Tom Moeller

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Import prices increased 0.5% (3.5% y/y) during September
following a 0.4% August decline, revised from -0.6%. A 0.2% rise had been
expected in the Action Economics Forecast Survey. These figures are not
seasonally adjusted.

Strength in import prices last month was paced by a 4.1%
increase (32.1% y/y) in petroleum prices which followed a 2.3% fall. Nonpetroleum import prices
held steady (0.6% y/y) following three consecutive months of decline. Industrial supplies &amp;
materials costs rose 1.5% (14.8% y/y) and reversed the August decline. Industrial materials prices
excluding petroleum eased 0.5% (+4.1% y/y) after falling for two months. Capital goods prices
held steady, both m/m and y/y, after a 0.1% dip. Motor vehicle &amp; parts prices
also were unchanged (0.1% y/y) for the third straight month. Nonauto consumer goods prices
eased 0.1% (+0.6% y/y) following no change in August.

Export prices held steady last month (2.7% y/y) after a 0.2%
slip, revised from -0.1%. A 0.1% rise in prices had been expected.

Agricultural commodities prices fell 1.4% (-2.3% y/y)
after rising 0.3%. Nonagricultural costs improved 0.2% (3.3% y/y) and reversed
the prior month's decline. Foods, feeds &amp; beverage prices fell 1.4% (-2.6% y/y)
following a 0.4% rise. The cost of industrial supplies &amp; materials gained
0.2% (6.6% y/y) after two months of decline. Capital goods prices ticked 0.1%
higher (1.9% y/y) for the fifth straight month. Motor vehicle &amp; parts prices
also improved 0.1% (0.7% y/y) after four months of little change. Nonauto consumer goods prices
held steady (0.5% y/y) following a 0.1% dip.

The import and export price series can be found in Haver's USECON
database. Detailed figures are available in the USINT database. The
expectations figure from the Action Economics Forecast Survey is 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" ><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export
 Prices (NSA, %)</a></th>
 <th scope="col" >Sep</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Jul</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" >Imports - All Commodities</td>
 <td >0.5</td>
 <td >-0.4</td>
 <td >-0.1</td>
 <td >3.5</td>
 <td >2.9</td>
 <td >-3.3</td>
 <td >-10.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Petroleum &amp; Petroleum
 Products</td>
 <td >4.1</td>
 <td >-2.3</td>
 <td >0.5</td>
 <td >32.1</td>
 <td >26.6</td>
 <td >-19.7</td>
 <td >-46.0</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Nonpetroleum</td>
 <td >0.0</td>
 <td >-0.2</td>
 <td >-0.1</td>
 <td >0.6</td>
 <td >1.1</td>
 <td >-1.5</td>
 <td >-2.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Exports - All Commodities</td>
 <td >0.0</td>
 <td >-0.2</td>
 <td >-0.5</td>
 <td >2.7</td>
 <td >2.4</td>
 <td >-3.2</td>
 <td >-6.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Agricultural</td>
 <td >-1.4</td>
 <td >0.3</td>
 <td >-5.2</td>
 <td >-2.3</td>
 <td >1.5</td>
 <td >-5.4</td>
 <td >-13.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Nonagricultural</td>
 <td >0.2</td>
 <td >-0.2</td>
 <td >0.1</td>
 <td >3.3</td>
 <td >2.5</td>
 <td >-3.0</td>
 <td >-5.5</td>
 </tr>
 </tbody>
 </table>
 
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Import prices increased 0.5% (3.5% y/y) during September following a 0.4% August decline, revised from -0.6%. A 0.2% rise had been expected in the Action Economics Forecast Survey. These figures are not seasonally adjusted. Strength [...]

U.S. Import Prices Rise With Higher Fuel Costs; Export Prices Steady

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The Mortgage Bankers Association reported that its total
Mortgage Applications Index fell 1.7% (-14.4% y/y) in the week ending
October 5 following no change during the prior week. Purchase loan applications
declined 1.1% (+2.1% y/y), while applications to refinance fell 2.6% (-32.2% y/y).

The effective interest rate on a 15-year fixed-rate mortgage
rose to 4.58% and remained up sharply from 3.51% at the end of last September.
The effective rate on a 30-year fixed-rate loan increased to 5.20%. The rate on
a Jumbo 30-year loan rose to 5.09%. For adjustable 5-year mortgages, the
effective interest rate increased to 4.49%.

The average mortgage loan size rose to $294,000 (1.7% y/y).
For purchases, the average loan size gained to $312,400 (-1.4% y/y); for
refinancings, it rose to $265,300 (1.9% y/y).

Applications for fixed-rate loans fell 15.1% y/y while
applications for adjustable-rate loans declined 5.5% y/y.

The survey covers over 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 SURVEYW 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" >MBA Mortgage Applications (%,
 SA)</th>
 <th scope="col" >10/05/18</th>
 <th scope="col" >09/28/18</th>
 <th scope="col" >09/21/18</th>
 <th scope="col" >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" >Total Market Index</td>
 <td >-1.7</td>
 <td >0.0</td>
 <td >2.9</td>
 <td >-14.4</td>
 <td >-17.8</td>
 <td >15.6</td>
 <td >17.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Purchase</td>
 <td >-1.1</td>
 <td >0.1</td>
 <td >2.6</td>
 <td >2.1</td>
 <td >5.6</td>
 <td >13.3</td>
 <td >15.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Refinancing</td>
 <td >-2.6</td>
 <td >-0.1</td>
 <td >3.2</td>
 <td >-32.2</td>
 <td >-34.0</td>
 <td >17.3</td>
 <td >19.7</td>
 </tr>
 <tr>
 <td class="firstcol" >15-Year Mortgage Effective Interest Rate
 (%)</td>
 <td >4.58</td>
 <td >4.52</td>
 <td >4.51</td>
 <td >3.57 (Oct'17)</td>
 <td >3.59</td>
 <td >3.22</td>
 <td >3.47</td>
 </tr>
 </tbody>
 </table>
 
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The Mortgage Bankers Association reported that its total Mortgage Applications Index fell 1.7% (-14.4% y/y) in the week ending October 5 following no change during the prior week. Purchase loan applications declined 1.1% (+2.1% y/y), [...]

U.S. Mortgage Loan Applications Decline As Interest Rates Rise

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Consumer price inflation remained subdued last month
due to broad-based weakness. The CPI rose 0.1% (2.3% y/y) during September following
two straight 0.2% gains. The increase fell short of expectations for a 0.2% gain
in the Action Economics Forecast Survey. The CPI excluding food &amp; energy also inched up 0.1% (2.2% y/y) for the second
straight month, following three consecutive months of 0.2% increase. A 0.2% rise had been expected.

Weakness in last month's CPI increase was led by a second
straight 0.3% monthly decline (-0.3% y/y) in goods
prices excluding food &amp; energy. Used car &amp; truck prices led the
shortfall as they plummeted 3.0% (-1.5% y/y). New car &amp; truck prices eased
0.1% (+0.5% y/y). Continuing to the downside were recreation goods prices by
0.6% (-3.3% y/y). A 1.9% decline in television prices (-18.6% y/y) paced the
shortfall. Also weak were sporting goods prices which fell 0.9% (-0.5% y/y).
Medical care product prices eased 0.1% (+0.7% y/y), the smallest of three
consecutive monthly declines. Elsewhere, leading the increases in pricing power
was a 0.9% rise (-0.6% y/y) in apparel prices which followed four straight
months of decline. Home furnishings prices gained 0.2% and were unchanged y/y,
while appliance costs improved 0.2% (2.9% y/y). Tobacco prices gained 0.3% (3.2% y/y).

Nonenergy service price inflation held steady at 0.2% (3.0%
y/y). Recreation services prices strengthened 0.7% (1.9% y/y), the largest
increase since February 2017. Transportation services prices increased 0.5%
(4.0% y/y) as car &amp; truck rental costs rebounded 2.2% (-1.8% y/y) after a
sharp August decline. Public transportation prices rose 0.4% (-0.2% y/y).
Shelter prices increased 0.2% (3.3% y/y) as the owners' equivalent
rent of primary residences rose 0.2% (3.3% y/y), down versus the 0.3% increases
in each of the prior six months. Rents also increased a lessened 0.2% (3.6% y/y). The cost of medical care
services rose 0.2% (2.0% y/y). Tuition costs and other schools fees &amp; child
care inched 0.1% higher (2.6% y/y).

Countering these increases was a 0.5% decline (+4.8% y/y) in energy prices
which followed a 1.9% rise. The decline was led by a 1.7% drop (-1.2% y/y) in natural gas prices.
Electricity prices also fell 0.5% (-1.2% y/y). Gasoline prices eased 0.2% (9.1%
y/y) after a 3.0% rise, and the cost of fuel oil improved 0.3% (23.4% y/y) following a 2.2% rise.

Food prices held steady in September (1.4% y/y) after two
straight 0.1% gains. Cereal &amp; bakery product prices strengthened 0.6% (0.7% y/y).
Nonalcoholic beverage prices rose 0.6% both m/m and y/y. Egg prices declined 4.1% (+10.1% y/y), down for the
fifth straight month. Meat, poultry and fish prices fell 0.8% (-0.1% y/y)
after a 0.2% rise, while dairy product prices eased 0.3% (unchanged y/y) following a
0.1% uptick. Fruit &amp; vegetable prices declined 0.5% (+0.5% y/y) after a 0.3% fall.

The modest gain in consumer prices caused real average hourly earnings
to increase 0.3% (0.5% y/y), the strongest gain in six months.

The consumer price data can be found in Haver's USECON
database with additional detail in CPIDATA. The Action Economics survey
figure is 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" >Consumer Price Index, All
 Urban Consumers (% chg)</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Jul</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 >0.1</td>
 <td >0.2</td>
 <td >0.2</td>
 <td >2.3</td>
 <td >2.1</td>
 <td >1.3</td>
 <td >0.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Total less Food &amp; Energy</td>
 <td >0.1</td>
 <td >0.1</td>
 <td >0.2</td>
 <td >2.2</td>
 <td >1.8</td>
 <td >2.2</td>
 <td >1.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Goods less Food &amp; Energy</td>
 <td >-0.3</td>
 <td >-0.3</td>
 <td >0.1</td>
 <td >-0.3</td>
 <td >-0.7</td>
 <td >-0.5</td>
 <td >-0.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Services less Energy</td>
 <td >0.2</td>
 <td >0.2</td>
 <td >0.3</td>
 <td >3.0</td>
 <td >2.7</td>
 <td >3.1</td>
 <td >2.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Food</td>
 <td >0.0</td>
 <td >0.1</td>
 <td >0.1</td>
 <td >1.4</td>
 <td >0.9</td>
 <td >0.3</td>
 <td >1.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Energy</td>
 <td >-0.5</td>
 <td >1.9</td>
 <td >-0.5</td>
 <td >4.8</td>
 <td >7.9</td>
 <td >-6.6</td>
 <td >-16.7</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

Consumer price inflation remained subdued last month due to broad-based weakness. The CPI rose 0.1% (2.3% y/y) during September following two straight 0.2% gains. The increase fell short of expectations for a 0.2% gain in the Action [...]

U.S. CPI & Core CPI Edge Higher

Robert Brusca

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Inflation diffusion is high over three months, six months and 12 months. The diffusion values show that inflation diffusion is well above the ‘neutral’ 50% mark on these horizons. Diffusion counts the number of sectors where inflation is accelerating and adds half the number where inflation is stable. A diffusion reading of 100% means that inflation forces all are pushing higher (all sectors accelerate). At a value of 50%, inflation forces are balanced (accelerations balance decelerations). At zero percent, all sectors are decelerating and prices are collapsing.

France has a situation in which the HICP is stable over 12 months and six months then accelerating over three months. Its domestic CPI measure is more stable with inflation at 2.2% over 12 months and three months but dips to a 1.9% pace over six months. Domestic core inflation dips from 1.3% over 12 months to 1.1% over six months then advances to 1.4% over three months. And despite that sort of headline and core rate trend prevarication, the diffusion indexes tell us that sector by sector inflation has been generally rising in more sectors than it has been falling on all horizons. How can you ‘square those seemingly opposite characterizations? Headline and core measures and diffusion measures take different approaches. Diffusion data are not weighted by sector. Diffusion an unweighted concept that looks at the breadth of inflation. The headline and core measures are weighted within their separate definitions. Those differences produce different results.

We can conclude that inflation forces in France are present but not intense and clearly not as present in items with the largest weights in the CPI and HICP inflation measures since diffusion shows more inflation than either the core or the headline.

Three French sectors show persistently accelerating inflation: (1) rent and utilities, (2) recreation and culture, and (3) education. Only the communication sector, a high technology usage sector, shows persistent inflation deceleration from 12 months to six months to three months.

And despite all these forces, core inflation is still only at 1.3% over 12 months. Headline inflation in France is high and on the uncomfortable side (2.5% for the HICP and 2.2% for the domestic CPI measure). But the core, free of the effects of energy where prices have spiked this year, offers a good deal of padding between itself and the ECB’s policy goal pace. So inflation is both percolating and being held at bay. The international forces of completion are still in play and providing restraint. Central banks are having a hard time getting their arms around these events in making policy.


French inflation trend on the rise for core and headline 
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Inflation diffusion is high over three months, six months and 12 months. The diffusion values show that inflation diffusion is well above the ‘neutral’ 50% mark on these horizons. Diffusion counts the number of sectors where inflation [...]

French Inflation Eases in September But Not Overall

Carol Stone, CBE

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Initial claims for unemployment insurance rose to 214,000 (-11.2% y/y) during the week ended October 6 from 207,000 in the prior week, which was unrevised. The Action Economics Forecast Survey had expected a smaller increase to 210,000. The four-week moving average of initial claims was 209,500, up from the prior week's 207,000.

In the week ending September 29, continuing claims for unemployment insurance rose 4,000 to 1.660 million (-13.3% y/y) from 1.656 million a week earlier; that earlier number was revised up by 6,000. The four-week moving average of claimants declined to 1,656,000. This is the lowest four-week average since August 18, 1973 -- just over 45 years ago -- when it was 1,646,750.

The insured rate of unemployment remained at its record low of 1.2%, where it's been since early May.

Insured rates of unemployment varied widely by state. During the week ended September 15, the lowest rates were in South Dakota (0.19%), Nebraska (0.302%), North Dakota (0.32%), Indiana (0.42%), North Carolina (0.43%) and New Hampshire (0.45%). The highest rates were in Pennsylvania (1.51%), Connecticut (1.61%), California (1.68%), Alaska (1.82%), and New Jersey (1.87%). Among other of the largest states by population, the rate was 1.15% in New York, 0.93% in Texas and 0.47% in Florida. These state data are not seasonally adjusted.

Data on weekly unemployment insurance are contained in
Haver's WEEKLY database, and they are summarized monthly in USECON.
Data for individual states are in REGIONW. The expectations figure is from
the Action Economics Forecast Survey, carried 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" >Unemployment Insurance (SA, 000s)</th>
 <th>10/06/18</th>
 <th>09/29/18</th>
 <th>09/22/18</th>
 <th>Y/Y %</th>
 <th>2017</th>
 <th>2016</th>
 <th>2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Initial Claims</td>
 <td >214</td>
 <td >207</td>
 <td >215</td>
 <td >-11.2</td>
 <td >245</td>
 <td >262</td>
 <td >278</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Continuing Claims</td>
 <td >--</td>
 <td >1,660</td>
 <td >1,656</td>
 <td >-13.3</td>
 <td >1,961</td>
 <td >2,135</td>
 <td >2,266</td>
 </tr>
 <tr>
 <td class="firstcol" >Insured Unemployment Rate (%)</td>
 <td >--</td>
 <td >1.2</td>
 <td >1.2</td>
 <td >
 1.4 
 (Oct 2017)
 </td>
 <td >1.4</td>
 <td >1.6</td>
 <td >1.7</td>
 </tr>
 </tbody>
 </table>
 
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Initial claims for unemployment insurance rose to 214,000 (-11.2% y/y) during the week ended October 6 from 207,000 in the prior week, which was unrevised. The Action Economics Forecast Survey had expected a smaller increase to [...]

U.S. Initial Claims for Unemployment Insurance Show Modest Increase

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The headline Final Demand Producer Price Index using new
methodology eased 0.1% during August (+2.8% y/y) after holding steady in July.
It was the first decline since February 2017. A 0.2% increase had been expected
in the Action Economics Forecast Survey. The PPI excluding food &amp; energy
also slipped 0.1% (+2.3% y/y) and reversed the July gain. A 0.2% rise had been
expected. The PPI excluding food, beverages and trade services is another
measure of underlying price inflation. It rose 0.1% (2.9% y/y) in August
following two months of 0.3% increase.
The PPI using the old methodology held steady (3.6% y/y)
following a 0.2% gain. Prices excluding food &amp; energy eased 0.1% (+2.4% y/y)
after a 0.2% rise.
A 0.9% decline (+0.8% y/y) in trade services prices provided
downward pressure on the overall PPI last month. It followed a 0.8% shortfall in
July. The cost of trade of finished products fell 0.8% (+0.5% y/y) for the
second straight month. Trade of government purchased goods dropped 1.1% (+0.7%
y/y), down for the third consecutive month. Passenger transportation prices
slipped 1.9% (+3.0% y/y) while transportation &amp; warehousing of goods costs
eased 0.1% (+6.4% y/y).&nbsp;&nbsp;
Goods prices excluding food &amp; energy held steady last
month following six months of 0.3% increase earlier this year. The 2.7% y/y rise
followed slight y/y declines as of late-2015. Core nondurable goods pries were
unchanged (+3.3% y/y), but durable goods prices gained 0.1%, the weakest
increase in six months. Price increases for durables have accelerated to 1.9%
y/y from little-change in mid-2016. Household furniture prices increased 0.1%
(2.6 y/y) but appliance costs declined 0.1% (+2.8% y/y). Capital equipment
prices rose 0.2% m/m. The 1.9% y/y increase also was accelerated from 0.3% as of
mid-2016. Government purchased goods prices less food &amp; energy rose 0.2% and
increased 2.3% y/y, following price deflation in 2016.
Food prices also weakened during August by 0.6% (-1.0% y/y),
the fourth decline in the last five months. Fresh fruit &amp; vegetable prices
dropped 11.3% (+0.1% y/y) while beef &amp; veal prices weakened 1.9% (-4.3%
y/y). Dairy product costs declined 1.2% (-3.7% y/y) for a second straight month.
Offsetting these declines was a 4.5% rise (8.1% y/y) in grain prices. Energy
product prices rose 0.4% (13.6% y/y) as natural gas prices strengthened 1.8%
(0.0% y/y). Gasoline prices rose 0.6% (28.1% y/y) and the cost of electric power
also increased 0.6% (1.5% y/y). Home heating oil prices declined 0.9% (+39.6%
y/y).
Construction prices inched 0.1% higher (3.2% y/y) following a
0.4% rise.
Prices for intermediate demand processed goods held steady
(6.3% y/y) for the second straight month. Monthly price increases during Q2
ranged between 0.4% and 1.3%.&nbsp;&nbsp;
The PPI data are contained in Haver's USECON database
with further detail in PPI and PPIR. West Texas Intermediate Crude
Oil prices are found in the WEEKLY database while the expectations
figures are available in the AS1REPNA database.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="1062">Producer Price Index (SA, %,
 New Methodology)</th>
 <th scope="col" width="115">Sep</th>
 <th scope="col" width="115">Aug</th>
 <th scope="col" width="115">Jul</th>
 <th scope="col" width="115">Sep Y/Y</th>
 <th scope="col" width="115">2017</th>
 <th scope="col" width="115">2016</th>
 <th scope="col" width="115">2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="1062">Final Demand</td>
 <td align="center" width="115"></td>
 <td align="center" width="115">-0.1</td>
 <td align="center" width="115">0.0</td>
 <td align="center" width="115">2.8</td>
 <td align="center" width="115">2.3</td>
 <td align="center" width="115">0.4</td>
 <td align="center" width="115">-0.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1062">&nbsp;&nbsp; Excluding Food &amp; Energy</td>
 <td align="center" width="115"></td>
 <td align="center" width="115">-0.1</td>
 <td align="center" width="115">0.1</td>
 <td align="center" width="115">2.3</td>
 <td align="center" width="115">1.9</td>
 <td align="center" width="115">1.2</td>
 <td align="center" width="115">0.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1062">&nbsp;&nbsp; Excluding Food, Energy
 &amp; Trade Services</td>
 <td align="center" width="115"></td>
 <td align="center" width="115">0.1</td>
 <td align="center" width="115">0.3</td>
 <td align="center" width="115">2.9</td>
 <td align="center" width="115">2.1</td>
 <td align="center" width="115">1.2</td>
 <td align="center" width="115">0.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1062">&nbsp;&nbsp; Goods</td>
 <td align="center" width="115"></td>
 <td align="center" width="115">0.0</td>
 <td align="center" width="115">0.1</td>
 <td align="center" width="115">3.9</td>
 <td align="center" width="115">3.3</td>
 <td align="center" width="115">-1.4</td>
 <td align="center" width="115">-4.3</td>
 </tr>
 <tr>
 <td class="firstcol" width="1062">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Foods</td>
 <td align="center" width="115"></td>
 <td align="center" width="115">-0.6</td>
 <td align="center" width="115">-0.1</td>
 <td align="center" width="115">-1.0</td>
 <td align="center" width="115">1.2</td>
 <td align="center" width="115">-2.8</td>
 <td align="center" width="115">-2.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1062">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Energy</td>
 <td align="center" width="115"></td>
 <td align="center" width="115">0.4</td>
 <td align="center" width="115">-0.5</td>
 <td align="center" width="115">13.6</td>
 <td align="center" width="115">10.4</td>
 <td align="center" width="115">-8.4</td>
 <td align="center" width="115">-20.6</td>
 </tr>
 <tr>
 <td class="firstcol" width="1062">&nbsp;&nbsp;&nbsp;&nbsp;Goods Excluding
 Food &amp; Energy</td>
 <td align="center" width="115"></td>
 <td align="center" width="115">0.0</td>
 <td align="center" width="115">0.3</td>
 <td align="center" width="115">2.7</td>
 <td align="center" width="115">2.2</td>
 <td align="center" width="115">0.7</td>
 <td align="center" width="115">0.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1062">&nbsp;&nbsp; Services</td>
 <td align="center" width="115"></td>
 <td align="center" width="115">-0.1</td>
 <td align="center" width="115">-0.1</td>
 <td align="center" width="115">2.2</td>
 <td align="center" width="115">1.8</td>
 <td align="center" width="115">1.4</td>
 <td align="center" width="115">0.9</td>
 </tr>
 <tr>
 <td class="firstcol" width="1062">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Trade
 Services</td>
 <td align="center" width="115"></td>
 <td align="center" width="115">-0.9</td>
 <td align="center" width="115">-0.8</td>
 <td align="center" width="115">0.8</td>
 <td align="center" width="115">1.5</td>
 <td align="center" width="115">1.3</td>
 <td align="center" width="115">1.3</td>
 </tr>
 <tr>
 <td class="firstcol" width="1062">&nbsp;&nbsp; Construction</td>
 <td align="center" width="115"></td>
 <td align="center" width="115">0.1</td>
 <td align="center" width="115">0.4</td>
 <td align="center" width="115">3.2</td>
 <td align="center" width="115">2.2</td>
 <td align="center" width="115">1.1</td>
 <td align="center" width="115">1.9</td>
 </tr>
 <tr>
 <td class="firstcol" width="1062">Intermediate Demand - Processed Goods</td>
 <td align="center" width="115"></td>
 <td align="center" width="115">0.0</td>
 <td align="center" width="115">0.0</td>
 <td align="center" width="115">6.3</td>
 <td align="center" width="115">4.7</td>
 <td align="center" width="115">-3.1</td>
 <td align="center" width="115">-6.9</td>
 </tr>
 </tbody>
</table>
&nbsp;
Wholesale Inventories Jumped in July While Sales
Floundered 
by <a href="http://haver.com/comment/Moeller.html">Tom Moeller</a>&nbsp;
October 10, 2018
Wholesale inventories jumped 0.6% m/m (5.0% y/y) in July
following an unrevised 0.1% m/m increase in June. The July increase is a little
smaller than expected--the Informa Global Markets Survey had looked for a 0.7%
m/m increase. Also, this increase was slightly smaller than the 0.7% m/m rise
contained in the advance report released two weeks ago.
The advance in durable goods inventories slowed in July with
a 0.8% m/m (6.1% y/y) rise versus a 0.9% m/m increase in June. Automotive (-1.1%
m/m) and miscellaneous durable goods inventories (-0.9% m/m) each fell while all
other categories experienced monthly increases. Inventories of computing
equipment led the July rise with a 3.8% m/m increase with metals inventories
posting a robust 3.1% m/m gain. A rebound in nondurable goods inventories led
the overall July surge. These inventories rose 0.3% m/m (3.3% y/y) in July after
having fallen 1.0% m/m in June. The recovery in nondurable inventories was
largely propelled by paper inventories (2.0% m/m) and farm inventories (1.4%
m/m).
Wholesale sales were essentially unchanged in July (+9.8%
y/y) from June after a downwardly revised 0.2% m/m decline in June (initially
reported as a 0.1% m/m fall). The Action Economics Survey had looked for a 0.3%
m/m increase.
Sales of durable goods were unchanged in July (+9.6% y/y)
versus a 0.2% m/m rise in June. Sales of computing equipment fell 4.0% m/m and
sales of furniture slipped 3.2% m/m. Hardware sales posted the largest monthly
increase with a 1.7% m/m gain. Sales of nondurable goods declined 0.1% m/m
(+10.0% y/y) following a 0.6% m/m slump in June. Apparel sales continued to fall
with an outsized 6.4% m/m drop in July.
With inventories rising and sales unchanged, the
inventory-to-sales (I/S) ratio at the wholesale level edged up to 1.26 in July
from 1.25 in each of the previous two months. This is still the second lowest
reading since December 2014.
The I/S ratio for durable goods increased to 1.59 from 1.58,
its second consecutive monthly increase while the I/S ratio for nondurables was
unchanged at 0.95, its lowest reading since December 2014. With weak furniture
sales in July, this sector's I/S ratio jumped to 1.84 from 1.78. Similarly, for
apparel: the sharp drop in sales was accompanied by a surge in this sector's I/S
ratio to 2.15 from 2.00. And the I/S ratio for petroleum and products continued
its general decline, falling to 0.37 in July, its lowest level since November
2014.
The wholesale trade figures 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.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="964">Wholesale Sector - NAICS
 Classification (%)</th>
 <th scope="col" width="129">Aug</th>
 <th scope="col" width="129">Jul</th>
 <th scope="col" width="129">Jun</th>
 <th scope="col" width="129">Y/Y</th>
 <th scope="col" width="129">2017</th>
 <th scope="col" width="129">2016</th>
 <th scope="col" width="129">2015</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" width="964">Inventories</td>
 <td align="center" width="129"></td>
 <td align="center" width="129">0.6</td>
 <td align="center" width="129">0.1</td>
 <td align="center" width="129">5.0</td>
 <td align="center" width="129">3.6</td>
 <td align="center" width="129">2.2</td>
 <td align="center" width="129">1.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="964">Sales</td>
 <td align="center" width="129"></td>
 <td align="center" width="129">0.0</td>
 <td align="center" width="129">-0.2</td>
 <td align="center" width="129">9.8</td>
 <td align="center" width="129">7.4</td>
 <td align="center" width="129">-1.3</td>
 <td align="center" width="129">-4.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="964">I/S Ratio</td>
 <td align="center" width="129"></td>
 <td align="center" width="129">1.26</td>
 <td align="center" width="129">1.25</td>
 <td align="center" width="129">1.32 (Jul '17)</td>
 <td align="center" width="129">1.30</td>
 <td align="center" width="129">1.35</td>
 <td align="center" width="129">1.33</td>
 </tr>
 </tbody>
</table>

&nbsp;


U.S. Energy Product Prices Strengthen 
by <a href="http://haver.com/comment/Moeller.html">Tom Moeller</a>&nbsp;&nbsp;October
10, 2018

Gasoline prices increased to $2.90 per gallon last week
(15.9% y/y), up three cents from the prior week.
Haver Analytics constructs factors to adjust for the marked seasonal variation
in prices. The seasonally-adjusted gasoline price rose w/w to $2.85 per gallon
from $2.80.
West Texas Intermediate crude oil prices strengthened
last week to $75.12 per barrel (49.6% y/y), the highest level since November
2014. Yesterday, the price eased to $74.96. Brent crude oil prices increased to
$85.52 (40.4% y/y) per barrel last week. The price was $85.16 yesterday.
Natural gas prices rose to 3.06/mmbtu (3.4% y/y)
last week. The price was $3.13 on Monday.
During the latest four weeks, gasoline demand decreased
1.5% y/y; total petroleum product demand rose 1.1% y/y. Gasoline inventories
strengthened 7.4% y/y, but inventories of all petroleum products declined 3.0%
y/y as residual fuel oil inventories fell 23.5% y/y. Crude oil input to
refineries strengthened 11.3% y/y in the last four weeks.
These data are reported by the U.S. Department of Energy. The
price data can be found in Haver's WEEKLY and DAILY databases.
Greater detail on prices, as well as the demand, production and inventory data,
along with regional breakdowns, are in OILWKLY.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="1028">Weekly Energy Prices</th>
 <th scope="col" width="119">10/08/18</th>
 <th scope="col" width="120">10/01/18</th>
 <th scope="col" width="120">09/24/18</th>
 <th scope="col" width="120">Y/Y %</th>
 <th scope="col" width="120">2017</th>
 <th scope="col" width="120">2016</th>
 <th scope="col" width="120">2015</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" width="1028">Retail Gasoline ($ per Gallon Regular,
 Monday Price)</td>
 <td align="center" width="119">2.90</td>
 <td align="center" width="120">2.87</td>
 <td align="center" width="120">2.84</td>
 <td align="center" width="120">15.9</td>
 <td align="center" width="120">2.47</td>
 <td align="center" width="120">2.31</td>
 <td align="center" width="120">2.03</td>
 </tr>
 <tr>
 <td class="firstcol" width="1028">Light Sweet Crude Oil, WTI ($ per bbl,
 Previous Week's Average)</td>
 <td align="center" width="119">75.12</td>
 <td align="center" width="120">72.70</td>
 <td align="center" width="120">70.29</td>
 <td align="center" width="120">49.6</td>
 <td align="center" width="120">50.87</td>
 <td align="center" width="120">43.22</td>
 <td align="center" width="120">48.90</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1028">Natural Gas ($/mmbtu, LA, Previous
 Week's Average)</td>
 <td align="center" width="119">3.06</td>
 <td align="center" width="120">3.03</td>
 <td align="center" width="120">2.93</td>
 <td align="center" width="120">3.4</td>
 <td align="center" width="120">2.99</td>
 <td align="center" width="120">2.51</td>
 <td align="center" width="120">2.64</td>
 </tr>
 </tbody>
</table>





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The headline Final Demand Producer Price Index using new methodology eased 0.1% during August (+2.8% y/y) after holding steady in July. It was the first decline since February 2017. A 0.2% increase had been expected in the Action [...]

U.S. Producer Prices Decline Unexpectedly

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As the second and third largest economies in the euro area, sharing a border and a currency, France and Italy see their industrial sectors tending to move more or less together over time. The R-squared relationship between Italian manufacturing IP and French manufacturing IP is 0.53 from 2011 on. It is not surprising that these two large EMU economies move in a synchronous orbit.

However, there are still differences in these two economies and those differences are emerging over the past month that correlation between France and Italian IP has fallen to an R-square value of 0.25. The chart shows how the overall IP growth rates in these countries are separating as weakness in Italy is coming on faster than in France.

Since January 2014, the Italian manufacturing PMI has been stronger than the French manufacturing in 48 of 56 months. But four of those eight Italian underperformances occurred over the past five months. Not only is Italy weakening faster than France but it is weaker in PMI terms as well as in production growth terms.

Weakness has been a common theme in the euro area. The IMF’s meeting this week extended that weakening to its outlook for the global economy, adding a caveat about deteriorating underlying risks and the potential for weakness to adversely affect the financial sector.

France bucks these trends and shows industrial output is accelerating. Consumer durables and capital equipment are driving the acceleration. Intermediate goods are building some minor momentum too. Consumer nondurables are losing some traction on trends within one year.

Italian trends within one year are uneven. Italian output declines over 12 months, makes a recovery over six months, then slows its pace over three-months. Consumer goods output is negative on all horizons. Capital goods output is accelerating. Intermediate goods output is declining on all horizons.

In the quarter-to-date, French IP is rising at a 5.6% pace while Italian IP is contracting at a 1.9% pace. French auto production and transportation output for Italy both show fading output and demonstrate contraction in the quarter-to-date. So there is still some commonality in the two national trends for output. And both have increasing spending trends in play for motor vehicles as registrations are increasingly strong in both Italy and France despite the output cutback.

However, the auto sector is not driving either of these two economies. The chart that displays year-on-year trends depicts both economies as engaged in some degree of slowing. The sequential growth figures are for trends for one year and less. While the longer profile shows that year-on-year growth rates are slowing, the within- one-year profile shows France accelerating and Italy growing slowly.

Economic trends can be complex. Conditions which are a conundrum over a short period of time may simply fade into a longer run trends when given the broader perspective of history. This month’s divergence between the year-over-year growth rates has some unusual aspects but is still only the 13th largest divergence in the last 56 months, marking it as a top 23% event which hardly makes it very unique. While Italy’s IP is weakening more than and faster than France’s and while that has not been the rule in this recovery, it is also not such an extreme event.

The political events in play make this divergence more understandable with the new Italian government seeking to use deficit financing to stimulate the economy and being opposed by the EU Commission. Italy’s real GDP is still some 2.8 percentage points below its level of Q3 2008 when global economic conditions were deteriorating rapidly. Italy still has not recouped its recession/financial sector losses. Only Italy and Greece, among the earliest EMU members, have failed to recoup their pre-recession levels of GDP over the past decade. Finland and Portugal each have seen GDP gain only about 1% net from their Q3 2008 level of GDP over the last ten years.

Italy has been trying to shrink itself into a more competitive state, but with all the debt it has, that is not an easy thing to do. Italian banks are in rough shape and Italy is having a hard time getting growth in gear. Despite the fact that its manufacturing sector and performance relative France has been solid, that is not much of an achievement. Italy is looking for answers and hoping to fund some projects using public finances, but the EU Commission is slamming that door shut.

This is an important time for Italy and for the EMU. Since Q3 2008, Italy’s GDP has been weak and the ratio of Italian to German GDP has fallen to 54.3% from 63.4%. In round terms, Italy is more like half the size of the German economy instead of early two-thirds its size. German GDP has grown substantially in recovery compared to Italy where economic size relative to Germany has lost nearly 10 percentage points. When a country like Italy has a huge debt load, it is very hard to regain fiscal probity and economic strength through fiscal contraction and slow growth. Italy is of the opinion that these German-led EU Commission rules have not worked and are not going to work. It is looking for a new way. The Commission is not inclined to do that. And that is going to be a point of real conflict because I don’t see how Italy will be able to repair itself on any reasonable timeline continuing on this same path. And that is Italy’s real problem and it has also become the EU’s problem. While everyone is looking at Brexit, the real EMU-busting issue is in progress in Italy.


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As the second and third largest economies in the euro area, sharing a border and a currency, France and Italy see their industrial sectors tending to move more or less together over time. The R-squared relationship between Italian [...]

French and Italian IP Both Gain in August As Italy Grapples with Deep Seated Issues

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Wholesale inventories jumped 1.0% during August (5.1% y/y)
following an unrevised 0.6% July increase. The August gain compared to 0.8%
expected in the Informa Global Markets Survey. The rise compared to the 0.7%
increase reported in advance report issued two weeks ago.

Durable goods inventories increased 0.9% (6.1% y/y) after a
0.6% gain. Automotive inventories surged 3.5% (0.4% y/y) and computer &amp;
office equipment inventories gained 1.6% (4.3% y/y). Machinery &amp; equipment
inventories rose 0.5% (8.6% y/y). Furniture inventories gained 0.1% (2.5% y/y)
but electrical goods inventories eased 0.4% (+3.6% y/y). Inventories of
nondurable goods strengthened 1.2% (3.9% y/y) powered by a 2.2% surge (8.8% y/y)
in chemical inventories. Petroleum inventories rose 0.5% (8.5% y/y) and paper
product inventories increased 0.3% (9.9% y/y). Apparel inventories inched 0.1%
higher (-2.7% y/y), but grocery product inventories fell 0.7% (-22.7% y/y), off
for the third straight month.

Wholesale sales increased 0.8% during August (9.2% y/y) after
a 0.2% gain, revised from no change. The Action Economics Forecast Survey looked
for a 0.5% m/m increase.

Sales of durable goods jumped 1.3% (9.0% y/y) as computer
equipment sales surged 6.2% (4.9% y/y). Machinery sales rose 1.1% (18.0% y/y).
Sales of furniture increased 0.9% (4.2% y/y) and hardware sales rose 0.7% (8.4%
y/y). Sales of nondurable goods gained 0.5% (9.4% y/y). Apparel sales rebounded
2.2% (-3.4% y/y) after a 6.7% decline. Petroleum sales increased 1.0% (35.8%
y/y) but chemical sales fell 1.1% (+10.6% y/y).

The inventory-to-sales (I/S) ratio at
the wholesale level held steady m/m at 1.26 in August. This remained the second
lowest reading since December 2014.

The I/S ratio for durable goods held at 1.58 for the third
straight month. The machinery sector's rate slipped to 2.53. The furniture
sector's I/S ratio eased to 1.81 while auto's ratio fell to 1.58. The nondurable
goods I/S ratio inched up to 0.96 as the apparel ratio eased to 2.10. The paper
products ratio held steady at 1.24 and the petroleum sector's ratio was steady at 0.37.

The wholesale trade figures 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" >Aug</th>
 <th scope="col" >Jul</th>
 <th scope="col" >Jun</th>
 <th scope="col" >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 >1.0</td>
 <td >0.6</td>
 <td >0.1</td>
 <td >5.1</td>
 <td >3.6</td>
 <td >2.2</td>
 <td >1.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Sales</td>
 <td >0.8</td>
 <td >0.2</td>
 <td >-0.2</td>
 <td >9.2</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 >1.26</td>
 <td >1.26</td>
 <td >1.25</td>
 <td >1.30 (Aug '17)</td>
 <td >1.30</td>
 <td >1.35</td>
 <td >1.33</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

Wholesale inventories jumped 1.0% during August (5.1% y/y) following an unrevised 0.6% July increase. The August gain compared to 0.8% expected in the Informa Global Markets Survey. The rise compared to the 0.7% increase reported in [...]

Wholesale Inventories and Sales Strengthen

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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Nonfarm payrolls increased 177,000 (1.2% y/y) during April after rising 185,000 in March, revised from 228,000, and 102,000 in February, revised from 117,000. Expectations had been for a 130,000 rise in the Action Economics Forecast Survey. The latest figure left the three-month average change at 155,000 in April, down from 232,000 in January.

Average hourly earnings rose 0.2% during April after unrevised increases of 0.3% in March and 0.2% in February. Earnings growth of 3.8% y/y was below the 5.9% high in March 2022.

The unemployment rate, measured in the household survey, held m/m at an expected 4.2% in April, and compared to 4.1% in February and 4.0% in January. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, eased to 7.8% in April from 7.9% in March.

In the **establishment survey**, private-sector employment rose 167,000 (1.2% y/y) after a 170,000 March increase. Factory sector jobs edged 1,000 lower (-0.7% y/y) following a 3,000 gain. Construction sector employment increased 11,000 (1.7% y/y), after rising 7,000 in March.

Private service-producing sector employment increased 156,000 (1.4% y/y) in April after improving 161,000 in March. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 70,000 (3.4% y/y) last month following a 74,000 March increase. Leisure & hospitality employment rose 24,000 (1.3% y/y) after a 38,000 gain. Trade, transportation & utilities rose 32,000 (0.9% y/y) in April following a 25,000 March increase. Professional & business services employment rose 17,000 (-0.1% y/y) following a 3,000 rise while temporary help employment rose 3,600 (-3.9% y/y) following a 2,700 decline. Financial activities employment improved 14,000 (1.2% y/y) after a 6,000 gain. The number of information sector jobs held steady (-0.4% y/y) last month after falling 2,000 in March.

Government sector payrolls rose 10,000 (1.3% y/y) last month after increasing 15,000 in March. The number of local government jobs increased 13,000 (1.4% y/y) following a 17,000 gain. State government employment rose 6,000 (1.8% y/y) following a 2,000 March increase but federal government payrolls fell 9,000 (-0.3% y/y), the third consecutive monthly decline.

Private-sector average hourly earnings rose 0.2% (3.8% y/y) in April after increasing 0.3% in March. Earnings in the goods-producing sector eased 0.1% (+4.0% y/y) following a 0.6% gain. Earnings in construction rose 0.3% (3.6% y/y), after a 0.2% rise but factory sector earnings declined 0.3% (+4.3% y/y) after surging 0.8% in March. In the private services-sector, earnings rose 0.2% (3.7% y/y) in April for the third straight month. Information sector pay increased 1.0% (5.2% y/y) last month after easing 0.1%, and financial activities earnings rose 0.5% (4.3% y/y) for the second straight month. Trade, transportation & utilities sector pay increased 0.4% (3.4% y/y) after 0.6%. Professional & business sector earnings increased 0.1% (4.4% y/y) after 0.2% in March. Leisure & hospitality earnings held steady (+3.8% y/y) following a 0.6% March increase.

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The length of the average workweek held steady at 34.3 hours in April. The workweek in the goods-producing sector eased to 39.8 hours from 40.0 hours. The construction sector average workweek eased to 39.0 hours from 39.3 hours while the factory sector workweek moved lower to 40.0 hours from 40.2. The average workweek in the private service sector held at 33.2 hours. Professional & business service hours fell to 36.3 hours from 36.4 while trade, transportation & utilities hours improved to 34.3 from 34.0 hours. Private education hours rose slightly to 32.8, but leisure & hospitality held steady at 25.5 hours.

In the **household survey**, the unemployment rate held at 4.2% in April as employment rose 436,000 and the size of the labor force increased 518,000. The labor force participation rate edged up to 62.6% last month from 62.5% in March. It remained below the high of 63.3% early in 2020. The rate for teenagers declined to 36.9%. For workers aged 20-24, the rate held steady at 72.1%, up from 71.8% six months earlier. For workers aged 25-54 the rate rose to 83.6%, a five-month high. For individuals 55 and over, the rate improved to 38.4% in April.

The employment/population ratio for all workers in April rose to 60.0%. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. 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.

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- Job growth spreads across most sectors.
- Earnings growth trend decelerates.
- Jobless rate holds steady.

U.S. Job Growth Is Firm in April but March Gain Is Lessened

Winnie Tapasanun

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Total factory orders rose a slightly less-than-expected 4.3% m/m in March after rises of 0.5% in February and 1.8% in January, data from the U.S. Census Bureau showed. A 4.5% m/m March increase had been expected in the Action Economics Forecast Survey. The March reading was the third successive monthly rise and the largest since July 2024. The year-on-year rate accelerated to 6.0% in March, the highest since November 2022, from 2.3% in February. Notably, orders for nondefense aircraft & parts soared 139.0% in March following a 7.4% drop in February and a 92.9% surge in January. Factory orders excluding defense rose 4.8% (5.9% y/y), the largest of three straight m/m/ rises, after a 0.4% February increase. Factory orders excluding the transportation sector fell 0.2% (+1.1% y/y), the first m/m fall since August, after rising 0.3% in February, January and December.

Durable goods orders jumped 9.2% (11.9% y/y) in March, the third consecutive m/m gain and the biggest since July 2024, on top of a 0.8% increase in February (matching +9.2% m/m in the advance report on April 24). The March jump reflected m/m orders increases of 27.1% (the largest m/m surge since July 2024; 31.2% y/y) in transportation equipment, 1.1% (4.9% y/y) in primary metals, 0.5% (-0.4% y/y) in furniture & related products, 0.1% (2.5% y/y) in fabricated metal products, and 0.1% (0.9% y/y) in machinery. To the downside, durable goods orders for computers & electronic products (-1.3%; +2.7% y/y) and electrical equipment, appliances & components (-1.0%; +4.2% y/y) declined m/m in March.

Nondurable goods orders, which equal nondurable goods shipments, fell 0.3% (+0.4% y/y) in March, the first m/m fall since September, after a 0.1% uptick in February. The March fall reflected m/m drops of 2.4% (-9.3% y/y) in petroleum & coal products and 0.9% (-1.2% y/y) in apparel. To the upside, the following nondurable goods shipments rose m/m in March: leather & allied products (1.5%; 8.6% y/y), beverage & tobacco products (0.7%; 5.8% y/y), paper products (0.6%; 2.3% y/y), printing (0.3%; 3.8% y/y), textile mills (0.3%; 0.8% y/y), chemical products (0.2%; 5.4% y/y), plastics & rubber products (0.2%; 0.4% y/y), food products (0.1%; 1.8% y/y), and textile products (0.1%; 2.1% y/y).

Total shipments slipped 0.1% (+2.0% y/y) in March, the first m/m easing since October, after a 0.7% increase in February. Excluding transportation, shipments were virtually unchanged m/m (+1.1% y/y) in March following six straight m/m gains. Shipments of durable goods industries inched up 0.1% (3.8% y/y) in March, the smallest of four consecutive m/m increases, after a 1.3% advance in February. This reflected m/m durable goods shipments rises of 1.2% (5.6% y/y) in primary metals, 0.9% (0.1% y/y) in furniture & related products, 0.8% (-0.2% y/y) in nonmetallic mineral products, 0.4% (0.0% y/y) in machinery, 0.3% (1.8% y/y) in fabricated metal products, 0.2% (4.5% y/y) in computers & electronic products, 0.2% (-2.1% y/y) in wood products, and 0.1% (3.0% y/y) in electrical equipment, appliances & components. In contrast, durable goods shipments for transportation equipment (-0.5%; +7.3% y/y) and miscellaneous durable goods (-0.1%; +2.9% y/y) fell m/m in March following three successive m/m increases.

Unfilled orders rose 2.0% (2.3% y/y) in March, up for the eighth month in nine, after a 0.1% uptick in February. Excluding transportation, unfilled orders dipped 0.1% (+0.7% y/y) in March, the first m/m easing since May 2024, after holding steady in February. Backlogs of durable goods rose 2.0% (2.3% y/y) in March, reflecting m/m rises of 3.1% (3.1% y/y) in transportation equipment and 0.2% (2.4% y/y) in electrical equipment, appliances & components.

Inventories edged up 0.1% (0.9% y/y) in March, the fifth straight m/m increase, after rising at the same pace in the prior two months. Excluding transportation, inventories were up 0.1% (0.5% y/y) in March, the fifth consecutive m/m rise. Durable goods inventories ticked up 0.1% (1.0% y/y) in March after holding steady in February and January; nondurable goods inventories edged up 0.1% (0.8% y/y), the fifth successive m/m increase.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- March manufacturers’ new orders +4.3% m/m; +6.0% y/y, highest since Nov. ’22.
- Durable goods orders (+9.2%) jump m/m, while nondurable goods orders (-0.3%) and shipments (-0.1%) decline m/m.
- Transportation equipt. orders +27.1% m/m, w/ a 139.0% m/m surge in nondefense aircraft & parts orders.
- Unfilled orders +2.0%, the eighth m/m rise in nine months.
- Inventories +0.1%, the fifth consecutive m/m increase.

U.S. Factory Orders Increase for the Third Straight Month in March

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The global manufacturing data showed broad weakening in April as conditions weakened across more than half of the contributing early reporters in the S&P survey of manufacturing. Of the 18 early reporting countries, more than half of them showed deceleration over six months and 12 months. Over three months, only 8 of 18 showed deterioration and that's about as good as it got in this report. In the current month, month-to-month changes showed more than half of the survey contributors showing weaker results than the month before. In the S&P framework, manufacturing improved month-to-month for the U.S.; however, looking at sequential averages for the U.S., U.K., European monetary union, Canada, and Japan, we see a steady weakening and results over 12 months, over six months versus 12 months, and for three months versus 6 months. The highly developed countries are not doing particularly well.

Asian economies are also showing slight deterioration but doing a little better than the developed countries in general.

Only five of the 18 reporting countries have queue percentile standings in their data back to January 2021 that are above their medians. Readings at or above the 50% mark are at or above the median standing. Canada is showing the weakest manufacturing result on record over this span, in terms of its queue percentile standing which is at 0 in the current month.

I showed the graphic for the Baltic dry goods index in this report rather than statistics on the manufacturing PMI data because the Baltic data, which reflect shipping volume for dry goods - that is excluding things like oil - is weak but it's only in the neighborhood where it's been for some time. There has been a great deal of talk about how tariffs may have impacted trade flows, expected trade flows, shipping, shipping rates, and the like. However, according to the Baltic dry goods index, there isn't much evidence that this is occurring right now and affecting the current data. That may still lie ahead but for now it's not baked in the cake.

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Globally Manufacturing Weakens

Andrew Cates

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

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

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

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

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

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

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

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Charts of the Week: Tariff Truce, Tenuous Trust

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

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

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

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

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

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

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