Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040528a.jpg" width="353">
Personal income rose 0.6% (+5.7% y/y) last month versus the Consensus expectation for a 0.5% gain.
While the upside surprise was slight, it reflected a firm 0.5% (4.8% y/y) rise in wages &amp; salaries that followed an upwardly revised 0.3% March increase. Firm wage gains were logged across industries.
Personal disposable income increased 0.5% following a 0.4% March increase. The 6.3% y/y increase in disposable income was the strongest since June 2002. After accounting for a 1.9% rise in prices, real disposable income rose 4.3%.
Consumer spending rose a modest 0.3% in April, held back by a 1.6% m/m decline unit light vehicle sales. A 0.2% gain in PCE had been expected. 
The PCE chain price index rose just 0.1%. Less food &amp; energy, prices rose 0.1% (1.4% y/y) following a 0.2% March gain. 
The savings rate moved higher to 2.4%, the highest level since last Summer. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM"> Disposition of Personal Income</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.6%</td>
<td>0.4%</td>
<td>5.7%</td>
<td>3.3%</td>
<td>2.3%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.3%</td>
<td>0.5%</td>
<td>6.5%</td>
<td>5.0%</td>
<td>4.8%</td>
<td>4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>2.4%</td>
<td>2.2%</td>
<td>2.4%</td>
<td>2.1%</td>
<td>2.3%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1%</td>
<td>0.3%</td>
<td>1.9%</td>
<td>1.8%</td>
<td>1.4%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Down in May 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 28, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040528c.jpg" width="353">
The University of Michigan&#146;s consumer sentiment index for the full month of May fell to90.2 from 94.2 in April. The reading reflected deterioration late in the month versus a mid-month reading of 94.2. Consensus expectations had been for a slight rise to 95.0.
During the last ten years there has been a 75% correlation between the level of consumer sentiment and the y/y change in real PCE. That correlation has risen to 82% during the last five years.
Perceptions of current economic conditions fell 1.3% following the 1.7% decline in April. The expectations index dropped a sharp 6.5% m/m and added to a 1.7% April dip. Both readings were down from mid-month.
The decline in Sentiment in May contrasted with the very slight rise in Consumer Confidence reported earlier by the Conference Board. During the last ten years there has been an 84% correlation between the y/y change in the two measures.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM"> University of Michigan</a></th>
<th scope="col"> May</th>
<th scope="col"> April</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>90.2</td>
<td>94.2</td>
<td>-2.1%</td>
<td>87.6</td>
<td>89.6</td>
<td>89.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>103.6</td>
<td>105.0</td>
<td>11.2%</td>
<td>97.2</td>
<td>97.5</td>
<td>100.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>81.6</td>
<td>87.3</td>
<td>-10.7%</td>
<td>81.4</td>
<td>84.6</td>
<td>82.3</td>
</tr>
</tbody>
</table>
Chicago Purchasing Agents' Index Again Strong 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 28, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040528b.jpg" width="353">
The Chicago Purchasing Managers Business Barometer for May rose to 68.0 from 63.9 in April. The rise reflected strength versus Consensus expectations for a slight decline to 62.5 and was to the highest level since July 1988.
During the last ten years there has been an 83% correlation between the level of the Chicago Business Barometer and quarterly growth in factory sector industrial output. There has been a 48% correlation with growth in real GDP.
The new orders index led the increase to 74.4, the highest level since 1988. Production also rose a hefty 6.3 points to 71.1 and moved closer to the January high of 76.5.
Employment surged 3.9 points to 54.8, the current cycle high. During the last twenty years there has been a 71% correlation between the level of this employment index and the y/y change in factory sector payroll employment.
The index of prices paid jumped to 80.0, the highest since February 1995.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF05/@EF05.HTM"> Chicago Purchasing Managers Index, SA</a></th>
<th scope="col"> May</th>
<th scope="col">April</th>
<th scope="col">May&nbsp; &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Barometer</td>
<td>68.0</td>
<td>63.9</td>
<td>51.6</td>
<td>54.7</td>
<td>52.7</td>
<td>41.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>74.4</td>
<td>65.1</td>
<td>54.5</td>
<td>58.0</td>
<td>56.2</td>
<td>42.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>80.0</td>
<td>76.1</td>
<td>52.6</td>
<td>55.8</td>
<td>56.9</td>
<td>50.4</td>
</tr>
</tbody>
</table>
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Personal income rose 0.6% (+5.7% y/y) last month versus the Consensus expectation for a 0.5% gain. While the upside surprise was slight, it reflected a firm 0.5% (4.8% y/y) rise in wages & salaries that followed an upwardly revised [...]

U.S. Personal Income Up More Than Expected

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040527d.jpg" width="353">
US financial markets are on alert during the middle of the first month of each quarter as companies report profits, a period that investors and traders refer to informally as &quot;earnings season&quot;. Similarly, the second half of the middle month of each quarter could be dubbed &quot;GDP season&quot;, as country after country publishes its prior quarter growth performance.
Today, Brazil and the Philippines released their first quarter results. Brazil&#39;s growth edged higher, to 1.6% quarter-on-quarter from 1.4% in the final period of 2003. This lifted the year-on-year rate to 2.7% after three quarters of contraction. Notably, as with the UK and Spain&#39;s data discussed here yesterday, investment is playing a roll in the improving trend in demand in Brazil. Investment growth was slower in Q1, at 2.3% compared with Q4&#39;s 4.0%. But these two gains, plus a similar one in the prior period, mark a distinct turnaround from a previous stretch of outright declines. Over longer periods, such as two and four years, overall growth in Brazil seems to be settling into a pace around 2%, not as high as some years, but less volatile.
Growth in the Philippines, by contrast, has been fairly steady over the last couple of years at rates higher than 5%. Even in the recession-plagued year of 2001, Philippine GDP did not contract year-over-year, and moreover, during the Asian crisis in 1997-98 there was only a modest and brief reduction in economic activity. Steady growth in the consumer sector, which constitutes about three-quarters of the Philippine economy (more than in many countries), is a source of stability. In the latest quarter, total GDP growth was 1.9%, down from Q4&#39;s 2.5%; however, the Q1 rate is hardly &quot;low&quot;, and it included a firming of private consumption from 1.5% to 1.6%. Investment is more erratic here than elsewhere, and it rose 7.1% in Q1 after falling 2.9% in Q4.
The gains in investment in many varied countries, which have been evident in most of the recently issued Q1 reports, suggest that low world interest rates are helping support world economic activity.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol">GDP &amp; Select Components, % Changes</th>
Qtr/Qtr (Seasonally Adjusted)
<th scope="col">Year/ Year</th>
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">1st Qtr&nbsp; 2004</td>
<td>4th Qtr 2003</td>
<td>3rd Qtr 2003 &nbsp;</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Brazil - Chain Index, 1990=100</td>
<td>1.6</td>
<td>1.4</td>
<td>0.5</td>
<td>2.7</td>
<td>-0.1</td>
<td>3.9</td>
<td>-0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; -&nbsp; Investment</td>
<td>2.3</td>
<td>4.0</td>
<td>3.2</td>
<td>2.2</td>
<td>-5.0</td>
<td>4.1</td>
<td>-8.2</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
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<td class="firstcol">Philippines - 1985 Pesos</td>
<td>1.9</td>
<td>2.5</td>
<td>1.1</td>
<td>6.4</td>
<td>5.0</td>
<td>5.6</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; -&nbsp; Fixed Capital Formation</td>
<td>7.1</td>
<td>-2.9</td>
<td>1.6</td>
<td>4.8</td>
<td>1.2</td>
<td>5.8</td>
<td>-15.5</td>
</tr>
</tbody>
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US financial markets are on alert during the middle of the first month of each quarter as companies report profits, a period that investors and traders refer to informally as "earnings season". Similarly, the second half of the middle [...]

Steadying GDP Trends in Brazil, Philippines; Investment Grows

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040527b.jpg" width="353">
US real GDP growth in 1Q was revised slightly higher to 4.4% (AR) from the advance report of 4.2% growth. The Consensus expectation was for a revision to 4.5% growth.
Growth in operating earnings slowed. Before tax corporate profits with inventory valuation adjustment (IVA) &amp; capital consumption adjustment (CCA) dropped to 4.9% (AR, 31.6% y/y) from the barnburner growth rates of 32.3%, 46.0% and 48.1% during the prior three quarters. After tax operating earnings grew 5.6% (AR) last quarter.
Operating profits for nonfinancial corporations grew 3.6% (AR, 37.7% y/y). Profit margins at nonfinancial corporations did not grow last quarter as indicated by an unchanged level of operating earnings per unit real value added. Nevertheless, margins were about two thirds higher than in 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040527a.jpg" width="353">
&quot;Recent Revisions to Corporate Profits: What We Know and When We Knew It&quot; from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/newsevents/news/research/2004/rp040323.html"> here</a>.
Personal consumption expenditures growth was little changed at 3.9% (4.3% y/y) rate. Durables spending fell 4.2% due to lower light vehicle sales but nondurables grew 6.6% and services were up 4.2%.
Nonresidential fixed investment growth was revised higher to 9.8% (AR, 12.5% y/y) from 7.2%. Investment in equipment &amp; software was revised to 17.0% (19.4% y/y) from 11.4%. Residential investment growth also was revised up to 3.8% (9.3% y/y) from 2.1%.
Additional investment in inventories is now estimated to have added 0.8 percentage points to GDP growth, up from the initial estimate of a 0.3% add.
The trade sector, however, is now estimated to have subtracted 0.4 percentage points from GDP growth as imports were revised up to 5.9% (AR, 7.9% y/y) from 2.0%. Export growth of 4.9% (8.3% y/y) was a little better than first estimated.
Inflation was little revised at 2.6% for the chain price index. The gain in the PCE chain price index actually was revised down to 3.0% (1.6% y/y) from 3.2%. Business equipment &amp; software prices were revised up to a 0.2% decline (0.0% y/y) from -0.5%.
&quot;Technology, Globalization, and Economic Policy&quot; from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/iet/20040501/cover.pdf"> here</a>.<table border="1" cellpadding="0" cellspacing="0" width="100%"><tr><td valign="top" width="211"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM"> Chained 2000$, % AR</a></td><td align="center" valign="top" width="118"> 1Q &#39;04 (Prelim.)</td><td align="center" valign="top" width="118"> 1Q &#39;04 (Advance)</td><td align="center" valign="top" width="86"> 4Q &#39;03 (Final)</td><td align="center" valign="top" width="60"> Y/Y</td><td align="center" valign="top" width="60">2003</td><td align="center" valign="top" width="60">2002</td><td align="center" valign="top" width="60">2001</td></tr><tr><td valign="top" width="211">GDP</td><td align="center" valign="top" width="118">4.4%</td><td align="center" valign="top" width="118">4.2%</td><td align="center" valign="top" width="86">4.1%</td><td align="center" valign="top" width="60">5.0%</td><td align="center" valign="top" width="60">3.1%</td><td align="center" valign="top" width="60">2.2%</td><td align="center" valign="top" width="60">0.5%</td></tr><tr><td valign="top" width="211"> Inventory Effect</td><td align="center" valign="top" width="118">0.8%</td><td align="center" valign="top" width="118">0.3%</td><td align="center" valign="top" width="86">0.7%</td><td align="center" valign="top" width="60">0.2%</td><td align="center" valign="top" width="60">-0.1%</td><td align="center" valign="top" width="60">0.4%</td><td align="center" valign="top" width="60">-0.9%</td></tr><tr><td valign="top" width="211">Final Sales</td><td align="center" valign="top" width="118">3.7%</td><td align="center" valign="top" width="118">3.9%</td><td align="center" valign="top" width="86">3.4%</td><td align="center" valign="top" width="60">4.7%</td><td align="center" valign="top" width="60">3.2%</td><td align="center" valign="top" width="60">1.8%</td><td align="center" valign="top" width="60">1.4%</td></tr><tr><td valign="top" width="211"> Trade Effect</td><td align="center" valign="top" width="118">-0.4%</td><td align="center" valign="top" width="118">0.0%</td><td align="center" valign="top" width="86">-0.3%</td><td align="center" valign="top" width="60">0.0%</td><td align="center" valign="top" width="60">-0.2%</td><td align="center" valign="top" width="60">-0.6%</td><td align="center" valign="top" width="60">-0.2%</td></tr><tr><td valign="top" width="211">Domestic Final Demand</td><td align="center" valign="top" width="118">3.9%</td><td align="center" valign="top" width="118">3.7%</td><td align="center" valign="top" width="86">3.6%</td><td align="center" valign="top" width="60">4.8%</td><td align="center" valign="top" width="60">3.4%</td><td align="center" valign="top" width="60">2.4%</td><td align="center" valign="top" width="60">1.6%</td></tr><tr><td valign="top" width="211">Chained GDP Price Index</td><td align="center" valign="top" width="118">2.6%</td><td align="center" valign="top" width="118">2.5%</td><td align="center" valign="top" width="86">1.5%</td><td align="center" valign="top" width="60">1.7%</td><td align="center" valign="top" width="60">1.7%</td><td align="center" valign="top" width="60">1.5%</td><td align="center" valign="top" width="60">2.4%</td></tr></table>

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<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM"> Chained 2000$, % AR</a></th>
<th scope="col"> 1Q &#39;04 (Prelim.)</th>
<th scope="col"> 1Q &#39;04 (Advance)</th>
<th scope="col"> 4Q &#39;03 &nbsp; &nbsp;(Final)</th>
<th scope="col"> Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>4.4%</td>
<td>4.2%</td>
<td>4.1%</td>
<td>&nbsp;5.0%</td>
<td>3.1%</td>
<td>2.2%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.8%</td>
<td>0.3%</td>
<td>0.7%</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>0.4%</td>
<td>-0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>3.7%</td>
<td>3.9%</td>
<td>3.4%</td>
<td>4.7%</td>
<td>3.2%</td>
<td>1.8%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>-0.4%</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>0.0%</td>
<td>-0.2%</td>
<td>-0.6%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>3.9%</td>
<td>3.7%</td>
<td>3.6%</td>
<td>4.8%</td>
<td>3.4%</td>
<td>2.4%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.6%</td>
<td>2.5%</td>
<td>1.5%</td>
<td>1.7%</td>
<td>1.7%</td>
<td>1.5%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>
Initial Jobless Insurance Claims Dip 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 27, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040527c.jpg" width="353">
Initial claims for jobless insurance dipped 3,000 last week to 344,000 following the 14,000 increase during the prior week that was revised up slightly. Consensus expectations had been for 335,000 initial claims.
The 4-week moving average of initial claims ticked up to 335,500 (-20.3% y/y).
Continuing claims for unemployment insurance rose 19,000 following a 30,000 decline the prior week that was deeper than originally estimated.
The insured rate of unemployment was unchanged at 2.3% where it has been for four weeks.

<table border="0" cellspacing="0" width="100%">
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<thead>
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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col">5/22/04</th>
<th scope="col">5/15/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;&nbsp; 344</td>
<td>347</td>
<td>-17.9%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>2,943</td>
<td>-19.8%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
Help-Wanted Advertising Down Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 27, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040527e.jpg" width="353">
The Conference Board&#146;s National Index of Help-Wanted Advertising fell for the second month to 38 from 39 in March and from 40 in February.
The decline runs counter to the improvement in hiring portended by the Manpower Employment Outlook Survey for 2Q04. During the last ten years there has been a 74% correlation between the help wanted index and the Manpower Survey.
There has been a 93% correlation between the level of help-wanted advertising and the year-to-year change in non-farm payrolls.
The proportion of labor markets with rising want-ad volume recovered some of the slump in March and rose to 43% from 22%.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">April &#39;03</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>38</td>
<td>39</td>
<td>37</td>
</tr>
</tbody>
</table>
</body>
</html>

US real GDP growth in 1Q was revised slightly higher to 4.4% (AR) from the advance report of 4.2% growth. The Consensus expectation was for a revision to 4.5% growth. Growth in operating earnings slowed. Before tax corporate profits [...]

Q1 2004 GDP Revised Up Slightly, Corporate Profit Growth Slowed

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040526d.jpg" width="353">
GDP reported today for Q1 2004 in the UK, Spain and Malaysia showed slower growth than in the final quarter of 2003, but important segments of each of those economies still show signs of strength.
This was the second report of the UK data, and they were virtually unchanged from last month&#39;s preliminary figures. The newly released detail show the downshift in growth from 0.9% in Q4 to 0.6% in Q1 due to an outright decline in exports and a smaller gain in fixed capital formation. However, this latter item still had a quite respectable performance that lifted its four-quarter growth to 6.9%, the strongest since late 1998.
Total growth in Spain eased to 0.6% in Q1 from 0.7% the period before.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040526e.jpg" width="353"> Consumption by households and nonprofit institutions was the main source of the lesser advance. Capital formation actually strengthened, up 0.9% relative to 0.6% before; the machinery segment firmed from a sluggish 0.1% to 1.6% in Q1.
Growth in Malaysia had a bigger slowdown, to 0.8% from 2.7% in Q4. But the more remarkable aspect was the Q4 number, which was the highest since early 2000. So some consolidation was hardly surprising. An industrial breakdown of the data shows that most sectors had slower growth in Q1, and manufacturing activity fell by 0.9%. However, after its surge in Q4, the year-on-year pace in manufacturing sustained its huge 12%-plus Q4 amount.
So the lower growth rates in these countries in Q1 don&#39;t look to spell slowdown; they are more likely signals of desirable reversion toward underlying trends in these very diverse economies.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GDP &amp; Select Components, % Changes</th>
Qtr/Qtr (Seasonally Adjusted)
<th scope="col">Year/ Year</th>
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">1st Qtr 2004</td>
<td>4th Qtr 2003</td>
<td>3rd Qtr &nbsp;2003 &nbsp;</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">UK - GDP, 2000 Pounds</td>
<td>0.6</td>
<td>0.9</td>
<td>0.8</td>
<td>3.0</td>
<td>2.7</td>
<td>1.9</td>
<td>1.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; -&nbsp; Fixed Capital Formation</td>
<td>1.1</td>
<td>2.4</td>
<td>1.9</td>
<td>6.9</td>
<td>3.7</td>
<td>5.3</td>
<td>-1.8</td>
</tr>
<tr>
<td class="firstcol">Spain - GDP, 1995 Euros</td>
<td>0.6</td>
<td>0.7</td>
<td>0.6</td>
<td>2.9</td>
<td>2.8</td>
<td>2.1</td>
<td>2.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp; Fixed Capital Formation</td>
<td>0.9</td>
<td>0.6</td>
<td>1.7</td>
<td>3.0</td>
<td>2.6</td>
<td>3.1</td>
<td>2.9</td>
</tr>
<tr>
<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">Malaysia - GDP, 1987 Ringgit</td>
<td>0.8</td>
<td>2.7</td>
<td>2.0</td>
<td>7.6</td>
<td>6.6</td>
<td>5.6</td>
<td>-0.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - Manufacturing</td>
<td>-0.9</td>
<td>6.0</td>
<td>3.3</td>
<td>12.5</td>
<td>12.2</td>
<td>5.8</td>
<td>-6.4</td>
</tr>
</tbody>
</table>
</body>
</html>

GDP reported today for Q1 2004 in the UK, Spain and Malaysia showed slower growth than in the final quarter of 2003, but important segments of each of those economies still show signs of strength. This was the second report of the UK [...]

GDP Growth Moderates in 3 Countries, But Key Sectors Remain Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040526b.jpg" width="353">
Sales of new one-family homes fell 11.8% in April to 1.093M. Consensus estimates had been for a lesser decline to 1.200 million. March sales were revised slightly higher.
The figures contrast with yesterday&#39;s report of a 2.5% m/m gain sales of existing single family homes. These new home sales data from the US Census Department reflect current sales versus the existing home sale figures which reflect closings on past sales.
Nevertheless, sales last month were up 6.4% from April 2003, although the rate of gain has eased considerably from the peaks above 20%. 
Sales fell hardest in the South with a 22.0% (-5.5% y/y) drop. Sales also fell 2.5% (+1.3% Y/Y) in the Northeast, down for the third consecutive month, and in the West where they fell 9.4% (+16.5% y/y). Sales rose 10.8% (25.6% y/y) in the Midwest.
The median price of a new single family home rose 8.8% to $221,200 (16.7% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E904/@E90401/@E90401.HTM"> Homes Sales (000s, AR)</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">New Single-Family</td>
<td>1,093</td>
<td>1,239</td>
<td>6.4%</td>
<td>1,088</td>
<td>977</td>
<td>907</td>
</tr>
</tbody>
</table>
Mortgage Applications & Business Borrowing Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 26, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040526a.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association fell another 3.3% (-61.3% y/y) last week.
A similar pattern of decline has been exhibited by commercial &amp; industrial (C&amp;I) loans. C&amp;I loans extended by all commercial banks in the US were down 7.0% y/y in the latest week, a decline that began early in 2001.
&quot;Why No Business Loan Growth?&quot; from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20040501/cover.pdf"> here</a>.
Applications to refinance mortgages cratered 6.7% last week on top of the double digit declines of the prior several periods. Purchase applications fell another 1.0% w/w but for the month still are 1.8% ahead of the April average.
During the last ten years there has been a 56% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The effective interest rate on a conventional 30-Year mortgage rose slightly to 6.53% from 6.48% the week prior. The average for April was 6.16% versus 5.65% averaged in March. The effective rate on a 15-year mortgage also ticked up to 5.97% from 5.93% the week prior. The average for April was 5.54% versus 5.00% in March.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">05/21/04</th>
<th scope="col">05/14/04</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>632.4</td>
<td>654.1</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>449.8</td>
<td>454.2</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,694.9</td>
<td>1,816.9</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
U.S. Durable Goods Orders Down More Than Expected, But ... 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 26, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040526c.jpg" width="353">
Durable goods orders fell 2.9% last month but the increase in March was revised up to a 5.7% jump from the advance report of a 3.4% gain. Consensus expectations had been for a 0.5% decline in April orders.
Transportation orders dropped 4.7% following a 4.1% jump in March, pulled down by a decline in motor vehicle orders and lower aircraft orders. Excluding the transportation sector, durable goods orders fell 2.1% (+16.9% y/y) following a 6.3% surge in March.
Non-defense capital goods orders fell 2.7% but the gain in March is now pegged at 6.0% versus the advance report of a 2.1% gain. Excluding aircraft and parts, orders fell 3.5% (+13.2% y/y) after a 6.0% March jump, revised up from 2.4%.
Orders for computers &amp; electronic products lost all of the March gain, posting a 4.1% (+13.9% y/y) decline. Lower orders for semiconductors dragged the sector down while computer orders surged 5.4% (8.8% y/y) and orders for communications equipment jumped 16.6% (15.2% y/y).
Machinery orders fell 4.9% (18.9% y/y) but orders for electrical equipment, appliances &amp; components jumped 3.4% (11.9% y/y).
Shipments of durable goods slipped 0.8% (12.5% y/y) following an upwardly revised 4.3% gain in March. Excluding transportation, shipments added 0.4% (13.8% y/y) to the upwardly revised 5.6% gain in March.
Durable inventories rose 0.5% (-0.9% y/y) for the sixth gain in the last seven months.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM"> NAICS Classification</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Durable Goods Orders</td>
<td>2.9%</td>
<td>5.7%</td>
<td>13.9%</td>
<td>2.6%</td>
<td>-1.7%</td>
<td>-10.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non-defense Capital Goods</td>
<td>-2.7%</td>
<td>6.0%</td>
<td>12.6%</td>
<td>5.6%</td>
<td>-7.2%</td>
<td>-15.5%</td>
</tr>
</tbody>
</table>
</body>
</html>

Sales of new one-family homes fell 11.8% in April to 1.093M. Consensus estimates had been for a lesser decline to 1.200 million. March sales were revised slightly higher. The figures contrast with yesterday's report of a 2.5% m/m gain [...]

New Home Sales Down

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040525d.jpg" width="353">
May data on consumer and business confidence are available for Belgium and the Netherlands, and business confidence for Germany (the IFO measure.) Confidence among both business and consumers had generally been steadily improving since early 2003 throughout Europe, but these recent data suggest that doubts are rising.
In May Consumer confidence fell in both Belgium and the Netherlands. Business confidence in Germany slipped for the third month in a row and, and in Belgium, fell sharply; but business confidence in the Netherlands rose by 2.3 percentage points and registered the first positive balance of opinion since August, 2002.
One factor eroding confidence is the rise in oil prices and its persistence. While these concerns have been reflected in the stock markets of the area, the recent declines in the stock markets probably reflect more uncertainties than just the price of oil and have affected confidence. In the attached chart we show the daily price of oil (West Texas Intermediate) inverted and the daily price of the German stock market over the past few months. (Trends in the German stock market are fairly typical of other European markets.) The rise in the stock market earlier this year has been virtually eliminated and similarly for the earlier decline in the price of oil.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Confidence</th>
<th scope="col">May 04</th>
<th scope="col">Apr 04</th>
<th scope="col">May 03</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %&nbsp;</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Belgium</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business</td>
<td>-1.7</td>
<td>0.6</td>
<td>-14.9</td>
<td>-2.3</td>
<td>13.2</td>
<td>-12.9</td>
<td>-7.9</td>
<td>-9.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer</td>
<td>-6</td>
<td>-4</td>
<td>-9</td>
<td>-2</td>
<td>3</td>
<td>-11</td>
<td>-2</td>
<td>-0</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Business</td>
<td>1.8</td>
<td>-1.4</td>
<td>-6.9</td>
<td>3.2</td>
<td>&nbsp;8.7</td>
<td>-5.6</td>
<td>-1.6</td>
<td>-1.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer</td>
<td>-28</td>
<td>-25</td>
<td>-36</td>
<td>-3</td>
<td>&nbsp;8</td>
<td>-35</td>
<td>-20</td>
<td>-1</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business IFO</td>
<td>96.1</td>
<td>96.3</td>
<td>89.4</td>
<td>-0.2</td>
<td>6.7</td>
<td>91.7</td>
<td>89.4</td>
<td>92.1</td>
</tr>
</tbody>
</table>
</body>
</html>

May data on consumer and business confidence are available for Belgium and the Netherlands, and business confidence for Germany (the IFO measure.) Confidence among both business and consumers had generally been steadily improving [...]

A Mixed Picture in European Confidence as Oil Prices Rise and Stock Markets Fall

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040525a.jpg" width="353">
Chain store sales fell 0.5% last week on top of a 0.8% decline the week prior, according to the International Council of Shopping Centers (ICSC)-UBS.
Retail gasoline prices rose to an average $2.06 per gallon last week (+38.8% y/y), up 14.8% from the April average of $1.80.
So far in May, chain store sales are 1.0% above the April average due to a 1.5% jump at the end of last month.
During the last ten years there has been a 59% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM"> ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">05/22/04</th>
<th scope="col">05/15/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>439.8</td>
<td>442.2</td>
<td>5.5%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Consumer Confidence Held The Higher Ground 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 25, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040525c.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence for May was about unchanged at 93.2 versus the upwardly revised April reading of 93.0. Confidence in April had improved 5.1% versus March. Consensus expectations were for a slight rise in May to 94.0.
The present situation reading was little changed at 90.3 (+34.2% y/y) and the index of consumer expectations ticked 0.4% higher (+0.7% y/y).
While perceptions of current business conditions improved to the highest level since June 2001, jobs were viewed as hard to get by 30.6% of respondents. The increase in this measure erased all of the improvement (decline) logged earlier this year.
Expectations for business conditions in six months jumped in May to the highest level since January as 19.2% of respondents expected there to be more jobs in six months, the highest percentage since January.
The May Confidence reading was right in line with the unchanged level of Consumer Sentiment in mid-May reported earlier by the University of Michigan.
During the last ten years there has been a 67% correlation between the level of consumer confidence and the y/y % change in real PCE.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM"> Conference Board</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>93.2</td>
<td>93.0</td>
<td>11.5%</td>
<td>79.8</td>
<td>96.6</td>
<td>106.6</td>
</tr>
</tbody>
</table>
Existing Home Sales Rose Unexpectedly to Near-Record 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 25, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040525b.jpg" width="353">
Sales of existing single family homes reported by the National Association of Realtors added another 2.5% in April to the gains of the prior two months. Sales of 6.640M were near the record of 6.68M set in September of last year. Consensus expectations had been for April sales 6.40M. March was unrevised.
Housing affordability has continued to rise despite higher mortgage rates as home price inflation has been stable near 7% and growth in real disposable income has accelerated to 4.0% from 2.6% last year.
Sales rose in all regions of the nation. In the Midwest sales rose 4.4% (+11.0% y/y) and in the South they rose 3.5% (+16.6% y/y). Lesser gains were logged in the Northeast where sales rose 1.4% (12.3% y/y) and in the West where sales rose 0.5% (17.9% y/y).
The median price of an existing home rose 1.1% m/m to $176,000 (+7.3% y/y). The prior month&#39;s figure was revised down.
The figures reflect closings of home sales in earlier months.
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/publicaffairsweb.nsf/Pages/AprilEHS04?OpenDocument"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM"> Existing Home Sales (000, AR)</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
<tbody>
<tr>
<td class="firstcol">Existing Single-Family</td>
<td>&nbsp;6,640</td>
<td>&nbsp;6,480</td>
<td>15.1%</td>
<td>6,098</td>
<td>5,593</td>
<td>5,290</td>
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Chain store sales fell 0.5% last week on top of a 0.8% decline the week prior, according to the International Council of Shopping Centers (ICSC)-UBS. Retail gasoline prices rose to an average $2.06 per gallon last week (+38.8% y/y), [...]

Chain Store Sales Lower Again As Gasoline Prices Rose Further

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Chile&#39;s Gross Domestic Product rose 1% in the first quarter of 2004 from the last quarter of 2003, the largest rate of growth since the fourth quarter of 2000. A small decline in domestic demand was more than offset by the exports of good and services, particularly exports of copper. Chart I shows the period to period changes in domestic demand and in exports of goods and services.
Exports of copper tend to be <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040524b.jpg" width="353"> volatile and, as they usually account for about 40% of Chile&#39;s total exports of goods, they are largely responsible for the volatility in the total exports of goods and services . In the first quarter of 2004, copper exports were especially strong and accounted for close to one half of the total export of goods. (See Chart 2) Copper exports are available monthly and the April data show a 8.4% decline from March, but they are 114.9% above April, 2003.

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<colgroup><col><col><col><col><col><col><col><col></colgroup>
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<tr>
<th scope="col" class="firstcol">(Bil 1966 Chilean Pesos)</th>
<th scope="col">Q1 04</th>
<th scope="col">Q4r 03</th>
<th scope="col">Q1&nbsp; 03</th>
<th scope="col">Q/Q &nbsp;&nbsp; %</th>
<th scope="col">Y/Y&nbsp; %&nbsp;</th>
<th scope="col">2003 %</th>
<th scope="col">2002 %</th>
<th scope="col">2001 %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>10010.0</td>
<td>9852.6</td>
<td>9618.6</td>
<td>1.60</td>
<td>4.07</td>
<td>3.12</td>
<td>2.21</td>
<td>3.48</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Domestic demand</td>
<td>9832.6</td>
<td>9855.4</td>
<td>9342.9</td>
<td>-0.23</td>
<td>5.24</td>
<td>3.51</td>
<td>2.50</td>
<td>2.28</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>3561.8</td>
<td>3393.0</td>
<td>3227.9</td>
<td>4.98</td>
<td>10.34</td>
<td>7.77</td>
<td>1.52</td>
<td>7.55</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>3401.8</td>
<td>3381.6</td>
<td>3028.1</td>
<td>0.60</td>
<td>12.34</td>
<td>8.81</td>
<td>2.38</td>
<td>4.09</td>
</tr>
<tr class="odd">
<td class="firstcol">(Mil US$)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Total Exports</td>
<td>6970.7</td>
<td>5082.1</td>
<td>5004.1</td>
<td>37.16</td>
<td>39.30</td>
<td>&nbsp;16.16</td>
<td>0.52</td>
<td>-4.06</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Copper exports</td>
<td>3047.2</td>
<td>2058.2</td>
<td>177.2</td>
<td>48.05</td>
<td>71.96</td>
<td>19.43</td>
<td>-3.90</td>
<td>-10.27</td>
</tr>
</tbody>
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Chile's Gross Domestic Product rose 1% in the first quarter of 2004 from the last quarter of 2003, the largest rate of growth since the fourth quarter of 2000. A small decline in domestic demand was more than offset by the exports of [...]

Chile's Gross Domestic Product Increases 1% in Q1 of 2004. Exports of Copper Play a Major Role

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

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Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

260205Z1.jpg

**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

260205Z2.jpg

**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

260205Z3.jpg

**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

260205Z4.jpg

**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

260205Z5.jpg

**An AI Bubble?** 
The final chart draws on the latest Blue Chip Financial Forecasts special questions, highlighting market participants’ perceptions of the economic gains likely to be delivered by artificial intelligence. While a sizeable share of respondents still believe that financial markets may be overestimating AI’s potential benefits, an increasing proportion now judge current expectations to be broadly accurate, with only a small minority viewing the gains as underestimated. Notably, this represents a softening in scepticism compared with the survey results from last month, when concerns about excessive market optimism were more pronounced. The shift suggests a growing acceptance that AI-related investment and innovation could translate into meaningful economic impacts—though uncertainty remains high around the scale, timing and distribution of these gains.

260205Z6.jpg

Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

Robert Brusca

260206E.jpg

With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

260206.jpg

**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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**Total job openings** fell 5.6% m/m (-12.9% y/y) to 6.542 million in December after a downwardly revised 7.0% decline to 6.928 million in November (previously -4.1% m/m; 7.146 million), according to the Job Openings and Labor Turnover Survey. December marked the third consecutive m/m fall and the lowest level since September 2020. The job openings rate declined to 3.9% in December, the lowest since April 2020, from 4.2% in November, remaining below a record-high 7.4% in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings. Significantly, the drop in job openings also lowered the **ratio of job openings to unemployed individuals** to 0.872 in December—the lowest since March 2021—from 0.890 in November, down from 1.085 in December 2024 and a pre-pandemic 1.211 in February 2020. A reading of 0.872 implies there were about 0.87 open jobs per unemployed person—indicating fewer openings than unemployed workers. December was the fifth time in six months that this ratio remained below 1.0.

**Private sector job openings** fell 6.8% (-12.5% y/y) to 5.804 million in December after a 6.6% fall to 6.227 million in November, registering the third successive m/m decline and the lowest level since September 2020. The private sector job openings rate fell to 4.1% in December, the lowest since April 2020, from 4.4% in November. The December m/m decline in private sector openings reflected drops of 27.7% (-36.9% y/y) in financial activities, 20.2% (-25.5% y/y) in professional & business services, 14.4% (-5.1% y/y) in trade, transportation & utilities, and 5.2% (-12.4% y/y) in private educational & health services. To the upside, private sector openings in the following categories rose m/m in December: other services (21.1%; 11.0% y/y), mining & lodging (17.6%; 0.0% y/y), information (13.5%; -4.7% y/y), manufacturing (8.5%; 0.5% y/y), leisure & hospitality (7.5%; -17.2% y/y), and construction (2.8%; 42.4% y/y). Meanwhile, government job openings rose 5.3% (-15.6% y/y) in December, the first m/m rise in three months, after a 10.6% drop in November.

**Total hiring** rebounded 3.4% (-1.5% y/y) to 5.293 million in December, the first m/m increase since September, following a 4.6% decrease to 5.121 million in November. The hiring rate edged up to 3.3% in December from 3.2% in November, though it remained below pre-pandemic levels. **Private sector hiring** rose 3.1% (-0.4% y/y) to 4.978 million in December, the third m/m rise in four months, after a 4.0% decline to 4.826 million in November. The private sector hiring rate rose to 3.7% in December from 3.5% in November, the same as in October and September. The December m/m increase in private sector hiring was led by a 32.1% jump (42.3% y/y) in information, followed by gains of 24.0% (-4.6% y/y) in financial activities, 23.5% (0.0% y/y) in mining & lodging, 6.5% (-4.8% y/y) in private educational & health services, 4.2% (-4.9% y/y) in trade, transportation & utilities, 3.6% (6.1% y/y) in construction, 3.4% (7.9% y/y) in leisure & hospitality, and 1.8% (-4.3% y/y) in manufacturing. To the downside, private sector hiring in professional & business services (-5.2%; +0.5% y/y) and other services (-4.3%; -16.5% y/y) declined m/m in December. Meanwhile, government hiring rebounded 6.4% (-16.3% y/y) in December, the first m/m rise since September, following a 13.5% drop in November.

**Total separations** rose 2.1% (3.3% y/y) to 5.251 million in December after a 1.5% rise to 5.144 million in November, marking the third m/m increase in four months and the highest level since September. The total separations rate edged up to 3.3% after holding at 3.2% in November and October. Private sector separations rose 1.6% (4.2% y/y) to 4.932 million in December, the highest level since June, while government sector separations jumped 10.4% (-9.1% y/y) to 319,000 following two consecutive m/m declines. **Total quits** (voluntary separations initiated by the employee) increased 0.3% (3.5% y/y) to 3.204 million in December, the third m/m rise in four months and the highest level since June, after a 7.4% rebound in November. The quits rate (a measure of workers’ willingness or ability to leave jobs) held at 2.0% in December and November, slightly below 2.3% in February 2020. Private sector quits eased 0.2% (+4.5% y/y) following an 8.4% November rebound. **Layoffs and discharges** (involuntary separations initiated by the employer) increased 3.6% (5.6% y/y) to 1.762 million in December, up for the third time in four months, after an 8.1% drop in November. The layoffs & discharges rate remained at 1.1% in December and November, marginally below 1.3% in February 2020. Private sector layoffs grew 4.3% (7.8% y/y) following a 7.3% November decrease.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

260205C15.jpg

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- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

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260205B2.jpg

Initial claims for unemployment insurance jumped 22,000 to 231,000 in the week ended January 31 following an unrevised 209,000 in the prior week. The four-week average rose to 212,250 from 206,250. The Action Economics Forecast Survey looked for 213,000 claims to have been filed. Winter Storm Fern and the accompanying very cold temperatures could have provided a temporary boost. Historically speaking, claims remain at low levels.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 25,000 to 1.844 million in the week ending January 24, from a downwardly revised 1.819 million in the prior week (previously 1.827 million). The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous eight weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), 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 **USECON**. Data for individual states are in **REGIONW** back to December 1986.

260205C2.jpg

260205D2.jpg

- New claims jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

260205E.jpg

German real orders in December adjusted for inflation rose strongly again, gaining 7.8% month-to-month after rising 5.7% month-to-month in November. Foreign orders were up by 5.6% in December compared to 5.2% in November. Domestic orders surged by 10.7% in December after rising 6.4% in November and 10% in October.

**Real sales**
Real sales were mixed in December with overall sales falling 1.4% month-to-month mostly on weakness in capital goods sales.

**Broad categorical acceleration**
Many flows are accelerating this month. Sequential growth rates show acceleration. Total real orders accelerate from a year ago, to the current year, to six-months, and to three-months. Sales growth rates for consumer goods, consumer nondurables, and intermediate goods all show accelerations in gear. The exceptions are foreign orders that are not as strong over six months compared to their 12-month growth. And on the sales side, consumer durables sales and capital goods sales are weak.

**Quarter-to-quarter**
Quarterly annualized growth is complete for Q4 with this report. Foreign orders are the ‘weak flow’ expanding at a 13.6% annual rate – certainly not a weak growth rate. But domestic real orders are up at an astounding 101.9% annual rate. The net impact on the total real orders growth is to lift it to a pace of 44.1%. 

**Order ranking is very strong**
The table provides two rankings: one based on the level of variables and the other based on its year-on-year growth. The rankings this month for real orders overall, foreign, and domestic orders all reside in their top 80th to 90th percentiles- extremely strong based on level or growth. Sales do not follow suit. This gives us some reason to suspect that there is some lumpiness involved in the manufacturing data as distinct from strength. That will be something to watch. Overall mining and manufacturing sales growth is essentially at its historic median at a rank of 49.8. However, capital goods, intermediate goods and manufacturing sales all have rankings at or above their medians - as high as a 61-percentile standing for capital goods.

**Industrial confidence**
Industrial confidence for Germany, France, Italy and Spain (the EU’s big-four economies) show rankings based on these survey levels that are much lower at the 11th percentile for Germany, the 42nd and 36th percentiles, for France and Italy, respectively. Spain scores better with a 61.8 percentile standing on its industrial confidence measure. 

On balance, there is now an accelerating profile that is broad in sales trends and especially strong order trends. Perhaps Europe, under the pressure to stimulate its miliary capabilities, has a core of demand to help drive output ahead more consistently. This is something to watch in the coming months.

Economy in Brief: 2004

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