Robert Brusca

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OECD LEIs point to weakness ahead for the OECD area as well as separately for the OECD seven largest economies, the euro area, and the United States. All LEI metrics declined in October as well as over three months, six months and 12 months. Japan is the ‘exception’ in the table, with sequential declines but with flat performance in its LEI in the two most recent months.

The OECD prefers to look at its measure in terms of its six-month changes; that calculation is performed in the lower panel of Table 1. There we see familiar declines over six months joined by declines over the six months before that and then increases, but increases representing decelerations for the six months below that. The OECD metrics, with few exceptions, show this leading batch of countries/regions have a slowdown that has been baking in the oven for 18 months. Note that declines in the six-month averages over the recent six months as well as declines for the six months before that reinforce the powerful nature of these slowdown forces.

While the Fed in the U.S. would like to consider the U.S. an island and buffered from these effects overseas, the evidence does not support that. Fluctuating exchange rates do permit relatively more independent movement of national policies and more policy ‘insulation’ but it is clear that many of the same forces that are driving all these economies are forces that have been weakening. The OECD indicators signal slower than normal growth, but they do not give any clears reading on whether a recession is in prospect or not.


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Table 2 shows that for the last four months nearly every reading for the OECD, the U.S., the U.K., the EMU, Japan, and China produces a value below 100, signaling below normal growth. Ratios to six months ago are below 100 across the board except for China and for six months before that all are below 100 except the U.S.

Within the EMU for the longest lived members, the LEI values are below 100 everywhere save in Austria over the last four months. However, six months ago, most EMU readings were still above 100 –only Ireland and Portugal were exceptions. Since then, the slowdown signal has broadened substantially. And 12 months ago, all the members in the table had above 100 readings. However, the metrics still have been broadly weakening. The ratio of the current value to six months and the six months ago reading to six months before that (the far right-most columns) show that out of 12 readings for each comparison (24 in all) only one has a value at 100 or above and this is for Austria that logs a value of 100- a neutral reading with regard to long-term growth prospects.

What we see for these metrics are absolutely low LEI readings and erosion in LEI values that both point to slowing conditions ahead. We find signals with relative deep roots. We find this at a time that central banks are dismantling stimulus programs or planning to do so. In the EMU, Germany is running fiscal surplus and Italy is being hounded to run a less stimulative policy by the EU itself. In the U.S., the Fed balance sheet has been in the process of shrinking as rate hikes also have been in train since end-2015. And despite ongoing financial distress and a sharply flattening yield curve, there is no consensus that the Fed will shelve its rate hike planned for December. But the Fed is expected to more broadly back off its rate hike path.


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Table 3 concerns itself with developing economies. Here we find that the LEI indexes for Brazil (102.1), India (101.1) and Russia (100) all are at or above 100 signaling normal or above normal growth. China (98.8) has a reading below 100, but it has two consecutive monthly gains for its LEI and a net gain over three months to pair with flat performance over six months. The BRICS are doing better than other developing economics.

Sixty-four percent of the developing economics have LEI indexes at or below 100. Over each of the last three months, the LEIs have declined in over 70% of the countries in the table. The same is result holds for changes over three months, six months and 12 months; they are declining in more than 70% of the countries. And the same result obtains for the ratio of the current reading to six months ago and the ratio of six months ago to months before that. There is a broad legacy of slowdown in train and it is hard to gauge how deep it will become. But the breadth of it is worrying.

I also calculated rank standings of the index levels for developing countries. On that basis, only Brazil (89.2%), India (85.4%) and Hungry (71.6%) have historically strong or firm readings. Chile (50.7%) and Slovakia (51.1%) log indexes that barely surpass their respective medians (above 50%). China despite its recent momentum has a weak queue ranking. That standing is very low (in its bottom 17 percentile).

There is no way to sugar coat this news. It is not good and it likely stems from concerns over trade frictions explaining the global nature of the unraveling. Between global trade frictions and rising interest rates in the U.S. fading fiscal stimulus also in the U.S., there is a lot in the mix to explain financial markets concerns about growth. The U.S. interest sensitive sectors already have been hit despite slow interest rate increases made more modest by a voracious flattening of the yield curve. These are draining growth. Beware that the United States’ somewhat better recent U.S. economic performance is probably boosting the BRICS performance through their trade with the U.S. As U.S. growth suffers, the resilience of the BRICS that depend on the U.S. will be eroded as well.


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OECD LEIs point to weakness ahead for the OECD area as well as separately for the OECD seven largest economies, the euro area, and the United States. All LEI metrics declined in October as well as over three months, six months and 12 [...]

OECD LEIs Point to Weakness

Tom Moeller

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The Bureau of Labor Statistics reported that the total job
openings rate improved to 4.5% during October from 4.4% in September, revised
from 4.5%. The job openings rate is the job openings level as a percent of total
employment plus the job openings level. The hiring rate remained strong and rose
to 3.9% from an unrevised 3.8%. The layoff &amp; discharge rate held steady at
1.1%, just above the record low, and the quits rate declined to 2.3%. It was
just below the record high. The JOLTS data begin in 2000.

The private-sector job openings rate held steady at 4.8%,
just below the record high of 4.9%. Leisure &amp; hospitality eased from a
series high to 6.0%, while professional &amp; business services eased to 5.5%,
still up from a low of 4.1% in December. In education &amp; health services, the
rate increased to a near record 5.2%, while in construction, it rose slightly to
a strong 3.7%. The rate in manufacturing strengthened to a record 3.9% and in
trade, transportation &amp; utilities, it held steady for the third month at
4.4%. The job openings rate in government declined to 2.6%, but remained
up sharply versus the 2009 low of 1.2%.

The level of job openings increased 1.7% in October (16.8%
y/y) to 7.079 million following a 4.6% decline from the August record.
Private-sector openings rose m/m and were up 17.7% y/y. Construction sector job
availability surged by one-quarter y/y. Openings in leisure &amp; hospitality
strengthened by one-quarter y/y and they rose 15.1% y/y in education &amp;
health services. Trade, transportation &amp; utilities job openings increased by
one-quarter y/y as did factory sector openings. Job openings in professional
business services gained an improved 13.2% y/y. Government sector job openings
rose a lessened 8.5% y/y.

The private-sector hiring rate increased to 4.3% from
September's 4.2%, but remained just below August's eleven-year high of 4.4%. The
rate in leisure &amp; hospitality improved to 6.7%, and it has been trending
higher during the last few months, but in professional &amp; business services
it held steady at a strong 5.6%. The construction sector's hiring rate declined
to 4.8%, down from the January 2017 high of&nbsp; 5.8%. The hiring rate in
trade, transportation &amp; utilities reached a near-record&nbsp; 4.6%, up
sharply from last year's low of 3.6%. In education &amp; health services, the
rate gained to 3.0%. In manufacturing, the rate recovered to 3.0% and made up
most of the prior month's decline to a twelve-year low. The hiring rate in
government edged higher to 1.6%.

Total hiring increased 3.4% (5.2% y/y) to a near-record 5.892
million, reversing the September decline. Hiring in the private sector increased
5.1% y/y with trade, transportation &amp; utilities hiring strengthening 20.2%
y/y. Factory-sector hiring rose a lessened 12.0% y/y. Educational &amp; health
services hiring increased 6.2% y/y and leisure &amp; hospitality improved 2.7%
y/y. Professional &amp; business employment rose 3.8% y/y, down from the
double-digit gains earlier in the year. Construction sector hiring fell 6.2% y/y.

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The overall job separations rate eased to 3.7%, but remained
near the expansion high. The private sector separations rate slipped to 4.1%,
down versus its cycle high of 4.3% reached in August. The separations rate in
government held steady at 1.5%.

The level of overall separations strengthened 5.4% y/y to 5.556
million. In the private sector, they were up 5.7% y/y led by a 16.7% y/y surge
in trade, transportation &amp; utilities. Leisure &amp; hospitality job
separations increased 12.6% y/y and in manufacturing, they rose 9.9% y/y.
Professional &amp; business services job separations increased 5.0% y/y.
Elsewhere, job separations weakened. In the financial sector, they declined 16.4%.
Separations in construction fell 8.4% y/y and education &amp; health
services separations eased 1.5% y/y. Separations in the information sector
declined 16.0% y/y. Separations in the government sector gained 1.5% y/y.

The level of quits edged down 1.4% m/m (+19.0% y/y) to 3.514
million in October. The quits rate eased m/m to 2.3%, but it remained up sharply
from 1.3% at the beginning of the expansion. The private-sector quit rate rose
to 2.6%, double the expansion low. The rate rose sharply in leisure &amp;
hospitality to 4.8% and in education &amp; health services, it increased to
2.0%. Elsewhere, the quits rate eased. In the financial sector, it fell to 1.3%
and in professional &amp; business services, the rate slipped to 3.2%. In the
factory sector, it held steady at 1.6% which was up from 0.6% 2009 low. The
government sector quit rate remained unchanged m/m at 0.8% which was double the expansion low.

The level of layoffs declined 1.2% y/y to 1.691 million, leaving
the layoff rate at 1.1%, nearly the record low. In the private sector, the
layoff rate declined to 1.2%, down from the 2009 high of 2.2%. The professional
&amp; business services rate held steady at 1.8%, while in the information
sector, it fell sharply to 0.6%. In leisure &amp; hospitality the layoff rate remained
high at 1.7% and in the factory sector, it rose to 1.0%. The government sector
layoff rate rose slightly to 0.5%.

The Job Openings &amp; Labor Turnover Survey (JOLTS) survey
dates to December 2000 and the figures are available 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" ><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS
 (Job Openings &amp; Labor Turnover Survey, SA)</a></th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Oct'17</th>
 <th scope="col" >Oct'16</th>
 <th scope="col" >Oct'15</th>
 </tr>
</thead>
<tbody>
 <tr class="grey3">
 <td class="firstcol" colSpan="7" >Job Openings, Total</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Rate (%)</td>
 <td>4.5</td>
 <td>4.4</td>
 <td>4.7</td>
 <td>4.0</td>
 <td>3.6</td>
 <td>3.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Total (000s)</td>
 <td>7,079</td>
 <td>6,960</td>
 <td>7,293</td>
 <td>6,059</td>
 <td>5,485</td>
 <td>5,536</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="7" >Hires, Total</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Rate (%)&nbsp;</td>
 <td>3.9</td>
 <td>3.8</td>
 <td>4.0</td>
 <td>3.8</td>
 <td>3.6</td>
 <td>3.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Total (000s)</td>
 <td>5,892</td>
 <td>5,696</td>
 <td>5,906</td>
 <td>5,600</td>
 <td>5,208</td>
 <td>5,310</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="7" >Layoffs &amp; Discharges,
 Total</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Rate (%)</td>
 <td>1.1</td>
 <td>1.1</td>
 <td>1.2</td>
 <td>1.2</td>
 <td>1.1</td>
 <td>1.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Total (000s)</td>
 <td>1,691</td>
 <td>1,707</td>
 <td>1,790</td>
 <td>1,711</td>
 <td>1,610</td>
 <td>1,758</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="7" >Quits, Total</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Rate (%)</td>
 <td>2.3</td>
 <td>2.4</td>
 <td>2.4</td>
 <td>2.2</td>
 <td>2.1</td>
 <td>2.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Total (000s)</td>
 <td>3,514</td>
 <td>3,564</td>
 <td>3,648</td>
 <td>3,224</td>
 <td>3,093</td>
 <td>2,836</td>
 </tr>
 </tbody>
 </table>
 
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The Bureau of Labor Statistics reported that the total job openings rate improved to 4.5% during October from 4.4% in September, revised from 4.5%. The job openings rate is the job openings level as a percent of total employment plus [...]

U.S. JOLTS: Job Openings and Hires Rates Improve

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Labor market strength eased during November. Nonfarm payrolls
increased 155,000 (1.7% y/y) after a 237,000 rise during October, revised from
250,000. September's gain was raised to 119,000 from 118,000. The November
increase fell short of expectations for a 200,000 rise in the Action Economics
Forecast Survey. Average hourly earnings increased 0.2% (3.1% y/y) during
November after a 0.1% rise, revised from 0.2%. It left the y/y gain at 3.1%
which remained the strongest since April 2009. A 0.3% rise had been expected. The unemployment rate held
steady at an expected 3.7%. It remains the lowest rate since December 1969.
From the payroll survey, the 155,000 increase in jobs
was held back by a 5,000 increase (4.0% y/y) in construction which followed
seven months of much stronger gain. Mining &amp; logging jobs fell 3,000 (7.6%
y/y), the first decline in two years. Holding steady was factory sector
employment, which increased by 27,000 (2.3% y/y). Strength has been notable in
several durable goods industries.
The 132,000 increase (1.7% y/y) in private services jobs
followed a 198,000 gain. It reflected an improved 53,000 increase (1.1% y/y) in
trade, transportation &amp; utilities. Elsewhere, job growth softened.
Professional &amp; business service sector hiring increased 32,000 (2.7% y/y).
It was the smallest gain since December 2017. Temporary help employment rose a
diminished 8,300 (2.8% y/y). Health care &amp; social assistance employment
improved 40,100 (2.2% y/y), but the rise was held back by a 6,400 decline (+0.9%
y/y) in education jobs. Employment in the leisure &amp; hospitality sector also
moderated to 15,000 (1.7% y/y). The gain in financial activities employment
halved to 6,000 (1.4% y/y) and information services employment fell 8,000 (-0.8%
y/y).
The number of jobs in the public sector declined 6,000 (+0.2%
y/y) following a 14,000 fall. State government jobs eased 13,000 (-0.3% y/y).
Hiring increased at the local level by 4,000 (0.4% y/y) and at the federal level
by 3,000, but it was unchanged y/y.
The length of the average workweek eased to 34.4 hours. The
peak for the current expansion occurred in June at 34.6 hours. The mining
logging workweek held steady at 45.8 hours and the factory sector workweek also
was stable at 40.8 hours. The private service-producing workweek held steady at
33.3 hours. It reflected stability in financial activities hours at 37.8 and
stability in professional &amp; business services at 36.1 hours. The length of
the construction sector workweek eased to 38.8 hours.&nbsp;&nbsp;&nbsp;
The 0.2% gain (3.1% y/y) in average hourly earnings reflected
an improved 0.3% rise (2.3% y/y) in the mining &amp; logging sector. It followed
a 0.5% decline. The rise in factory sector earnings improved to 0.3% (1.8% y/y).
The gain in private service sector earnings was steady at 0.2% (3.2% y/y) while
construction sector pay rose an improved 0.2% (3.7% y/y).
From the household employment survey, the unchanged
3.7% unemployment rate reflected a 233,000 increase in employment and a 133,000
rise in the labor force. The total unemployment rate, including the marginally
attached and those working part-time for economic reasons, increased to 7.6%,
its highest level since June. The labor force participation rate held steady at
62.9%, about where it's been since early 2016. The labor force participation
rate for men aged 25-54 years it held at 89.0% and for women of that age, it
eased to 75.6%. The average duration of unemployment fell to 21.7 weeks and
nearly equaled the low for the economic expansion.&nbsp;
The unemployment rate for individuals with less than a high
school diploma fell to 5.6% and for high school graduates but no college, it
declined to 3.5%. For those with some college but no
degree, it rose to 3.1%. For college graduates, the jobless rate increased to
2.2%.
By age group, individuals aged 16-19
were 12.0% unemployed. The jobless rate for those 20-24 was 6.5%, and those aged
25-54 were 3.1% unemployed. Persons over age 55 were 2.9%
unemployed.&nbsp;&nbsp;&nbsp;
The labor market data are contained in Haver's USECON
database. Detailed figures are in the EMPL and LABOR databases.
The expectations figures are in the AS1REPNA database.
The Fed's latest Beige Book covering regional economic
conditions is available here <a href="https://www.federalreserve.gov/monetarypolicy/beigebook201812.htm">https://www.federalreserve.gov/monetarypolicy/beigebook201812.htm</a>
<table width="936" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="973">Employment: (SA, M/M Change,
 000s)</th>
 <th scope="col" width="127">Nov</th>
 <th scope="col" width="127">Oct</th>
 <th scope="col" width="128">Sep</th>
 <th scope="col" width="128">Nov Y/Y</th>
 <th scope="col" width="128">2017</th>
 <th scope="col" width="128">2016</th>
 <th scope="col" width="44">2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="973">Payroll Employment</td>
 <td align="center" width="127">155</td>
 <td align="center" width="127">237</td>
 <td align="center" width="128">119</td>
 <td align="center" width="128">1.7%</td>
 <td align="center" width="128">1.6%</td>
 <td align="center" width="128">1.8%</td>
 <td align="center" width="44">2.1%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="973">&nbsp;Previous Estimate</td>
 <td align="center" width="127">--</td>
 <td align="center" width="127">250</td>
 <td align="center" width="128">118</td>
 <td align="center" width="128">--</td>
 <td align="center" width="128">--</td>
 <td align="center" width="128">--</td>
 <td align="center" width="44">--</td>
 </tr>
 <tr>
 <td class="firstcol" width="973">&nbsp; Manufacturing</td>
 <td align="center" width="127">27</td>
 <td align="center" width="127">26</td>
 <td align="center" width="128">19</td>
 <td align="center" width="128">2.3</td>
 <td align="center" width="128">0.7</td>
 <td align="center" width="128">0.1</td>
 <td align="center" width="44">1.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="973">&nbsp; Constructionxz</td>
 <td align="center" width="127">5</td>
 <td align="center" width="127">24</td>
 <td align="center" width="128">15</td>
 <td align="center" width="128">4.0</td>
 <td align="center" width="128">3.4</td>
 <td align="center" width="128">4.1</td>
 <td align="center" width="44">5.0</td>
 </tr>
 <tr>
 <td class="firstcol" width="973">&nbsp; Private Service-Producing</td>
 <td align="center" width="127">132</td>
 <td align="center" width="127">198</td>
 <td align="center" width="128">80</td>
 <td align="center" width="128">1.7</td>
 <td align="center" width="128">1.8</td>
 <td align="center" width="128">2.2</td>
 <td align="center" width="44">2.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="973">&nbsp; Government</td>
 <td align="center" width="127">-6</td>
 <td align="center" width="127">-14</td>
 <td align="center" width="128">2</td>
 <td align="center" width="128">0.2</td>
 <td align="center" width="128">0.4</td>
 <td align="center" width="128">0.9</td>
 <td align="center" width="44">0.7</td>
 </tr>
 <tr>
 <td class="firstcol" width="973">Average Weekly Hours - Private Sector</td>
 <td align="center" width="127">34.4</td>
 <td align="center" width="127">34.5</td>
 <td align="center" width="128">34.4</td>
 <td align="center" width="128">34.5</td>
 <td align="center" width="128">34.4</td>
 <td align="center" width="128">34.4</td>
 <td align="center" width="44">34.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="973">Private Sector Average Hourly Earnings
 (%)</td>
 <td align="center" width="127">0.2</td>
 <td align="center" width="127">0.1</td>
 <td align="center" width="128">0.3</td>
 <td align="center" width="128">3.1</td>
 <td align="center" width="128">2.5</td>
 <td align="center" width="128">2.6</td>
 <td align="center" width="44">2.3</td>
 </tr>
 <tr>
 <td class="firstcol" width="973">Unemployment Rate (%)</td>
 <td align="center" width="127">3.7</td>
 <td align="center" width="127">3.7</td>
 <td align="center" width="128">3.7</td>
 <td align="center" width="128">4.1</td>
 <td align="center" width="128">4.4</td>
 <td align="center" width="128">4.9</td>
 <td align="center" width="44">5.3</td>
 </tr>
 </tbody>
</table>

&nbsp;
U.S. Consumer Credit Usage Eases 
by <a href="http://www.haver.com/comment/Moeller.html">Tom
Moeller</a>&nbsp;&nbsp;December 7, 2018
Consumer credit outstanding increased $10.93 billion (4.8%
y/y) during September following a $22.88 billion August increase, revised from
$20.07 billion. A $16.5 billion gain had been expected in the Action Economics
Forecast Survey. During the past ten years, there has been a 51% correlation
between the y/y gain in consumer credit and y/y growth in personal consumption
expenditures.
Nonrevolving credit usage increased $11.23 billion (5.2% y/y)
during September. Federal government borrowing (42% of the total) rose a weaker
8.3% y/y. Borrowing from depository institutions (25% of the total) improved
3.7% y/y but finance company balances (18% of the total) fell 1.1% y/y. Credit
union loans (13% of the total) rose a greatly strengthened 11.7% y/y.
Revolving consumer credit balances eased $0.31 billion in
September (+3.7% y/y). Balances at depository institutions (88% of the total)
rose a lessened 6.1% y/y. Borrowing from credit unions (6% of the total) rose a
weaker 7.8% y/y. Finance company balances (2% of the total) fell a steady 9.9%
y/y, while nonfinancial business borrowing (2% of the total) weakened 4.0% y/y.
Student loans rose a steady 5.6% y/y during Q3'18 while motor
vehicle borrowing gained a stronger 3.7% y/y.
These Federal Reserve Board figures are break-adjusted and
calculated by Haver Analytics. There is a break in the credit outstanding data
from November 2010 to December 2010 due to the Fed's benchmarking process.
Benchmark estimates are based on the Census of Finance Companies (CFC) and the
Survey of Finance Companies (SFC) conducted in 2010 and 2011, respectively.
The consumer credit data are available in Haver's USECON
database. The Action Economics figures are contained in the AS1REPNA
database.
<table width="100%" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col">Consumer Credit Outstanding (M/M Chg,
 SA)</th>
 <th scope="col"></th>
 <th scope="col">Sep</th>
 <th scope="col">Aug</th>
 <th scope="col">Sep Y/Y</th>
 <th scope="col">2017</th>
 <th scope="col">2016</th>
 <th scope="col">2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol">Total</td>
 <td></td>
 <td>$10.93 bil.</td>
 <td>$22.88 bil.</td>
 <td>4.8%</td>
 <td>5.1%</td>
 <td>6.7%</td>
 <td>7.1%</td>
 </tr>
 <tr>
 <td class="firstcol">&nbsp; &nbsp;Nonrevolving</td>
 <td></td>
 <td>11.23</td>
 <td>18.26</td>
 <td>5.2</td>
 <td>4.8</td>
 <td>6.7</td>
 <td>7.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">&nbsp; &nbsp;Revolving</td>
 <td></td>
 <td>-0.31</td>
 <td>4.61</td>
 <td>3.7</td>
 <td>6.1</td>
 <td>6.8</td>
 <td>5.4</td>
 </tr>
 </tbody>
</table>

&nbsp;

</body>

</html>

Labor market strength eased during November. Nonfarm payrolls increased 155,000 (1.7% y/y) after a 237,000 rise during October, revised from 250,000. September's gain was raised to 119,000 from 118,000. The November increase fell [...]

U.S. Employment and Earnings Gains Weaken Unexpectedly

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Consumer credit outstanding increased $25.38 billion during
October following an $11.57 billion September rise, revised from $10.93 billion.
A $17.00 billion gain had been expected in the Action Economics
Forecast Survey. During the past ten years, there has been a 52% correlation
between the y/y gain in consumer credit and y/y growth in personal consumption expenditures.

Nonrevolving credit usage increased $16.18 billion (5.4% y/y)
during October. Gains here have been trending upward this year. Federal government
borrowing (42% of the total) rose a weaker 8.1% y/y. Borrowing from depository institutions
(25% of the total) rose a slightly improved 4.0% y/y but finance company balances (18% of the total) eased
0.7% y/y. Credit union loans (13% of the total) rose a greatly strengthened 11.8% y/y.

Revolving consumer credit balances jumped $9.21 billion in
October (2.8% y/y). Balances at depository institutions (88% of the total)
rose a lessened 4.7% y/y. Borrowing from credit unions (6% of the total) rose
8.3% y/y. Finance company balances (2% of the total) fell 10.4%
y/y, while nonfinancial business borrowing (2% of the total) weakened 4.0% y/y.

These Federal Reserve Board figures are break-adjusted and
calculated by Haver Analytics. There is a break in the credit outstanding data
from November 2010 to December 2010 due to the Fed's benchmarking process.
Benchmark estimates are based on the Census of Finance Companies (CFC) and the
Survey of Finance Companies (SFC) conducted in 2010 and 2011, respectively.

The consumer credit data are available in Haver's USECON
database. The Action Economics figures are contained in the AS1REPNA database.

Assessing Financial Stability over the Cycle from Fed
Governor Lael Brainard can be found <a href="https://www.federalreserve.gov/newsevents/speech/brainard20181207a.htm">here</a>.

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 <a href="/comment/181207o.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/181207o.png"></a>

<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" >Consumer Credit Outstanding (M/M Chg,
 SA)</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Oct y/y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >$25.38 bil.</td>
 <td >$11.57 bil.</td>
 <td >$23.21 bil.</td>
 <td >4.7%</td>
 <td >5.0%</td>
 <td >6.7%</td>
 <td >3.0%</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; &nbsp;Nonrevolving</td>
 <td >16.18</td>
 <td >11.88</td>
 <td >18.59</td>
 <td >5.4</td>
 <td >4.8</td>
 <td >6.7</td>
 <td >3.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; &nbsp;Revolving</td>
 <td >9.21</td>
 <td >-0.31</td>
 <td >4.62</td>
 <td >2.8</td>
 <td >5.6</td>
 <td >6.8</td>
 <td >2.1</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

Consumer credit outstanding increased $25.38 billion during October following an $11.57 billion September rise, revised from $10.93 billion. A $17.00 billion gain had been expected in the Action Economics Forecast Survey. During the [...]

U.S. Consumer Credit Usage Expands

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Labor market strength eased during November. Nonfarm payrolls
increased 155,000 (1.7% y/y) after a 237,000 rise during October, revised from
250,000. September's gain was raised to 119,000 from 118,000. The November
increase fell short of expectations for a 200,000 rise in the Action Economics
Forecast Survey. Average hourly earnings increased 0.2% (3.1% y/y) during
November after a 0.1% rise, revised from 0.2%. It left the y/y gain at 3.1%
which remained the strongest since April 2009. A 0.3% rise had been expected.
The unemployment rate held steady at an expected 3.7%. It remains the lowest rate
since December 1969.

From the payroll survey, the 155,000 increase in jobs
was held back by a 5,000 increase (4.0% y/y) in construction which followed
seven months of much stronger gain. Mining &amp; logging jobs fell 3,000 (7.6%
y/y), the first decline in two years. Holding steady was factory sector
employment, which increased by 27,000 (2.3% y/y). Strength has been notable in
several durable goods industries.

The 132,000 increase (1.7% y/y) in private services jobs
followed a 198,000 gain. It reflected an improved 53,000 increase (1.1% y/y) in
trade, transportation &amp; utilities. Elsewhere, job growth softened.
Professional &amp; business service sector hiring increased 32,000 (2.7% y/y).
It was the smallest gain since December 2017. Temporary help employment rose a
diminished 8,300 (2.8% y/y). Health care &amp; social assistance employment
improved 40,100 (2.2% y/y), but the rise was held back by a 6,400 decline (+0.9%
y/y) in education jobs. Employment in the leisure &amp; hospitality sector also
moderated to 15,000 (1.7% y/y). The gain in financial activities employment
halved to 6,000 (1.4% y/y) and information services employment fell 8,000 (-0.8% y/y).

The number of jobs in the public sector declined 6,000 (+0.2%
y/y) following a 14,000 fall. State government jobs eased 13,000 (-0.3% y/y).
Hiring increased at the local level by 4,000 (0.4% y/y) and at the federal level
by 3,000, but it was unchanged y/y.

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The length of the average workweek eased to 34.4 hours. The
peak for the current expansion occurred in June at 34.6 hours. The mining
logging workweek held steady at 45.8 hours and the factory sector workweek also
was stable at 40.8 hours. The private service-producing workweek held steady at
33.3 hours. It reflected stability in financial activities hours at 37.8 and
stability in professional &amp; business services at 36.1 hours. The length of
the construction sector workweek eased to 38.8 hours.

The 0.2% gain (3.1% y/y) in average hourly earnings reflected
an improved 0.3% rise (2.3% y/y) in the mining &amp; logging sector. It followed
a 0.5% decline. The rise in factory sector earnings improved to 0.3% (1.8% y/y).
The gain in private service sector earnings was steady at 0.2% (3.2% y/y) while
construction sector pay rose an improved 0.2% (3.7% y/y).

From the household employment survey, the unchanged
3.7% unemployment rate reflected a 233,000 increase in employment and a 133,000
rise in the labor force. The total unemployment rate, including the marginally
attached and those working part-time for economic reasons, increased to 7.6%,
its highest level since June. The labor force participation rate held steady at
62.9%, about where it's been since early 2016. The labor force participation
rate for men aged 25-54 years it held at 89.0% and for women of that age, it
eased to 75.6%. The average duration of unemployment fell to 21.7 weeks and
nearly equaled the low for the economic expansion.

The unemployment rate for individuals with less than a high
school diploma fell to 5.6% and for high school graduates but no college, it
declined to 3.5%. For those with some college but no
degree, it rose to 3.1%. For college graduates, the jobless rate increased to 2.2%.

By age group, individuals aged 16-19 were 12.0% unemployed.
The jobless rate for those 20-24 was 6.5%, and those aged
25-54 were 3.1% unemployed. Persons over age 55 were 2.9% unemployed.

The labor market data are contained in Haver's USECON
database. Detailed figures are in the EMPL and LABOR databases.
The expectations figures are in the AS1REPNA database.

The Fed's latest Beige Book covering regional economic
conditions is available <a href="https://www.federalreserve.gov/monetarypolicy/beigebook201812.htm">here</a>.

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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" >Employment: (SA, M/M Change,
 000s)</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Nov Y/Y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Payroll Employment</td>
 <td >155</td>
 <td >237</td>
 <td >119</td>
 <td >1.7%</td>
 <td >1.6%</td>
 <td >1.8%</td>
 <td >2.1%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Previous Estimate</td>
 <td >--</td>
 <td >250</td>
 <td >118</td>
 <td >--</td>
 <td >--</td>
 <td >--</td>
 <td >--</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Manufacturing</td>
 <td >27</td>
 <td >26</td>
 <td >19</td>
 <td >2.3</td>
 <td >0.7</td>
 <td >0.1</td>
 <td >1.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Construction</td>
 <td >5</td>
 <td >24</td>
 <td >15</td>
 <td >4.0</td>
 <td >3.4</td>
 <td >4.1</td>
 <td >5.0</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Private Service-Producing</td>
 <td >132</td>
 <td >198</td>
 <td >80</td>
 <td >1.7</td>
 <td >1.8</td>
 <td >2.2</td>
 <td >2.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Government</td>
 <td >-6</td>
 <td >-14</td>
 <td >2</td>
 <td >0.2</td>
 <td >0.4</td>
 <td >0.9</td>
 <td >0.7</td>
 </tr>
 <tr>
 <td class="firstcol" >Average Weekly Hours - Private Sector</td>
 <td >34.4</td>
 <td >34.5</td>
 <td >34.4</td>
 <td >34.5</td>
 <td >34.4</td>
 <td >34.4</td>
 <td >34.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Private Sector Average Hourly Earnings
 (%)</td>
 <td >0.2</td>
 <td >0.1</td>
 <td >0.3</td>
 <td >3.1</td>
 <td >2.5</td>
 <td >2.6</td>
 <td >2.3</td>
 </tr>
 <tr>
 <td class="firstcol" >Unemployment Rate (%)</td>
 <td >3.7</td>
 <td >3.7</td>
 <td >3.7</td>
 <td >4.1</td>
 <td >4.4</td>
 <td >4.9</td>
 <td >5.3</td>
 </tr>
 </tbody>
 </table>
 
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Germany's industrial production slowed to a gain of only 0.1% in September then dropped by 0.5% in October. The string of growth rates from 12-months to six-months to three-months also trace a legacy of losing as the 12-month gain is at a respectable 1.8%, but the six-month and three-month growth rates both are zero.

IP components show a smattering of negative growth rates, not some great syncopated wave of deceleration. Growth is uneven and the underpinning of deceleration is still unclear. Consumer goods output shows a steady deceleration, culminating in the three-month annualized growth rate of -7.8%. Capital goods output is surprisingly erratic, showing a 2.6% gain over 12 months and a 2.4% decline at an annual rate over six months then a rebound with a 3.9% gain annualized over three months. Intermediate goods output has been flying at a very low trajectory over all horizons; it has zero growth over three months with output lower by -0.3% year-over-year.

Year-to-date, IP is falling at a 1.7% annual rate in Q4, led by a 15.9% annual rate drop for the consumer sector, a 3.9% gain in capital goods output and a 0.2% drop in intermediate goods output. Construction output is up at a 0.9% pace in the quarter but shows decelerating gains over 12 months.

Manufacturing output is persistently weak and is flat over three months and lower over six months with a modest 1.4% rise over 12 months. In contrast, real manufacturing orders are moving steadily higher, logging an 11.1% annualized gain over three months. Real sales in manufacturing are also persistently weak. Sales and output trends are weaker than orders. Perhaps this lull in output is temporary and a ramp of order growth is yet to hit the bottom line for output. But even in the quarter-to-date, manufacturing IP is falling at a 1.9% annual rate as real orders rise at a 6.8% pace and real sales gain at a 2.5% pace. Moreover, the much more topical Markit PMI data show ongoing manufacturing weakness. There is no hint that order strength will shine through in the end.

Only a few countries have reported IP for October this early. Among those four, Ireland shows powerful growth although Ireland tends to run from hot to cold. Sweden and Norway both show growth that is solid to strong, but Portugal shows declining IP on all horizons with weakness gathering momentum.

The IP picture has good deal of dissonance present in the dataset. For Germany, the various sectors show that output is out of phase and IP as a whole is running counter to the strength in orders. For the few reporting European countries, their results are wholly idiocentric and seemingly ruled by their own internal circumstances with little reference to outside forces or implications for European growth.

Quite apart from this IP report, even more topical data from Markit globally increasingly show slowing is in progress. Data in the U.S. add to all dissonance as housing and interest-sensitive sectors are slowing while the ISM data show a strengthening in manufacturing and in nonmanufacturing. Yet, job growth did slow in November and there is no consistent picture yet to be assembled from the current fragments of U.S. economic data that are available. Asia has clearly been slowing and the trade is a worry. CEOs are losing come of their past confidence too.

While some want to focus on the declines in markets as an issue, I would prefer to point out that markets do not unravel on their own. They are not manipulated by traders with an ‘agenda'. These are not markets trying to force the Fed or some central bank to do something. These are markets reacting to the news of the economic environment and with concerns about the present and fears of the future. These things are real and more real than a simple decline in stock prices. If central banks change policy or pace, it will be because of the same fundamentals that markets are reacting to not because of markets themselves. So now all eyes are on the Fed and on its ‘planned' December rate hike. Has that been put to question? The Fed's future path is thought to be much less of a gradient.

Book-makers in the U.K. have putting up the odds of there being no Brexit at all. This means not only that there will be no approval of Theresa May's deal but that the book-makers see a strong possibility of a change in the decision to leave- a new referendum with a new outcome. So stay tuned as the world churns. It's not a soap opera; it's real life. And things change. It's the Bob Dylan economy!


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Germany's industrial production slowed to a gain of only 0.1% in September then dropped by 0.5% in October. The string of growth rates from 12-months to six-months to three-months also trace a legacy of losing as the 12-month gain is [...]

German IP Takes Surprising October Slip

Gerald D. Cohen

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Wholesale inventories increased 0.8% month-on-month (6.9% year-over-year) during October following an upwardly revised 0.7% gain in September. The advance report issued last week reported 0.7% growth in October, while the Informa Global Markets Survey expected a 0.3% rise.

Durable goods inventories increased 1.7% (9.3% y/y) in October after a 1.3% gain. Machinery inventories, the largest sector, grew 2.1% (11.7% y/y), while vehicles, the second largest, advanced 3.4% (8.1% y/y). Electrical equipment grew 0.9% (6.4% y/y). Inventories of nondurable goods declined 0.6% (+3.4% y/y) after edging down 0.2% in September. Drug inventories, which make up a quarter of nondurable inventories, rose 0.6% (4.0% y/y). Groceries, the second largest category, edged up 0.2% (-2.0% y/y). Miscellaneous nondurables increased 0.4 (2.2% y/y).

Wholesale sales declined 0.2% during October (+6.8% y/y) after inching up 0.1% (was 0.2%). The Action Economics Forecast Survey looked for 0.5% growth.

Durable goods sales inched down 0.1% (+6.8% y/y) after a 0.2% gain. Electrical equipment, the largest sector, declined 0.9% (+8.3% y/y). Professional and commercial equipment, which includes computers, advanced 1.5% (6.8% y/y), while vehicle sales fell 1.3% (unchanged y/y). Nondurable product sales decreased 0.3% (+6.8% y/y) after edging up 0.1%. Petroleum product sales, the largest category, increased just 0.5% (31.6% y/y) as oil price gains moderated in October. Drug sales grew 0.3% (5.5% y/y) while groceries gained 0.7% (-1.8% y/y).

The inventory-to-sales (I/S) ratio at the wholesale level rose to 1.28, the third increase in four months. The I/S ratio for durable goods jumped to 1.63 from 1.60, the highest level in over a year. The machinery ratio increased to 2.56 from 2.54, while motor vehicles surged to 1.69 from 1.62. The I/S ratio for nondurable goods was unchanged at 0.96. The petroleum industry I/S ratio fell to 0.35, a four-year low. The drug industry I/S remained at 1.06.

The wholesale trade figures and oil prices are available in Haver's USECON
database. The expectations figure for inventories is contained in the MMSAMER database.
Expectations for sales are in the AS1REPNA 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" >Wholesale Sector - NAICS
 Classification (%)</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Oct Y/Y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >Inventories</td>
 <td >0.8</td>
 <td >0.7</td>
 <td >0.9</td>
 <td >6.9</td>
 <td >3.6</td>
 <td >2.2</td>
 <td >1.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Sales</td>
 <td >-0.2</td>
 <td >0.1</td>
 <td >0.7</td>
 <td >6.8</td>
 <td >7.4</td>
 <td >-1.3</td>
 <td >-4.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >I/S Ratio</td>
 <td >1.28</td>
 <td >1.27</td>
 <td >1.26</td>
 <td >1.28 (Oct '17)</td>
 <td >1.30</td>
 <td >1.35</td>
 <td >1.33</td>
 </tr>
 </tbody>
 </table>
 
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Wholesale inventories increased 0.8% month-on-month (6.9% year-over-year) during October following an upwardly revised 0.7% gain in September. The advance report issued last week reported 0.7% growth in October, while the Informa [...]

Wholesale Inventories Grow While Sales Decline

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Labor market strength eased during November. Nonfarm payrolls
increased 155,000 (1.7% y/y) after a 237,000 rise during October, revised from
250,000. September's gain was raised to 119,000 from 118,000. The November
increase fell short of expectations for a 200,000 rise in the Action Economics
Forecast Survey. Average hourly earnings increased 0.2% (3.1% y/y) during
November after a 0.1% rise, revised from 0.2%. It left the y/y gain at 3.1%
which remained the strongest since April 2009. A 0.3% rise had been
expected. The unemployment rate held steady at an expected 3.7%. It was the
lowest rate since December 1969.

The labor market data are contained in Haver's USECON
database. Detailed figures are in the EMPL and LABOR databases.
The expectations figures are in the AS1REPNA database.

The Fed's latest Beige Book covering regional economic
conditions is available <a href="https://www.federalreserve.gov/monetarypolicy/beigebook201812.htm">here</a>.

<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" >Employment: (SA, M/M Change,
 000s)</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Nov Y/Y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Payroll Employment</td>
 <td >155</td>
 <td >237</td>
 <td >119</td>
 <td >1.7%</td>
 <td >1.6%</td>
 <td >1.8%</td>
 <td >2.1%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Previous Estimate</td>
 <td >--</td>
 <td >250</td>
 <td >118</td>
 <td >--</td>
 <td >--</td>
 <td >--</td>
 <td >--</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Manufacturing</td>
 <td >27</td>
 <td >26</td>
 <td >19</td>
 <td >2.3</td>
 <td >0.7</td>
 <td >0.1</td>
 <td >1.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Construction</td>
 <td >5</td>
 <td >24</td>
 <td >15</td>
 <td >4.0</td>
 <td >3.4</td>
 <td >4.1</td>
 <td >5.0</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Private Service-Producing</td>
 <td >132</td>
 <td >198</td>
 <td >80</td>
 <td >1.7</td>
 <td >1.8</td>
 <td >2.2</td>
 <td >2.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Government</td>
 <td >-6</td>
 <td >-14</td>
 <td >2</td>
 <td >0.2</td>
 <td >0.4</td>
 <td >0.9</td>
 <td >0.7</td>
 </tr>
 <tr>
 <td class="firstcol" >Average Weekly Hours - Private Sector</td>
 <td >34.4</td>
 <td >34.5</td>
 <td >34.4</td>
 <td >34.5</td>
 <td >34.4</td>
 <td >34.4</td>
 <td >34.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Private Sector Average Hourly Earnings
 (%)</td>
 <td >0.2</td>
 <td >0.1</td>
 <td >0.3</td>
 <td >3.1</td>
 <td >2.5</td>
 <td >2.6</td>
 <td >2.3</td>
 </tr>
 <tr>
 <td class="firstcol" >Unemployment Rate (%)</td>
 <td >3.7</td>
 <td >3.7</td>
 <td >3.7</td>
 <td >4.1</td>
 <td >4.4</td>
 <td >4.9</td>
 <td >5.3</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

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

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Real GDP eased 0.3% SAAR (+2.1% y/y) during the first quarter of 2025 after increasing 2.4% in Q4’24 and 3.1% in Q3’24. A 0.4% increase had been expected in the Action Economics Forecast Survey. It was the first decline since Q1 2022.

Foreign trade subtracted 4.83 percentage points from growth last quarter as imports surged 41.3% (13.4% y/y) ahead of tariffs, which began to come into effect in the first quarter. The rise followed a 1.9% decline in Q4’24. Exports rose 1.8% (3.0% y/y) after easing 0.2% in Q4. Inventories added 2.25 percentage points to growth after subtracting 0.84 percentage point from Q4 growth.

Real final sales to domestic purchasers grew 2.3% (2.9% y/y) in Q1 after rising 3.0% in Q4. Personal consumption expenditures rose 1.8% (3.1% y/y) following a 4.0% gain. Durable goods spending fell 3.4% (+5.3% y/y) after surging 12.4% in Q4. Motor vehicle purchases declined 11.1% (+5.5% y/y) after strengthening 19.7% in Q4. Spending on home furnishings & appliances gained 1.5% (6.1% y/y) following a 5.4% rise. Recreational goods & vehicle outlays rose 2.5% (7.0% y/y) last quarter after a 13.9% Q4 increase.

Nondurable goods outlays rose 2.7% (3.0% y/y) following 3.1% growth in Q4. Apparel spending increased 6.7% (2.5% y/y) following a 5.0% rise. Food & beverage buying gained 2.5% (2.3% y/y) after a 1.8% increase. Gasoline & fuel oil purchases increased 4.6% (3.4% y/y) after falling 2.0% in Q4.

Spending on services increased 2.4% last quarter (2.7% y/y) after a 3.0% gain. Outlays on housing & utilities increased 3.4% (1.8% y/y) after rising 1.1% in Q4. Health care expenditures rose 4.0% (4.8% y/y) following a 4.7% strengthening. Transportation outlays increased 5.3% (4.6% y/y) after a 3.7% rise while recreation spending rose 4.7% (2.8% y/y) following a 4.5% rise. Restaurant & hotel expenditures declined 2.1% (+0.5% y/y) following a 2.8% rise. Financial services expenditures rose 1.9% (2.0% y/y) after a 3.1% Q4 increase.

Business fixed investment increased 9.8% (3.6% y/y) following a 3.0% decline in Q4. Expenditures on structures rose 0.4% (-0.4% y/y) after a 2.9% increase. Expenditures on producers’ durable equipment jumped 22.5% (8.0% y/y) after falling 8.7%.  Outlays on information processing equipment soared 69.3% (18.9% y/y) following a 7.3% decline. Industrial equipment investment fell 1.4% (-0.3% y/y) after easing 0.9%. Intellectual property product spending rose 4.1% (1.8% y/y) following a 0.5% decline. 

Residential structures investment increased 1.3% (-0.1% y/y) in Q1 after a 5.5% Q4 rise.

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Government spending fell 1.5% (+2.4% y/y) after a 3.1% Q4 rise. Federal government expenditures declined 5.1% (+2.9% y/y) after rising 4.0% in Q4. National defense expenditures declined 8.0% (+4.0% y/y) after increasing 4.8% in Q4. State & local government spending rose 0.8% (2.1% y/y) following a 2.5% rise.

The GDP price index rose 3.7% (2.6% y/y) after increasing 2.3% in Q4. It was the largest increase since Q4’22. A 2.4% increase had been expected. The PCE chain price index increased 3.6% (2.5% y/y) following a 2.4% rise. The PCE price index excluding food and energy rose 3.5% (2.8% y/y) after increasing 2.6% in Q4. The business fixed investment price index rose 0.4% (1.8% y/y) after 1.5% rise. The residential price index strengthened 3.9% (3.2% y/y) after a 1.9% rise while the government price index increased 4.7% (2.8% y/y) following a 2.1% rise.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Decline in GDP is first in three years.
- Foreign trade subtracts substantially ahead of tariffs.
- Domestic final demand growth weakens.
- Price index strengthens with higher core PCE prices.

U.S. GDP Unexpectedly Declines in Q1’25; Prices Strengthen

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The Pending Home Sales Index, a forward-looking home sales measure based on contract signings, from the National Association of Realtors rose 6.1% to 76.5 (-0.6% y/y) during March after rising a little-revised 2.1% in February. These changes followed a 4.6% January decline.

The rise in March sales occurred as the rate on a 30-year mortgage eased to an average 6.65% from 6.84% in February. This rate was well above a low of 2.68% averaged in December 2020.

Pending home sales were up in most regions of the country. Sales in the Midwest rose 4.9% (1.4% y/y) last month after rising 1.8% in February. Sales in the South increased 9.8% (-0.4% y/y) following a 5.8% February rise. Sales in the West improved 4.8% (-2.0% y/y) after falling 3.0% in February. Sales in the Northeast were off 0.5% (-3.0% y/y) in March after falling 0.9% in February.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- Sales rise to highest level in four months.
- Strength is evident throughout most of country.

U.S. Pending Home Sales Surge in March

Sandy Batten

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The employment cost index (ECI) for civilian workers, arguably the most accurate measure of labor compensation in the United States, rose 0.9% q/q (3.6% y/y) in Q1, the same quarterly increase as in last year’s Q4, according to the Bureau of Labor Statistics. The quarterly gains have fluctuated between 0.8% and 1.0% for the past six quarters. The Action Economics Forecast Survey had expected a 0.9% q/q increase and a 3.5% y/y gain.

Wages and salaries for civilian workers rose 0.8% q/q (3.5% y/y) in Q1, down from 1.0% q/q in Q4. This tied the Q3 2024 quarterly rise as the smallest increase since Q2 2021. It was also the smallest y/y increase since Q2 2021. Benefits increased by an outsized 1.2% q/q (3.9% y/y) in Q1 versus 0.8% q/q in Q4. This is the largest quarterly gain since Q2 2022. In general, employment cost gains remain above the pace observed prior to the pandemic but are slowing gradually.

Private industry workers’ compensation rose 0.8% q/q (3.4% y/y) in Q1, down from 0.9% q/q (3.6% y/y) in Q4. Wages and salaries for private industry workers increased 0.8% q/q (3.4% y/y) in Q1 versus 0.8% q/q (3.7% y/y) in Q4. The quarterly gain in Q1 tied that in Q3 2024 as the smallest increase since Q4 2020. Benefits for private industry workers jumped 1.2% q/q (3.6% y/y). the largest quarterly gain since Q2 2022. The acceleration in benefits in Q1 was primarily in service-producing industries.

Compensation in private goods-producing industries increased 1.0% q/q (3.2% y/y) in Q1, the largest quarterly gain in five quarters, versus a 0.7% q/q increase in Q4. Compensation in construction jumped 1.3% q/q, its largest quarterly increase since Q2 2022, up from a 0.6% q/q gain in Q4. Manufacturing compensation growth slowed to 0.7% q/q, its slowest quarterly advance since Q4 2020, from 0.8% q/q in Q4. Compensation in private service-producing industries increased 0.8% q/q (3.5% y/y), down slightly from a 0.9% q/q gain in Q4. Compensation in education and health services jumped 1.3% q/q, its largest quarterly gain since Q3 2023. In contrast, compensation in other services edged up 0.1% q/q in Q1, its smallest quarterly advance since before the pandemic.

The employment cost index measures the change in the cost of labor, free from the influence of employment shifts across occupations and industries. It is provided by the Bureau of Labor Statistics and is available in Haver’s **USECON** database. Consensus estimates from the Action Economics Forecast Survey are in Haver’s **AS1REPNA** database.

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- Compensation grew 0.9 q/q in Q1, the same pace as in Q4.
- Wage growth slowed to 0.8% q/q while benefits surged 1.2% q/q, their largest quarterly increase since Q2 2022.

Employment Cost Growth Steady in Q1 2025

Kathleen Stephansen, CBE

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The ADP National Employment Report indicated that nonfarm private sector payrolls rose 62,000 (1.4% y/y) during April after increasing 147,000 (1.4% y/y) during March, revised from 155,000. A 124,000 April rise in ADP employment had been expected in the Action Economics Forecast Survey.

Growth in median annual pay for "job stayers" eased to 4.5% y/y during April, from 4.6% y/y in March and from 4.7% y/y in the prior two months. Manufacturing sector pay grew 4.6% y/y during April, down from 4.8% y/y in March. Construction sector pay was unchanged at 4.7% y/y. Natural resource & mining sector pay grew 4.4% y/y. Financial sector pay rose 5.1% y/y, while education & health services pay rose 4.7% y/y. Leisure & hospitality pay also increased 4.7% y/y. Professional & business service sector pay increased 4.3% y/y as did trade, transportation & utilities pay. Information pay rose 4.1% y/y. Median annual pay for “job changers” rose 6.9% y/y after 6.7% y/y in March.

Small business hiring (less than 50 employees) rose 11,000 (0.6% y/y) after rising 18,000 (0.6% y/y) in March, revised down from 52,000. Employment at medium-sized firms (50-499,000 employees) rose 40,000 (1.1% y/y) after rising 43,000 (1.1% y/y). Large business hiring (500+ employees) rose 12,000 (3.4% y/y) in April, after rising 61,000 (3.6% y/y) in March, revised from 59,000.

Goods-producing employment rose 26,000 (1.3% y/y) in April, after rising 16,000 (1.3% y/y) during March, revised from 24,000. Manufacturing jobs rose 4,000 (-0.2% y/y) after rising 17,000 (-0.3% y/y) in March. The number of construction sector jobs rose 16,000 (3.4% y/y) in April, following a 2,000 (3.6% y/y) March increase, revised from 6,000. Natural resources & mining jobs rose 6,000 (2.8% y/y) in April after falling 3,000 (+1.9% y/y) in March.

The number of service-producing jobs rose 34,000 (1.4% y/y) during April, following a rise of 131,000 (1.4% y/y) in March. Professional & business services employment fell 2,000 (0.6% y/y) after rising 46,000 (0.7% y/y) in the prior month, revised from 57,000. Employment in the financial industry rose 20,000 (2.1% y/y) in April, after rising 38,000 (2.0% y/y) in March. Leisure and hospitality employment increased 27,000 (3.0% y/y), following a 23,000 (2.9% y/y) March increase, revised from 17,000. The number of education & health care jobs fell 23,000 (1.6% y/y) in April, following a 15,000 (1.8% y/y) rise in March, revised from 12,000. Information sector employment fell 8,000 (-0.1% y/y) after a rise of 3,000 (0.2% y/y) in March. The number of jobs in trade, transportation & utilities rose 21,000 (0.4% y/y) in April, after falling 4,000 (+0.4% y/y) in March, revised from a 6,000 fall. Employment in “other” services rose fell 1,000 (+3.2% y/y) following a 10,000 (3.4% y/y) rise in March, revised from 11,000.

By region, employment in the Northeast increased 10,000 (1.9% y/y) in April, following an increase of 95,000 (2.0% y/y) in March, revised from 89,000. Employment in the Midwest rose 42,000 (1.5% y/y) after a gain of 84,000 (1.4% y/y) in March, revised from 81,000. In the South, employment rose 3,000 (1.3% y/y) during April, after rising 10,000 (1.4% y/y) in March, revised from 27,000. In the West, employment rose 9,000 (0.6% y/y) after declining 43,000 (+0.6% y/y), revised from a 41,000 decline in March.

The ADP National Employment Report and Pay Insights data can be found in Haver's **USECON** database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's **AS1REPNA** database.

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- Employment increase is modest in both services & factory sectors.
- Wage growth for “job stayers” moderates.
- Small and medium-sized business employment slows.

U.S. ADP Payrolls Rise Modestly in April

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Mortgage applications declined 4.2% (+16.4% y/y) in the week ended April 25, after dropping 12.7% (+18.7% y/y) in the week ended April 18, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications to refinance an existing mortgage dropped 3.7% (+42.0% y/y) in the week ended April 25 after plunging 20.0% (+42.5% y/y) in the week ended April 18. Loan applications to purchase a home declined 4.4% (+3.5% y/y) in the latest week after falling 6.6% (+6.4% y/y) in the prior week.

The effective interest rate on a 30-year fixed rate loan edged down 1bp to 7.08% in the week ended April 25 from 7.09% in the week ended April 18. The effective rate on a 15-year fixed rate loan rose 2bps to 6.36% in the week ended April 25 from 6.34% in the week of April 18. The rate on a 30-year jumbo loan rose 3bps to 7.06% in the latest week from 7.03% in the prior week, while the rate on a 5-year ARM eased 7bps to 6.12% in the week ended April 25 from 6.19% in the week ended April 18.

The share of applications to refinance an existing mortgage remained at a 10-month low of 37.3% in the week ended April 25, unchanged from the prior week. The share of loans with an adjustable rate fell to 7.4% in the latest week from 7.5% in the week ended April 18.

The average size of a mortgage loan declined 0.7% (+1.6% y/y) to $384,100 in the week ended April 25, after dropping 6.8% (+1.3% y/y) to $386,800 in the week ended April 18. The average size of a loan to purchase a home rose to $440,100 (+0.9% y/y) in the latest week from $439,900 (+0.5% y/y) in the week prior. The average size of a loan to refinance an outstanding mortgage dropped to $289,800 (+18.5% y/y) in the week ended April 25 from $297,700 (+16.4% y/y) in the week ended April 18.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Refinancing and purchase loan applications decline.
- Effective interest rates are range-bound.
- Average loan size falls

Economy in Brief

Jump to:

OECD LEIs Point to Weakness

U.S. JOLTS: Job Openings and Hires Rates Improve

U.S. Employment and Earnings Gains Weaken Unexpectedly

U.S. Consumer Credit Usage Expands

U.S. Employment and Earnings Gains Weaken Unexpectedly

German IP Takes Surprising October Slip

Wholesale Inventories Grow While Sales Decline

U.S. Employment and Earnings Gains Weaken Unexpectedly