ended May 30 following a rise to 284,000 in the prior week, initially
reported as 282,000. The four week moving average rose to 274,750, the highest
level since early in the month. The Action Economics Forecast Survey expected
280,000 claims in the latest week. During the last ten years, there has been a
76% correlation between the level of initial claims and the m/m change in
nonfarm payrolls.
By state, in the week ended May 16 the insured rate of unemployment continued
to vary greatly with Virginia (0.81%), Georgia (0.93%), Kansas (1.12%), Idaho
(1.24%), Michigan (1.29%) and Texas (1.53%) at the low end of the range. At the
high end were Maryland (1.59%), Massachusetts (1.98%), Nevada (2.17%),
Pennsylvania (2.20%), California (2.42%) and New Jersey (2.47%). These data are
not seasonally adjusted.
The insured rate of unemployment slipped back to 1.6% in the week ended May
23, the lowest point since November 2000.
Continuing claims for unemployment insurance declined to 2.196 million
(-16.0% y/y) in the latest week. The four-week moving average fell to 2.214
million, the lowest level since November 2000.
Data on weekly unemployment insurance are contained in Haver's WEEKLY
database and they are summarized monthly in USECON. Data for individual
states are in REGIONW. The expectations figure is from the Action
Economics survey, carried in the AS1REPNA database.
<table class="centered" border="0" cellspacing="0" width="100%">
 <thead>
 <tr>
 <th class="firstcol" 0801>Unemployment Insurance (000s)</th>
 <th 0801>06/06/15</th>
 <th 0801>05/30/15</th>
 <th 0801>05/23/15</th>
 <th 0801>Y/Y %</th>
 <th 0801>2014</th>
 <th 0801>2013</th>
 <th 0801>2012</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" 0801>Initial Claims</td>
 <td 0801 align="center"></td>
 <td 0801 align="center">276</td>
 <td 0801 align="center">284</td>
 <td 0801 align="center">-12.9</td>
 <td 0801 align="center">309</td>
 <td 0801 align="center">343</td>
 <td 0801 align="center">374</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" 0801>Continuing Claims</td>
 <td 0801 align="center"></td>
 <td 0801 align="center">--</td>
 <td 0801 align="center">2,196</td>
 <td 0801 align="center">-16.0</td>
 <td 0801 align="center">2,599</td>
 <td 0801 align="center">2,978</td>
 <td 0801 align="center">3,319</td>
 </tr>
 <tr>
 <td class="firstcol" 0801>Insured Unemployment Rate (%)</td>
 <td 0801 align="center"></td>
 <td 0801 align="center">--</td>
 <td 0801 align="center">1.6</td>
 <td 0801 align="center">2.0 
 (05/14)</td>
 <td 0801 align="center">2.0</td>
 <td 0801 align="center">2.3</td>
 <td 0801 align="center">2.6</td>
 </tr>
 </tbody>
</table>


</body>

</html>

Overall retail sales including food services & drinking places during May strengthened 1.2% (1.0% y/y) following gains of 0.2% and 1.5%. The April and March results were revised up from little-change and 1.1%. The May increase matched [...]

U.S. Retail Sales Show Broad-Based Strength

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Total business inventories increased 0.4% during April (2.6% y/y) following an
unrevised 0.1% March uptick. During the last three months, inventory growth
picked up to 3.2% (AR) from its January low of 0.1%. Total business sales
increased 0.6% (-2.3% y/y), the same as during March. It raised the 3-month
change to 3.3% (AR), its best since last July. As a result, the inventory/sales
ratio for April held steady at 1.36, just off its expansion high of 1.37.

Inventories in the retail sector jumped 0.8% (3.8% y/y) leaving three-month
growth at 6.6%, its quickest since July. General merchandise inventories surged
1.4% (1.5% y/y) and at a 3.6% rate since January. Auto inventories jumped 1.2%
(5.9% y/y). Clothing inventories rose 0.9% (6.0% y/y) and at a 10.0% annual rate
during the last three months. It was the quickest growth rate in over a year.
Furniture inventories declined 0.3% (+0.6% y/y), off in three of the last four months.

Merchant wholesale inventories gained 0.4% (4.5% y/y) in April. The 3.1% rate
of growth in the last three months was the slowest since mid-2013. Factory
inventories improved 0.1% and by the same amount during the last 12 months. Three-
month growth picked up, however, to a slim 0.5%.

The 0.6% rise in business sales (-2.3% y/y) left them rising at a 3.3% annual
rate during the last three months, a turnaround from just the prior month. The
latest increase reflected a 0.1% uptick (2.0% y/y) in retail spending but more
life was apparent in May. Sales excluding motor vehicles slipped marginally (-1/0%
y/y) but rose strongly in May. Wholesale sales jumped 1.6% (-3.3% y/y) helping
to revive 3-month growth to 2.9%, the first positive reading since September.
Factory shipments declined marginally (-3.6% y/y) but rose at a 2.6% rate during
the last three months.

The total business inventory-to-sales ratio remained stable m/m but has been
trending higher since early 2011. Each of the business sectors participated in
the rise. The increase in the wholesale sector ratio to 1.29 is from a low of
1.12 early in 2011. This is nearly the highest since mid-2011. The retail sector
realized an I/S ratio 1.46 in April, also nearly the highest since the middle of
2009. The ratio excluding autos displayed similar upward movement. The
manufacturing sector I/S ratio is now also at the highest point since 2009.

The manufacturing and trade data are in Haver's USECON database.

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 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Manufacturing &amp; Trade (%)</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >Feb</th>
 <th scope="col" >Apr Y/Y</th>
 <th scope="col" >2014</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Business Inventories</td>
 <td >0.4</td>
 <td >0.1</td>
 <td >0.3</td>
 <td >2.6</td>
 <td >3.8</td>
 <td >4.4</td>
 <td >5.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Retail</td>
 <td >0.8</td>
 <td >0.3</td>
 <td >0.5</td>
 <td >3.8</td>
 <td >2.7</td>
 <td >7.6</td>
 <td >7.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Retail excl. Motor Vehicles</td>
 <td >0.6</td>
 <td >0.1</td>
 <td >0.5</td>
 <td >2.7</td>
 <td >2.2</td>
 <td >5.0</td>
 <td >3.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Merchant Wholesalers</td>
 <td >0.4</td>
 <td >0.2</td>
 <td >0.2</td>
 <td >4.5</td>
 <td >6.7</td>
 <td >4.2</td>
 <td >6.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Manufacturing</td>
 <td >0.1</td>
 <td >-0.1</td>
 <td >0.1</td>
 <td >0.1</td>
 <td >2.4</td>
 <td >1.9</td>
 <td >3.8</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colspan="8" >Business Sales (%)</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Total</td>
 <td >0.6</td>
 <td >0.6</td>
 <td >-0.3</td>
 <td >-2.3</td>
 <td >3.4</td>
 <td >3.0</td>
 <td >5.0</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Retail</td>
 <td >0.1</td>
 <td >1.6</td>
 <td >-0.6</td>
 <td >0.6</td>
 <td >3.6</td>
 <td >3.9</td>
 <td >4.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Retail excl. Motor Vehicles</td>
 <td >-0.0</td>
 <td >1.1</td>
 <td >-0.2</td>
 <td >-1.0</td>
 <td >2.5</td>
 <td >2.7</td>
 <td >3.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Merchant Wholesalers</td>
 <td >1.6</td>
 <td >-0.3</td>
 <td >-0.6</td>
 <td >-3.3</td>
 <td >4.3</td>
 <td >3.1</td>
 <td >5.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Manufacturing</td>
 <td >-0.0</td>
 <td >0.5</td>
 <td >0.1</td>
 <td >-3.6</td>
 <td >2.5</td>
 <td >2.1</td>
 <td >4.4</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colspan="8" >I/S Ratio</td>
 </tr>
 <tr>
 <td class="firstcol" >Total</td>
 <td >1.36</td>
 <td >1.36</td>
 <td >1.37</td>
 <td >1.29</td>
 <td >1.31</td>
 <td >1.29</td>
 <td >1.27</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Retail</td>
 <td >1.46</td>
 <td >1.45</td>
 <td >1.47</td>
 <td >1.42</td>
 <td >1.43</td>
 <td >1.41</td>
 <td >1.38</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Retail Excl. Motor Vehicles</td>
 <td >1.28</td>
 <td >1.27</td>
 <td >1.28</td>
 <td >1.23</td>
 <td >1.24</td>
 <td >1.23</td>
 <td >1.21</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Merchant Wholesalers</td>
 <td >1.29</td>
 <td >1.30</td>
 <td >1.30</td>
 <td >1.19</td>
 <td >1.20</td>
 <td >1.18</td>
 <td >1.16</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Manufacturing</td>
 <td >1.35</td>
 <td >1.34</td>
 <td >1.35</td>
 <td >1.30</td>
 <td >1.31</td>
 <td >1.30</td>
 <td >1.29</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

Total business inventories increased 0.4% during April (2.6% y/y) following an unrevised 0.1% March uptick. During the last three months, inventory growth picked up to 3.2% (AR) from its January low of 0.1%. Total business sales [...]

U.S. Business Inventory Growth Increases but Still Lags Sales

Carol Stone, CBE

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Total credit market borrowing was sharply reduced in Q1, according to the Federal Reserve's Financial Accounts of the U.S., which were published today. Net paydowns by the federal government and the financial sector led to a reduction in the seasonally adjusted total to $1.13 trillion from $2.57 trillion in Q4. That latter figure was slightly revised from $2.47 trillion initially reported. As we will explain, the key here is "seasonally adjusted," since the federal government in fact did borrow funds in Q1.

The Q1 total amount is 6.4% of GDP, following 14.5% in Q4. This is the smallest ratio since Q2 2011. This ratio peaked at 37.3% in Q3 2007, just at the peak of the previous business cycle, and there were total net paydowns during 2009, in the depth of the recession.

Many press reports of these Financial Accounts highlight the household balance sheet data and the results they show for net worth. This result did continue to improve in Q1, reaching $84.9 billion. This was 639% of disposable income, the highest such ratio since Q3 2007, before the financial crisis and recession. However, these Financial Accounts cover the entire economy, and here in our commentary, we emphasize portions describing broad borrowing aggregates. These had undergone a historically unprecedented contraction during the last recession. Most of the time recently, total borrowing has ratcheted upward both in total and as a ratio to GDP. So Q1's reduction and low GDP ratio might be construed as a bad sign.

However, as we point out, the main source of the reduction among nonfinancial sectors is the federal government. It borrowed $66.8 billion during Q1, a period when its borrowing is generally much larger. Thus, after seasonal adjustment, this number translated into a net paydown of $13.4 billion, or $53.8 billion at an annual rate. Since the budget deficit has diminished, such a borrowing result, while startling, would logically follow. And it is probably not "a bad sign" about the economy's health, which is good enough to help the budget deficit shrink.

The other source of marked reduction in total borrowing came from two of the financial sectors, government-sponsored enterprises (GSEs) and depository institutions. GSEs paid down $164 billion in their direct debt, and their mortgage pools shrank by $851 million. While their direct debt has often diminished in recent years, this is apparently the first cut in the amount of mortgage pool securities. Depository institutions, i.e., banks and similar institutions, paid down $136 billion in debt, unusual by historical standards, but not so unusual since the recession. Among other financial sectors, broker-dealers, holding companies and asset-backed securities issuers all paid down marginal amounts. 

Among nonfinancial sectors, households borrowed $292 billion in Q1, less than 2014 amounts, but firmer than previous post-recession periods. Home mortgages returned to a modest net paydown after three quarters of net borrowing, while consumer credit ran upward at about its recent pace. Corporate business borrowed $542 billion, a similar magnitude to other recent periods, including, among other sources of funds, $450 billion in corporate bonds and $109 billion in depository institution loans.


The Financial Accounts data are in Haver's FFUNDS database. Associated
information is compiled in the Integrated Macroeconomic Accounts produced
jointly with the Bureau of Economic Analysis (BEA); these are carried in Haver's
USNA database.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>
	
 <thead>
 <tr>
 <th class="firstcol" scope="col">Flow of Funds (SAAR, Bil.$)</th>
 <th>Q1'15</th>
 <th>Q4'14</th>
 <th>Q3'14</th>
 <th>2014</th>
 <th>2013</th>
 <th>2012</th>
 <th>2011</th>
 </tr>
 </thead>
 
 <tr>
 <td class="firstcol" scope="col">Total Credit Market Borrowing*</td>
 <td>1130</td>
 <td>2569</td>
 <td>2319</td>
 <td>2151</td>
 <td>1953</td>
 <td>1592</td>
 <td>1113</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">Federal Government</td>
 <td>-54</td>
 <td>700</td>
 <td>913</td>
 <td>667</td>
 <td>759</td>
 <td>1140</td>
 <td>1068</td>
 </tr>
 <tr>
 <td class="firstcol">Households</td>
 <td>292</td>
 <td>373</td>
 <td>390</td>
 <td>386</td>
 <td>203</td>
 <td>200</td>
 <td>-32</td>
 </tr>
 
 <td class="firstcol">Nonfinancial Corporate Business</td>
 <td>542</td>
 <td>523</td>
 <td>400</td>
 <td>463</td>
 <td>428</td>
 <td>363</td>
 <td>295</td>
 <tr>
 <td class="firstcol">Financial Sectors</td>
 <td>-341</td>
 <td>597</td>
 <td>466</td>
 <td>272</td>
 <td>214</td>
 <td>-419</td>
 <td>-341</td>
 </tr>
 
 
 
 *Includes noncorporate business, state and local government and foreign sectors, not shown separately.
 </html>

Total credit market borrowing was sharply reduced in Q1, according to the Federal Reserve's Financial Accounts of the U.S., which were published today. Net paydowns by the federal government and the financial sector led to a reduction [...]

U.S. Financial Accounts Show Markedly Reduced Credit Needs in Q1

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Import prices increased 1.3% last month (-9.6% y/y) following a 0.2% April
drop, revised from -0.3%. The Action Economics Forecast Survey anticipated a 0.8%
rise.

Prices of petroleum imports jumped 12.7% (-40.6% y/y) following two months of
moderate gain. Nonpetroleum import prices, however, were unchanged (-2.6% y/y).
Industrial materials prices excluding petroleum slipped 0.1% (-8.0% y/y). Prices
amongst the other end-use categories were mixed. Food, feed &amp; beverage
prices gained 0.3% (-1.4% y/y) but autos &amp; parts prices slipped 0.1% (-2.0%
y/y). Nonauto consumer goods prices were unchanged (-0.8% y/y) while capital
goods prices were off 0.2% (-1.7% y/y).

Export prices also firmed. Their 0.6% increase reversed a 0.7% decline. No
change had been expected. Agricultural prices fell 1.0% (-16.8% y/y) and
nonagricultural costs rebounded 0.7% (-4.6% y/y). Overall industrial materials
&amp; supplies prices increased 2.2% (-12.3% y/y), reflecting a 9.9% rise (-30.0%
y/y) in petroleum prices. That was offset by a 1.2% drop (-16.3% y/y) in foods,
feeds &amp; beverage prices. Prices excluding foods and fuels ticked 0.1% higher
(-1.9% y/y). Capital goods export prices were off 0.1% (+0.1% y/y) and prices
excluding computers &amp; peripherals were unchanged for the third straight
month (+0.8% y/y). Nonauto consumer goods prices edged 0.1% lower (-2.3% y/y)
but autos &amp; parts prices gained 0.2% (0.1% y/y).

The import and export price series can be found in Haver's USECON
database. Detailed figures, including the industrial materials excluding
petroleum imports and the fuel &amp; lubricant export items mentioned above, are
available in the USINT database. The expectations figure from the Action
Economics Forecast Survey is in the AS1REPNA database.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export
 Prices (NSA, %)</a></th>
 <th scope="col" >May</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >May Y/Y</th>
 <th scope="col" >2014</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Imports - All Commodities</td>
 <td >1.3</td>
 <td >-0.2</td>
 <td >-0.2</td>
 <td >-9.6</td>
 <td >-1.1</td>
 <td >-1.1</td>
 <td >0.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Petroleum</td>
 <td >12.7</td>
 <td >1.8</td>
 <td >2.1</td>
 <td >-40.6</td>
 <td >-5.6</td>
 <td >-2.6</td>
 <td >-0.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Nonpetroleum</td>
 <td >0.0</td>
 <td >-0.4</td>
 <td >-0.4</td>
 <td >-2.6</td>
 <td >0.1</td>
 <td >-0.6</td>
 <td >0.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Exports - All Commodities</td>
 <td >0.6</td>
 <td >-0.7</td>
 <td >0.1</td>
 <td >-5.9</td>
 <td >-0.5</td>
 <td >-0.4</td>
 <td >0.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Agricultural</td>
 <td >-1.0</td>
 <td >-0.9</td>
 <td >-1.7</td>
 <td >-16.8</td>
 <td >-2.7</td>
 <td >1.6</td>
 <td >2.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Nonagricultural</td>
 <td >0.7</td>
 <td >-0.7</td>
 <td >0.2</td>
 <td >-4.6</td>
 <td >-0.3</td>
 <td >-0.7</td>
 <td >0.1</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

Import prices increased 1.3% last month (-9.6% y/y) following a 0.2% April drop, revised from -0.3%. The Action Economics Forecast Survey anticipated a 0.8% rise. Prices of petroleum imports jumped 12.7% (-40.6% y/y) following two [...]

U.S. Import Prices Increase as Petroleum Costs Jump

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.

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**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

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

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

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

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

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

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

250501H20.jpg

250501I20.jpg

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

U.S. Light Vehicle Sales Fall in April

250501J5.jpg

250501K5.jpg

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

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

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

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

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

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

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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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250501O.jpg

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 2015

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