Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040517a.jpg" width="353">
For the first quarter of 2004, Japan reported a current account balance of 50,388 (100 million yen) or about 15,000 (100 million yen) above the first quarter of 2003. At the same time, the financial account showed an increase of 132,395 (100 million yen).
A country that runs a positive balance on current account usually tends to run a negative balance on its financial account since the balance of payments, by definition, has to sum to zero. Japan, however, frequently runs a positive balance on its financial account as well as its current account. As a result of these positive balances, Japan&#39;s holdings of foreign exchange increase. Changes in reserves have become an important item in Japan&#39;s balance of payments. Since the balance of payment has to sum to zero, an increase in reserves is shown as a negative figure while a decrease in reserves is shown as a positive figure
For the last four quarters, Japan has reported positive balances on both current and financial accounts. As a result, gold and foreign exchange reserves have risen sharply. Since the end of 2001 to the end of March this year, they have more than doubled from $402 billion to $827 billion.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Balance of Payments (100 million yen)</th>
<th scope="col">Q1 O4</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">Current account</td>
<td>50,388</td>
<td>157,668</td>
<td>141,397</td>
<td>106,524</td>
</tr>
<tr>
<td class="firstcol">Capital account</td>
<td>-2,263</td>
<td>-4,672</td>
<td>-4,216</td>
<td>-3,462</td>
</tr>
<tr class="odd">
<td class="firstcol">Financial account</td>
<td>119,963</td>
<td>82,012</td>
<td>-80,559</td>
<td>-58,264</td>
</tr>
<tr>
<td class="firstcol">Errors and omissions</td>
<td>-11,583</td>
<td>-19723</td>
<td>1,347</td>
<td>4,568</td>
</tr>
<tr class="odd">
<td class="firstcol">Total of above</td>
<td>156,509</td>
<td>215,286</td>
<td>57,970</td>
<td>49,364</td>
</tr>
<tr>
<td class="firstcol">Change in reserves</td>
<td>-156,509</td>
<td>-215,286</td>
<td>-57,970</td>
<td>-49,364</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance&nbsp;</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr>
<td class="firstcol">Addendum: Reserves in millions US$</td>
<td>826,577</td>
<td>673,529</td>
<td>469,728</td>
<td>401,959</td>
</tr>
</tbody>
</table>
</body>
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For the first quarter of 2004, Japan reported a current account balance of 50,388 (100 million yen) or about 15,000 (100 million yen) above the first quarter of 2003. At the same time, the financial account showed an increase of [...]

With Positive Balances on Current and Financial Accounts Japan Continues to Pile Up Foreign Exchange Reserves

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/040514c.jpg" width="353">
CPI inflation in Spain picked up last month to a 2.7% year/year increase from just 2.1% in February. While 2.7% is not a &quot;high&quot; inflation rate for Spain, the steep upturn from February&#39;s pace is an unusual one-month move. As evident in the table below, half of it resulted from an abrupt turn in energy costs. Excluding energy, the increase in inflation was just 0.3%, and at 2.8%, this major subset of prices is rising more slowly than anytime since the middle of 2000, almost four years.
Energy prices have played an interesting role in Spanish inflation behavior in the last couple of years.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040514d.jpg" width="353"> As we described here exactly a month ago for other European countries, the strong Euro since early 2002 has offset rapidly rising dollar prices of energy when they are expressed in Euro terms. Seen in accompanying graph and table, for Spain, this meant that energy prices were flat across 2003, while they rose 6.9% in the US. The &quot;energy products&quot; sector of Spain&#39;s CPI actually declined year-on-year in several recent months, particularly this past January through March.
However, the euro has recently been declining, and by April, the monthly average was already down about 5% from a February peak. So now, with the higher dollar and lower euro, energy products are starting to get more expensive in Europe and Spain&#39;s experience is likely being repeated elsewhere on the Continent. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">NSA, Yr/Yr % Changes</th>
<th scope="col">Apr 2004</th>
<th scope="col">Mar 2004</th>
<th scope="col">Feb 2004</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Spain: Total CPI</td>
<td>2.7</td>
<td>2.1</td>
<td>2.2</td>
<td>2.6</td>
<td>4.5</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI ex Energy Products</td>
<td>2.8</td>
<td>2.5</td>
<td>2.7</td>
<td>2.9</td>
<td>4.3</td>
<td>4.0</td>
</tr>
<tr>
<td class="firstcol">Energy Products</td>
<td>1.5</td>
<td>-2.5</td>
<td>-2.6</td>
<td>0.0</td>
<td>6.3</td>
<td>-10.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">US: CPI: Energy</td>
<td>5.6</td>
<td>0.4</td>
<td>3.8</td>
<td>6.9</td>
<td>10.7</td>
<td>-13.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Euro/US $: Level</td>
<td>1.1989</td>
<td>1.2261</td>
<td>1.2640</td>
<td>1.2298*</td>
<td>1.0194*</td>
<td>0.8912*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Yr/Yr % Change</td>
<td>10.4</td>
<td>13.6</td>
<td>17.2</td>
<td>20.6</td>
<td>14.4</td>
<td>-0.8</td>
</tr>
</tbody>
</table>
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CPI inflation in Spain picked up last month to a 2.7% year/year increase from just 2.1% in February. While 2.7% is not a "high" inflation rate for Spain, the steep upturn from February's pace is an unusual one-month move. As evident [...]

Upturn in Spain's CPI Led by Energy, as Euro Falls

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040514a.jpg" width="353">
The Consumer Price Index (CPI-U) rose 0.2% in April versus Consensus expectations for a 0.3% gain. Core consumer prices, however, rose 0.3%, slightly more than Consensus expectations for a 0.2% rise.
A surprising 0.3% m/m (11.0% y/y) decline in seasonally adjusted gasoline prices held back the rise in overall energy prices to 0.1% (2.6% y/y). Not seasonally adjusted gasoline prices rose 3.7% and not seasonally adjusted energy prices rose 2.0%.
Prices of core consumer goods were unchanged, the weakness in part reflecting no change in apparel prices (0.2% y/y) following the 0.9% spike in March. Prices for home furnishings &amp; operation slid 0.2% for the second consecutive month (-1.3% y/y) and new &amp; used vehicle prices were also unchanged (-3.8% y/y). Medical care commodities prices jumped 0.4% (2.7% y/y).
Core service prices rose a firm 0.4% led by a 0.5% gain in shelter costs though prices for medical care services eased to 0.3% (5.4% y/y). Public transportation prices strengthened 0.4%(+2.1% y/y) and tuition costs rose 0.6% for the second consecutive month (7.4% y/y).
The chained CPI which adjusts for shifts in consumer buying behavior eased to just a 0.3% gain. It is similar to the PCE price deflator. The core chain price measure also eased to 0.2%, the weakest increase since January.
&quot;The Historical and Recent Behavior of Goods and Services Inflation&quot; from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/epr/forthcoming/peach.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM"> Consumer Price Index</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">Total&nbsp;</td>
<td>0.2%</td>
<td>0.5%</td>
<td>2.3%</td>
<td>2.3%</td>
<td>1.6%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.3%</td>
<td>0.4%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>2.3%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.0%</td>
<td>0.1%</td>
<td>-1.4%</td>
<td>-2.0%</td>
<td>-1.1%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.4%</td>
<td>0.5%</td>
<td>3.1%</td>
<td>2.9%</td>
<td>3.8%</td>
<td>3.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>0.1%</td>
<td>1.9%</td>
<td>5.5%</td>
<td>12.2%</td>
<td>-5.8%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.2%</td>
<td>0.2%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM"> Chained CPI: Total (NSA)</a></td>
<td>0.3%</td>
<td>0.6%</td>
<td>1.9%</td>
<td>1.9%</td>
<td>1.3%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.7%</td>
<td>1.3%</td>
<td>1.1%</td>
<td>1.9%</td>
<td>&nbsp;2.0%</td>
</tr>
</tbody>
</table>
U.S. Industrial Production Jumped 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 14, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040514b.jpg" width="353">
Industrial production jumped 0.8% last month led by a surge in factory output. Consensus expectations had been for a 0.5% rise in total output.
Production in the factory sector surged 0.7% (5.0% y/y) following a slight uptick in March. The gain was paced by more strength in the tech sector.
Output in selected high-technology industries rose 1.7% m/m (27.0% y/y). Output of computers &amp; peripheral equipment surged 2.4% (24.1% y/y) and output of semiconductors &amp; related equipment jumped 2.5% (46.6% y/y). Output of communications equipment fell 2.7% (-2.7% y/y), down for the third consecutive month.
Excluding high-tech factory output jumped 0.6% (+3.8% y/y). Machinery output added 0.6% (10.2% y/y) and electrical equipment output surged 2.0% (6.5% y/y). Output of motor vehicles &amp; parts fell slightly (+8.5% y/y) and output of furniture jumped 1.2% (2.0% y/y). Non-durables output less energy was strong for the third month with a 0.6% (2.0% y/y) gain that was led by recently surging clothing output (+1.6% y/y).
Total capacity utilization rose to 76.9%. Growth in capacity remained low at 1.1% 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/@EA/@EA.HTM"> Production &amp; Capacity</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">Industrial Production</td>
<td>0.8%</td>
<td>-0.1%</td>
<td>4.8%</td>
<td>0.3%</td>
<td>-0.6%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>76.9%</td>
<td>76.5%</td>
<td>74.2%(4/03)</td>
<td>74.8%</td>
<td>75.6%</td>
<td>77.4%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Unchanged 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 14, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040514e.jpg" width="353">
The University of Michigan&#146;s Index of Consumer Sentiment was unchanged in mid-May from the April level at 94.2. Consensus expectations had been for a rise to 96.0.
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 improved 2.1% to 107.2 and rose to the highest level since January. The expectations index fell for the second consecutive month by 1.7% to 85.8.
The University of Michigan survey is not seasonally adjusted.It is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<table border="0" cellspacing="0" width="100%">
<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/@EF1402/@EF1402.HTM"> University of Michigan</a></th>
<th scope="col"> Mid-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>94.2</td>
<td>94.2</td>
<td>2.3%</td>
<td>87.6</td>
<td>89.6</td>
<td>89.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>107.2</td>
<td>105.0</td>
<td>15.0%</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>85.8</td>
<td>87.3</td>
<td>-6.1%</td>
<td>81.4</td>
<td>84.6</td>
<td>82.3</td>
</tr>
</tbody>
</table>
U.S. Budget Swung to a Small Surplus in April 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 14, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040514f.jpg" width="353">
The U.S. Government Budget improved in April, as it usually does, to a surplus of $17.6B. That was less than the expected improvement to a $25.0B surplus and was quite a bit less than last April&#39;s surplus of $51.1B. For the first seven months of FY04 the deficit of $281.8B was nearly 40% larger than last year.
So far this fiscal year the deficit is running about 5% of US GDP versus 3.5% last year and a peak of 6.0% in 1983. Adjusted for economic and other fluctuations, the standardized budget deficit is projected to hit 3.4% this year versus 2.8% last year and a peak of 4.8% in 1986.
Growth in net receipts for the first seven months of FY04 dropped to 1.3% versus the first seven months of FY03. The drop from 3.1% growth last month reflected a slide in individual tax receipts of 4.5% (to $471.3B) versus the first seven months of FY02. Versus last April individual tax receipts were down 14.9%. Corporate tax receipts for the fiscal year-to-date were up 44.5% (at $90.8B) and in April were up 28.5%. Contributions for social insurance, estate taxes, and miscellaneous taxes rose.
Federal net expenditures surged 7.5% versus the first seven months of last fiscal year. Defense expenditures jumped 16.7% and Medicare outlays grew 8.9%. Interest expense fell 3.8% 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/@E1/@E106/@E10602/@E10602.HTM"> US Government Finance</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">April &#39;03</th>
<th scope="col">FY2003</th>
<th scope="col">FY2002</th>
<th scope="col">FY2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$17.6B</td>
<td>$-72.7B</td>
<td>$51.1B</td>
<td>$-374.2B</td>
<td>$-157.8B</td>
<td>$127.3B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revenues</td>
<td>$220.1B</td>
<td>$132.4B</td>
<td>-4.8%</td>
<td>-3.8%</td>
<td>-6.9%</td>
<td>-1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Outlays</td>
<td>$202.5B</td>
<td>$205.1B</td>
<td>12.4%</td>
<td>7.2%</td>
<td>7.9%</td>
<td>4.2%</td>
</tr>
</tbody>
</table>
U.S. Business Inventories Rose Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 14, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040514g.jpg" width="353">
Total business inventories rose 0.7% in March for the seventh consecutive monthly increase. Consensus expectations were for a 0.5% increase.
Retail inventories rose a strong 1.1% in March that reflected a 1.9% (7.4% y/y) pop in auto inventories but also a 0.6% gain in non-auto inventories. The preliminary report of a 0.1% February rise in nonauto retail inventories was revised to 0.4%. What had been scattered inventory accumulation across retail sectors has broadened out.
Inventory additions lead production gains. During the last ten years there has been a 46% correlation between the three month change in business inventories and the three month change in US factory production. That correlation rises to 65% when the production gain is lagged three months.
Overall business sales jumped 2.9% (9.7% y/y) as factory shipments jumped 3.8% (9.2% y/y), wholesale sales rose 2.7% (12.0% y/y) and retail sales surged 2.1% (8.2% y/y).
The sales jump dropped the ratio of inventories-to-sales to a new record low of 1.30.

<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/@ED06/@ED0601/@ED0601.HTM"> Business Inventories</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</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">Total</td>
<td>0.7%</td>
<td>0.8%</td>
<td>2.6%</td>
<td>1.9%</td>
<td>1.5%</td>
<td>-4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>1.1%</td>
<td>0.7%</td>
<td>4.5%</td>
<td>4.9%</td>
<td>6.0%</td>
<td>-2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.6%</td>
<td>0.4%</td>
<td>3.1%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.6%</td>
<td>1.2%</td>
<td>3.8%</td>
<td>2.2%</td>
<td>0.4%</td>
<td>-4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.3%</td>
<td>0.6%</td>
<td>-0.2%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Consumer Price Index (CPI-U) rose 0.2% in April versus Consensus expectations for a 0.3% gain. Core consumer prices, however, rose 0.3%, slightly more than Consensus expectations for a 0.2% rise. A surprising 0.3% m/m (11.0% y/y) [...]

Consumer Prices Rose Less Than Forecast, But ...

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040513c.jpg" width="353">
Retail sales eased 0.5% in April following little-revised jumps of 2.0% and 1.0% during the prior two months. Consensus expectations had been for a 0.1% dip.
Retail sales excluding motor vehicles &amp; parts dealers matched Consensus expectations and eased 0.1% following an upwardly revised 1.8% jump in March.
The easing of prior sales strength was fairly broad based last month. Clothing and accessory store sales fell 2.0% (+8.2% y/y) following a downwardly revised 0.8% gain in March.Sales at general merchandise stores fell 0.8% (+7.2% y/y) after a 0.4% March gain. Strength was exhibited by sales of furniture/home furnishings &amp; electronics/appliances which rose 0.7% (10.3% y/y) after an upwardly revised 1.2% March increase.
Sales of building materials, garden equipment &amp; supply dealers (20.4% y/y) dipped 0.7% following the 11.0% m/m March surge.
Motor vehicle dealers&#39; sales fell 1.8% after a 2.4% March gain as unit sales of light vehicles fell 1.6% to 16.41M. Sales at gasoline service stations rose 0.2% (10.9% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</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"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM"> Retail Sales &amp; Food Services</a></td>
<td>-0.5%</td>
<td>2.0%</td>
<td>8.0%</td>
<td>5.4%</td>
<td>2.5%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>-0.1%</td>
<td>1.8%</td>
<td>9.4%</td>
<td>5.2%</td>
<td>3.2%</td>
<td>3.1%</td>
</tr>
</tbody>
</table>
PPI Jumped 0.7% in April 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 13, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040513b.jpg" width="353">
Finished producer prices surged 0.7% last month, the largest monthly gain since March 2003. The surge was more than double Consensus expectations.In contrast, the core PPI rose a moderate, expected 0.2%.
Finished consumer goods prices jumped 0.9% after a 0.7% leap in March. Less food &amp; energy these consumer goods prices rose 0.3% (1.5% y/y) for the second month. Consumer durable prices fell 0.3% (+1.4% y/y) but core non-durable prices jumped 0.7% (+1.6% y/y).
Finished capital goods prices were unchanged for the second month in four (1.3% y/y).
Intermediate goods prices doubled the March gain with a 1.4% increase in April. The increase in core intermediate prices also nearly doubled with a 1.1% jump (4.3% y/y). Plywood prices added another 1.8% (NSA) to the pronounced strength in earlier months (52.3% y/y).
Crude goods prices jumped 3.0% as crude energy prices rebounded 6.3% (12.6% y/y) after the 6.1% March drop. Natural gas prices (5.4% y/y) and crude petroleum prices (29.7% y/y) jumped. 

<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/@E8/@E802/@E80201/@E80201.HTM"> Producer Price Index</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">Finished Goods</td>
<td>0.7%</td>
<td>0.5%</td>
<td>3.6%</td>
<td>3.2%</td>
<td>-1.3%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.2%</td>
<td>0.2%</td>
<td>1.4%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>1.4%</td>
<td>0.7%</td>
<td>5.2%</td>
<td>4.7%</td>
<td>-1.5%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>1.1%</td>
<td>0.6%</td>
<td>4.3%</td>
<td>2.0%</td>
<td>-0.5%</td>
<td>-0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>3.0%</td>
<td>0.7%</td>
<td>20.4%</td>
<td>25.1%</td>
<td>-10.6%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-3.9%</td>
<td>2.7%</td>
<td>26.3%</td>
<td>12.4%</td>
<td>3.8%</td>
<td>-10.0%</td>
</tr>
</tbody>
</table>
Jobless Claims Up A Bit More Than Expected 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 13, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040513a.jpg" width="353">
Initial claims for jobless insurance rose 13,000 last week to 331,000 following a 20,000 drop the week prior that was slightly less than initially estimated. Consensus expectations had been for 320,000 claims.
The 4-week moving average of initial claims fell to 335,750 (-22.1% y/y), the lowest level since November 2000.
Continuing claims for unemployment insurance recouped 53,000 of the deepened 83,000 drop the week prior.
The insured rate of unemployment ticked back up to 2.4% from 2.3%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col"> 5/08/04</th>
<th scope="col">5/01/04</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; 331</td>
<td>318</td>
<td>-20.8%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>2,974</td>
<td>-19.5%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
</body>
</html>

Retail sales eased 0.5% in April following little-revised jumps of 2.0% and 1.0% during the prior two months. Consensus expectations had been for a 0.1% dip. Retail sales excluding motor vehicles & parts dealers matched Consensus [...]

U.S. Retail Sales Moderate

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040512a.jpg" width="353">
Besides the US, three other countries reported March trade data today. And like the US, most of these data showed gains in both exports and imports. Similarities end there, however.
Canada&#39;s trade surplus increased by C$0.3 billion from February, with a larger increase in exports than in imports. While Canada is known as a major oil exporter and a major exporter of motor vehicles and parts to the US, these weren&#39;t the most significant sources of the March improvement. The auto sector did see a C$0.2 billion export increase, but energy exports actually edged lower. All other exports were up 1.9% and exports to non-US destinations rose more than those to the US. Further, shipments to the US are down from a year ago, but those elsewhere rose more than 10% from March 2003. Canadian imports were up in March by 0.9% from February. France maintained a modest trade surplus. It has maintained a near balance in trade virtually every month for the last two years, resulting from remarkably stable patterns in both exports and imports. In March, exports were up 4.5%, but that just about reversed declines in the previous two months, netting little change so far this year. What may be developing is stronger trade with France&#39;s EU partners. The most recent months have seen a tentative breakout of exports to the EU; March, at EUR17.9 billion and December at EUR18.0 billion are the largest in three years.Hungary&#39;s overall economy seems to be strengthening, and this is reflected in its trade performance. Its industrial production has rebounded vigorously through March after sluggish behavior during 2003. The demand evident in that measure is pulling in imports, which reached a new high of 1,003 billion florints in March, up 3.9% on the month and 19.7% on the year. Sometimes such large moves in these values can be related more to currency moves than to &quot;real&quot; developments, and indeed the florint has hardly been steady relative to the euro; but it has held to a basically flat trend and has in fact risen since January. Hungarian exports decreased in February and March, but from an all-time high in January; they have trended consistently higher since late 2002.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Trade in Goods, SA, Billions of Local Currency</th>
<th scope="col">Mar 2004</th>
<th scope="col">Feb 2004</th>
<th scope="col">Jan 2004</th>
<th scope="col">Year Ago</th>
Monthly Average
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Canada: Balance (Bil.C$)</td>
<td>6.2</td>
<td>5.9</td>
<td>5.1</td>
<td>5.9</td>
<td>5.0</td>
<td>4.8</td>
<td>5.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>34.9</td>
<td>34.3</td>
<td>31.9</td>
<td>35.8</td>
<td>33.4</td>
<td>34.5</td>
<td>35.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>28.7</td>
<td>28.4</td>
<td>26.8</td>
<td>30.0</td>
<td>28.4</td>
<td>29.7</td>
<td>29.2</td>
</tr>
<tr class="odd">
<td class="firstcol">France:&nbsp; Balance (Bil.Euros)</td>
<td>0.8</td>
<td>0.3</td>
<td>0.9</td>
<td>-0.1</td>
<td>0.2</td>
<td>0.6</td>
<td>0.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports</td>
<td>28.1</td>
<td>26.9</td>
<td>27.9</td>
<td>27.0</td>
<td>27.0</td>
<td>27.6</td>
<td>27.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports</td>
<td>27.3</td>
<td>26.6</td>
<td>27.0</td>
<td>27.1</td>
<td>26.8</td>
<td>27.0</td>
<td>27.6</td>
</tr>
<tr>
<td class="firstcol">Hungary:&nbsp; Balance (Bil.Forints)</td>
<td>-143.5</td>
<td>-70.6</td>
<td>-4.3</td>
<td>-81.0</td>
<td>-87.7</td>
<td>-69.2</td>
<td>-76.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>859.3</td>
<td>894.7</td>
<td>934.1</td>
<td>754.9</td>
<td>803.5</td>
<td>739.5</td>
<td>729.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>1002.8</td>
<td>965.3</td>
<td>938.4</td>
<td>835.9</td>
<td>891.2</td>
<td>808.7</td>
<td>805.4</td>
</tr>
</tbody>
</table>
</body>
</html>

Besides the US, three other countries reported March trade data today. And like the US, most of these data showed gains in both exports and imports. Similarities end there, however. Canada's trade surplus increased by C$0.3 billion [...]

Two-Way Trade Gains in Canada, France and Hungary

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040512c.jpg" width="353">
The U.S. foreign trade deficit deepened to a record $45.96B in March from the unrevised $42.12B deficit of a month earlier. Consensus expectations had been for a deficit of $43.0B.
The 1Q04 average deficit of $43.8 also set a new record.
Total imports jumped 4.6% in March. Higher oil prices (+5.0% m/m, 1.2% y/y) and higher oil import volumes (7.8% m/m, 10.3% y/y) caused the value of petroleum imports to rise 7.8% (11.3% y/y). Imports of non-petroleum goods, however, also rose a quite strong 4.2% (11.2% y/y).
Capital goods imports recouped all of the February decline with a 3.4% (15.9% y/y) gain. Imports of non-auto consumer goods jumped 9.0% (+11.7% y/y) and auto imports gained 3.1% (9.7% y/y).
Exports rose 2.6% on top of a strong 3.9% February gain. Exports of capital goods added 1.7% (+17.5% y/y) to the 5.7% gain in February. Non-auto consumer goods exports jumped another 6.8% (18.1% y/y) and auto exports were firm (8.7% y/y).
By country, the US trade deficit with China deepened sharply m/m to $10.4B ($123.9B in 2003) but a surge in exports (11.2% m/m, 39.1% y/y) kept the deficit with China well below the November &#39;03 record of $13.6B. The US trade deficit with Japan deepened to $6.7B ($66.0B in 2003) and the deficit with the European Union deepened to $9.3B ($94.3B in 2003).

<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/@EE/@EE03/@EE03.HTM"> Foreign Trade</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</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">Trade Deficit</td>
<td>$46.0B</td>
<td>$42.1B</td>
<td>$43.0B(3/03)</td>
<td>$489.9</td>
<td>$418.0B</td>
<td>$357.8B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>2.6%</td>
<td>3.9%</td>
<td>14.6%</td>
<td>4.6%</td>
<td>-3.3%</td>
<td>-5.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>4.6%</td>
<td>1.6%</td>
<td>12.0%</td>
<td>8.4%</td>
<td>2.0%</td>
<td>-5.5%</td>
</tr>
</tbody>
</table>
Food Lifted Non-oil Import Prices 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 12, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040512d.jpg" width="353">
Non-petroleum import prices rose 0.3% in April, up from the 0.2% March gain. The 2.4% y/y gain in non-oil import prices is near the high of the last nine years.
Higher food prices lifted the index for non-oil import prices with a 1.2% (4.6% y/y) gain. Meat prices have been notably strong (11.8% y/y). Capital goods import prices tumbled 0.5% (-1.2% y/y) as computer &amp; peripheral prices fell 1.3% (-5.4% y/y). Excluding computers, capital gods prices fell 0.1% (+1.2% y/y). Non-auto consumer goods prices were unchanged (0.7% y/y).
Imported petroleum prices fell 0.8% in April but in early May the price of Brent Crude Oil topped $37.00 /bbl, up more than 10% from the April average of $33.15/bbl.
Export prices again were strong with a 0.6% gain (4.1% y/y). Agricultural export prices continued strong with a 2.6% rise (23.3% y/y). Nonagricultural export prices rose a moderate 0.4% (2.4% y/y). Capital goods export prices rose 0.1% (-0.2% y/y) and non-auto consumer goods prices ticked 0.1% (0.9% y/y) higher.

<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/@E8/@E807/@E807.HTM"> Import/Export Prices (NSA)</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">Import - All Commodities</td>
<td>0.2%</td>
<td>0.8%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>-2.5%</td>
<td>-3.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-0.8%</td>
<td>5.2%</td>
<td>23.7%</td>
<td>21.0%</td>
<td>3.0%</td>
<td>-17.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.3%</td>
<td>0.2%</td>
<td>2.4%</td>
<td>1.1%</td>
<td>-2.4%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.6%</td>
<td>0.9%</td>
<td>4.1%</td>
<td>1.6%</td>
<td>-1.0%</td>
<td>-0.8%</td>
</tr>
</tbody>
</table>
Mortgage Applications Tumble. Interest Rates Up Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 12, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040512b.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association fell 5.0% (-47.7% y/y) last week as applications to refinance tumbled 13.2% (-69.9% y/y), the sixth drop in seven weeks.
The effective interest rate on a conventional 30-Year mortgage rose to 6.61% from 6.38% the week prior. The average for April was 6.16% versus 5.65% averaged in March. The effective rate on a 15-year mortgage rose to 6.03% from 5.75% the week prior. The average for April was 5.54% versus 5.00% in March.
Purchase applications continued higher with a 2.4% w/w gain (+19.1% y/y) and began May 7.9% above the April average. Purchase applications for the month of April rose 3.3% versus March.
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 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">05/07/04</th>
<th scope="col">04/30/04</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>742.2</td>
<td>780.9</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>494.3</td>
<td>482.5</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,184.6</td>
<td>2,516.0</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
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The U.S. foreign trade deficit deepened to a record $45.96B in March from the unrevised $42.12B deficit of a month earlier. Consensus expectations had been for a deficit of $43.0B. The 1Q04 average deficit of $43.8 also set a new [...]

U.S. Trade Deficit Another Record in March

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040511d.jpg" width="353">
Earlier this year the weakness in the dollar that had characterized the foreign exchange markets during most of last year reversed itself as growth in the US economy exceeded expectations.
More recently, the probability of higher interest rates resulting from the strength of the economy has led to the unwinding of speculative positions that had been undertaken as investors borrowed at low rates in the US and invested in higher yielding assets abroad.
It is probable that it is this unwinding that is responsible for the recent turmoil in the foreign exchange markets. From May 5th to May 10th, the yen fell 4.4%, compared with a decline of 5.5% over the entire period from the end of 2003 to May 10th. Comparable figures for the Australian dollar were 5.0% and 7.5%. Even the Korean won, which had remained relatively unchanged against the dollar in the December to May period, fell by 2.2% in the May 5-10 period. Declines in the euro and the Canadian dollar were less precipitous, but still notable.

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<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">&nbsp;</th>
<th scope="col">&nbsp;</th>
<th scope="col">&nbsp;</th>
<th scope="col">&nbsp;</th>
<th scope="col">&nbsp;</th>
 % Chg
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Currency/US$</td>
<td> May 10, 04</td>
<td> May 5,&nbsp; 04</td>
<td> Dec 29, 03</td>
<td> Aug 29, 03</td>
<td> May 5-May 10</td>
<td> Dec to May</td>
<td> Aug to Dec</td>
</tr>
<tr>
<td class="firstcol">Euro</td>
<td>0.8435</td>
<td>0.8216</td>
<td>0.7950</td>
<td>0.9099</td>
<td>-2.6</td>
<td>-5.7</td>
<td>14.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Yen</td>
<td>113.662</td>
<td>108.684</td>
<td>107.365</td>
<td>116.863</td>
<td>-4.4</td>
<td>-5.5</td>
<td>8.8</td>
</tr>
<tr>
<td class="firstcol">Canadian dollar</td>
<td>1.3908</td>
<td>1.3746</td>
<td>1.2963</td>
<td>1.3854</td>
<td>-1.2</td>
<td>-6.8</td>
<td>6.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Australian dollar</td>
<td>1.4364</td>
<td>1.3646</td>
<td>1.3282</td>
<td>1.5451</td>
<td>-5.0</td>
<td>-7.5</td>
<td>10.3</td>
</tr>
<tr>
<td class="firstcol">South Korea won</td>
<td>1190.05</td>
<td>1164.01</td>
<td>1192.46</td>
<td>1174.54</td>
<td>-2.2</td>
<td>0.2</td>
<td>-1.5</td>
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Earlier this year the weakness in the dollar that had characterized the foreign exchange markets during most of last year reversed itself as growth in the US economy exceeded expectations. More recently, the probability of higher [...]

Fears of Higher Rates Cause Turmoil in Foreign Exchange Markets

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040511a.jpg" width="353">
Chain store sales rose another 0.3% last week on top of a 1.5% gain the prior period, according to the International Council of Shopping Centers (ICSC)-UBS.
Sales began the month of May 1.7% above the April average.
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.
The gain in chain store sales occurred despite a sharp increase last week in gasoline prices to an average $1.94 per gallon (+30.2% y/y).
For analysis of higher gasoline and energy prices on the consumer from the Federal Reserve Bank of Dallas see the following two articles: <a href="http://www.dallasfed.org/eyi/usecon/0405gasoline.html">U.S. Gasoline Prices on the Rise Once Again</a> and <a href="http://www.dallasfed.org/research/indepth/2004/id0402.html">Energy Prices and the Economy</a>

<table border="0" cellspacing="0" width="100%">
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<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">05/08/04</th>
<th scope="col">05/01/04</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>445.9</td>
<td>444.7</td>
<td>7.0%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Small Business Optimism Up With Pricing Power 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 11, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040511b.jpg" width="353">
The Small Business Optimism Index published by the National Federation of Independent Business (NFIB) rose 2.8% in April following three consecutive months of decline. The increase pulled the level of optimism to within 1.4% of the record high set in December.
The m/m increase reflected sharp increases in the percentage of firms both raising and planning to raise average selling prices. Also, the percentage of firms expecting the economy to improve bounced off a March low.
The percentage of firms expecting higher sales in six months rose slightly but the percentage of firms planning to add to capital expenditures dipped to 34%. The percentage planning to raise employment ticked up to 14% from 13% in March.
During the last ten years there has been a 47% correlation between the level of the NFIB index and the y/y change in real GDP.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM"> Nat&#39;l Federation of Independent Business</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">Small Business Optimism Index (1986=100)</td>
<td>105.4</td>
<td>102.5</td>
<td>5.4%</td>
<td>101.3</td>
<td>101.2</td>
<td>98.4</td>
</tr>
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</table>
JOLTS Signals Improved Hiring 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 11, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040511c.jpg" width="353">
The Job Openings &amp; Labor Turnover Survey (JOLTS) from the US Bureau of Labor Statistics supports recent data indicating that the US job market has improved. The hires rate rose to 3.5% in March versus a monthly low of 3.0% last Spring and 3.1% during all of last year.
The survey dates only to December 2000 but has since followed closely the movement in nonfarm payrolls.
Broad based improvement in the hires rate in the manufacturing, services and construction industries accounts for the rise in the total.
The job openings rate has similarly improved to 2.3% from an August low of 2.0% and 2.1% for all of last year.

<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/@EB/@EB14/@EB14.HTM">JOLTS</a> (Job Openings &amp; Labor Turnover Survey)</th>
<th scope="col">March</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Job Openings Rate: Total</td>
<td>2.3%</td>
<td>2.2%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>2.2%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Hires Rate: Total</td>
<td>3.5%</td>
<td>3.2%</td>
<td>3.1%</td>
<td>3.1%</td>
<td>3.2%</td>
<td>3.5%S</td>
</tr>
</tbody>
</table>
</body>
</html>

Chain store sales rose another 0.3% last week on top of a 1.5% gain the prior period, according to the International Council of Shopping Centers (ICSC)-UBS. Sales began the month of May 1.7% above the April average. During the last [...]

Chain Store Sales Up Despite Rise In Gas Price

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

260205X15.jpg

260205Y15.jpg

**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

260205D15.jpg

- 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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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.

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- 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

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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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