Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040505b.jpg" width="353">
The monthly household survey conducted by the Instiute National de la Statistique et Etudes Economic (INSEE) showed a slight improvement in French consumer confidence in April, with the overall balance of opinion rising from a minus 22 to a minus 20.
The survey, however, gives little encouragement that consumer spending is about to provide stronger support to the economy. In spite of a sharp drop in those expecting an increase in unemployment and improved outlooks for their personal finances and living standards, consumers indicated that they were less likely to make major purchases in April than they were in March.
In its press release INSEE announced a change in methodology, effective January 2004, to harmonize its measure with other European economic surveys. The release provided only six months of data that used the new methodology. These data are shown in the following table and in the attached chart, they data have been linked to data based on the old methodology.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">INSEE Household Survey &nbsp;(% balance)</th>
<th scope="col">Apr 04</th>
<th scope="col">Mar 04</th>
<th scope="col">Feb 04</th>
<th scope="col">Jan 04</th>
<th scope="col">Dec 03</th>
<th scope="col">Nov 03</th>
<th scope="col">M/M % chg</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Summary Indicator</td>
<td>-20</td>
<td>-22</td>
<td>-23</td>
<td>-22</td>
<td>-25</td>
<td>-24</td>
<td>2</td>
</tr>
<tr>
<td class="firstcol">Personal Financial Situation Outlook</td>
<td>4</td>
<td>1</td>
<td>0</td>
<td>-2</td>
<td>-5</td>
<td>-3</td>
<td>3</td>
</tr>
<tr class="odd">
<td class="firstcol">Living Standard Outlook</td>
<td>-22</td>
<td>-28</td>
<td>-26</td>
<td>-27</td>
<td>-32</td>
<td>-23</td>
<td>6</td>
</tr>
<tr>
<td class="firstcol">Unemployment</td>
<td>39</td>
<td>50</td>
<td>50</td>
<td>38</td>
<td>52</td>
<td>48&nbsp;</td>
<td>-11</td>
</tr>
<tr class="odd">
<td class="firstcol">Likelihood of Major Purchases</td>
<td>-12</td>
<td>-10</td>
<td>-15</td>
<td>-10</td>
<td>-18</td>
<td>-19&nbsp;</td>
<td>-2</td>
</tr>
<tr>
<td class="firstcol">Prices Outlook</td>
<td>-45</td>
<td>-44</td>
<td>-39</td>
<td>-38</td>
<td>-38</td>
<td>&nbsp;&nbsp;-39</td>
<td>-1</td>
</tr>
</tbody>
</table>
</body>
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The monthly household survey conducted by the Instiute National de la Statistique et Etudes Economic (INSEE) showed a slight improvement in French consumer confidence in April, with the overall balance of opinion rising from a minus [...]

French Consumer Confidence Up Slightly in April

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040504d.jpg" width="353">
As expected, the Federal Reserve left the target rate for federal funds unchanged at 1.00%. The discount rate also was left unchanged at 2.00%.
The decision was unanimous.
The press release which accompanied the Fed&#39;s action indicated that &quot;output is continuing to expand at a solid rate and hiring appears to have picked up.&quot;
Regarding inflation and future policy action the Fed acknowledged that inflation had &quot;moved somewhat higher&quot; and that future &quot;policy accommodation can be removed at a pace that is likely to be measured.&quot;
<a href="http://www.federalreserve.gov/boarddocs/press/monetary/2004/20040504/default.htm">Here</a> is the complete text of the Fed&#39;s latest press release.
&quot;How Do Data Revisions Affect the Evaluation and Conduct of Monetary Policy?&quot; from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/Publicat/econrev/Pdf/1Q04kozi.pdf">here</a>.

Chain Store Sales Jumped Last Week 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 4, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040504a.jpg" width="353">
Chain store sales jumped 1.5% higher last week following a 0.5% slip the prior period, according to the International Council of Shopping Centers (ICSC)-UBS survey.
For the full month, sales in April rose 0.4% following a 0.1% dip during March.
During the last ten years there has been a 59% correlation between y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM"> ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">05/01/04</th>
<th scope="col">04/24/04</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>444.7</td>
<td>438.3</td>
<td>6.5%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Factory Orders Surged, Inventories Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 4, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040504c.jpg" width="353">
Factory orders surged 4.3% m/m in March, nearly twice the Consensus expectation for a 2.3% rise. The gain was driven by a 5.0% increase in durable goods orders which was revised up from the advance report of a 3.4% rise.
Strength was quite apparent in the capital good sector. The advance report of a 2.1% rise in nondefense capital goods orders was revised and doubled. Excluding aircraft &amp; parts the rise in advance orders was nearly doubled to 4.5% (12.4% y/y). Much of the upward revision stemmed from orders for computers &amp; electronic products which were revised to show a 2.5% (16.3% y/y) gain versus the advance report of a 0.2% uptick.
Non-durable goods orders (which equal shipments) jumped 3.5% (6.2% y/y) and recouped a 1.8% February decline. Higher petroleum shipments led the March gain but shipments of apparel, paper and chemicals also were quite strong.
Factory inventories rose 0.3% in March and the February increase was revised up. The swing to inventory accumulation from decumulation has been scattered across industries, although the furniture and automobile industries still lag.
Factory shipments jumped 3.8%. Excluding the transportation sector shipments rose 4.2% (9.1% 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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM"> Factory Survey</a> (NAICS)</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">Inventories</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>
<tr>
<td class="firstcol">New Orders</td>
<td>4.3%</td>
<td>1.1%</td>
<td>7.0%</td>
<td>3.7%</td>
<td>-1.9%</td>
<td>-6.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>3.8%</td>
<td>-0.1%</td>
<td>9.2%</td>
<td>2.6%</td>
<td>-2.0%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>1.2%</td>
<td>0.9%</td>
<td>5.0%</td>
<td>4.2%</td>
<td>-6.1%</td>
<td>-5.9%</td>
</tr>
</tbody>
</table>
Challenger Layoffs Ticked Higher 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 4, 2004


<img align="left" border="0" height="286" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040504b.jpg" width="353">
Challenger, Gray &amp; Christmas reported that announced job cuts rose 6.1% to 72,184 in April following m/m declines of 11.9% and 34.3% during the prior two periods.
The three month moving average of job cut announcements fell to 72,489 (-41.2% y/y). During the last ten years there has been an 83% (inverse) correlation between the three month average level of announced job cuts and the y/y percent change payroll employment.
The m/m increase in layoffs was scattered across industries but notable in the automotive, computer &amp; chemical industries.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.

<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/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">April</th>
<th scope="col">March</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">Announced Job Cuts</td>
<td>72,184</td>
<td>68,034</td>
<td>-50.7%</td>
<td>1,236,426</td>
<td>1,431,052</td>
<td>1,956,876</td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">

</table>
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As expected, the Federal Reserve left the target rate for federal funds unchanged at 1.00%. The discount rate also was left unchanged at 2.00%. The decision was unanimous. The press release which accompanied the Fed's action indicated [...]

FOMC Left Rates Unchanged, Language Altered

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040503c.jpg" width="353">
Purchasing managers in the Euro-12 reported continued growth in manufacturing in April. (Diffusion indexes that range from 0% to 100% based on surveys are complied for Reuters Group Plc by NTC Research Ltd. A percentage over 50% indicates expansion while on below 50% indicates a contraction.)
The overall Euro zone index, which began to rise in the last half of 2003, rose 1.3% from March to 54.0% in April, the highest level seen since December, 2000 and above the consensus of 53.3% reported by the Financial Times. Among the individual countries for which data are available, Germany and the Netherlands showed the greatest month-to-month increases of 2.4% and 2.9%, respectively. More modest increases were reported for Spain and Greece, while a decline of 1.4% was reported for Austria.
Much of the strength in manufacturing is due to foreign demand as shown in the attached chart. (Since data on export orders for the Euro zone are not available, we have used export orders for Germany as a proxy for the total Euro Zone.) Export orders in the individual countries have been rising sharply, reflecting growth in demand from the U. S. and Asia, particularly China. The decline in the euro since its high on February 18, has also contributed to the rise in export orders.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Purchasing Managers &nbsp;Survey (%)</th>
<th scope="col">Apr 04</th>
<th scope="col">Mar 04</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro zone</td>
<td>53.95</td>
<td>53.26</td>
</tr>
<tr>
<td class="firstcol">&nbsp; France</td>
<td>53.53</td>
<td>53.24</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Germany</td>
<td>55.34</td>
<td>54.07</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Italy</td>
<td>52.48</td>
<td>52.15</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Netherlands</td>
<td>53.35</td>
<td>51.85</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Spain</td>
<td>53.59</td>
<td>52.92</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Greece</td>
<td>54.48</td>
<td>53.83</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Austria</td>
<td>53.92</td>
<td>54.70</td>
</tr>
</tbody>
</table>
</body>
</html>

Purchasing managers in the Euro-12 reported continued growth in manufacturing in April. (Diffusion indexes that range from 0% to 100% based on surveys are complied for Reuters Group Plc by NTC Research Ltd. A percentage over 50% [...]

Rise in Manufacturing in the Euro Zone Beats Consensus as Export Orders Climb

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040503b.jpg" width="353">
The Purchasing Managers&#146; Composite Index (PMI) for April released by the Institute of Supply Management was little changed at 62.4 versus 62.5 in March. Consensus expectations were for 62.5.
During the last twenty years there has been a 71% correlation between the level of the Composite Index and the three month growth in factory sector industrial production. There has been a 56% correlation between the level of the Composite Index and quarterly growth in real GDP.
Patterns amongst the component series were mixed. Production jumped to 67.0 vs. 65.5 in March and from 48.8 a year ago while employment rose to 57.8, the highest level since December of 1987. These gains were offset by a lower orders index (65.0 vs. 65.7), a slightly quicker pace of vendor deliveries (67.1 vs. 67.9) and a lower inventory index which fell to the lowest level since October (44.8 vs.48.3).
The prices paid index strengthened further to 88.0, the highest level since July 1979.

<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/@EF02/@EF02.HTM"> ISM Manufacturing Survey</a></th>
<th scope="col"> April</th>
<th scope="col">Mar</th>
<th scope="col">April &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>62.4</td>
<td>62.5</td>
<td>46.2</td>
<td>53.3</td>
<td>52.4</td>
<td>43.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>65.0</td>
<td>65.7</td>
<td>45.9</td>
<td>58.1</td>
<td>56.6</td>
<td>46.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>88.0</td>
<td>86.0</td>
<td>63.5</td>
<td>59.6</td>
<td>57.6</td>
<td>42.9</td>
</tr>
</tbody>
</table>
U.S. Construction Spending Jumped on Public Sector Surge 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 3, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040503a.jpg" width="353">
The total value of construction put in place jumped 1.5% in March following an upwardly revised 0.4% gain in February. A 0.5% rise had been the Consensus expectation.
A 5.2% jump in public construction led the March gain as spending on highways &amp; streets (nearly one third of the value of public constructions spending) surged 9.8% (13.7% y/y).Transportation spending also surged 8.5% (6.0% y/y) and spending on power ballooned 15.6% (63.8% y/y).
Private residential building activity rose 0.7% following a modest decline in February as multi-family home building jumped 2.7% (8.2% y/y) and prior months&#39; figures were revised up. New single family building rose 1.1% (19.9% y/y).
Nonresidential building fell 0.2% (-2.9% y/y) following a 1.4% gain in February.
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM"> Construction Put-in-place</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>1.5%</td>
<td>0.4%</td>
<td>7.9%</td>
<td>4.0%</td>
<td>1.1%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.4%</td>
<td>0.4%</td>
<td>8.0%</td>
<td>4.6%</td>
<td>-0.2%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>0.7%</td>
<td>-0.0%</td>
<td>13.4%</td>
<td>10.1%</td>
<td>8.6%</td>
<td>3.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.2%</td>
<td>1.4%</td>
<td>-2.9%</td>
<td>-5.5%</td>
<td>-13.0%</td>
<td>-1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>5.2%</td>
<td>0.4%</td>
<td>7.4%</td>
<td>2.1%</td>
<td>5.3%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Purchasing Managers Composite Index (PMI) for April released by the Institute of Supply Management was little changed at 62.4 versus 62.5 in March. Consensus expectations were for 62.5. During the last twenty years there has been [...]

ISM Factory Index About Unchanged

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/040430d.jpg" width="353">
A couple of weeks ago, we commented on Japanese industry employment data that showed some improvement through February, although the gain was narrowly focused on the service sector. Today, the comprehensive labor force survey for March, along with separate wage and hour data, shows a similar pattern of scattered advance.
Improvement in the unemployment picture is unequivocal. The rate dropped from 5.0% in February to 4.7% in March, the lowest since March 2001. This accompanied a rise in total employment of 0.3% from February. However, while unemployment rate is well down from its peak of 5.5% in early 2003, employment seems not to have much of a growth trend in place yet.
A good sign of promise is contained in the hours data. This is a separate survey of companies with 5 or more employees conducted by the Ministry of Health, Labor and Welfare. Hours worked at these companies surged in March by 4.2% to 102.2, the highest level since May 1997, nearly seven years ago. But other results of that survey are not as strong, as cash earnings for March actually fell. This could suggest that jobs growth is in lower-paying sectors or positions.
Thus, despite the better look of some of the labor market data, household spending has yet to respond definitively. In data for March also released today, workers&#39; household expenditures decreased 6.7%, more than erasing the gains in January and February. Several of these measures, then -- employment, earnings and spending -- look to be forming a base toward expansion, but are not yet climbing with any resolve.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Selected Indicators for Japan</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>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Employment* (millions)&nbsp;</td>
<td>63.40</td>
<td>63.21</td>
<td>63.22</td>
<td>63.28</td>
<td>63.17</td>
<td>63.30</td>
<td>64.10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>+0.3</td>
<td>-0.0</td>
<td>+0.1</td>
<td>+0.2</td>
<td>-0.2</td>
<td>-1.2</td>
<td>-0.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate* (%)</td>
<td>4.7</td>
<td>5.0</td>
<td>5.0</td>
<td>5.4</td>
<td>5.3</td>
<td>5.4</td>
<td>5.0</td>
</tr>
<tr>
<td class="firstcol">Hours Worked** (2000=100)</td>
<td>102.2</td>
<td>98.1</td>
<td>99.4</td>
<td>97.8</td>
<td>98.0</td>
<td>98.0</td>
<td>99.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Cash Earnings** (2000=100)</td>
<td>93.5</td>
<td>96.5</td>
<td>96.2</td>
<td>96.0</td>
<td>95.2</td>
<td>96.0</td>
<td>98.7</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Workers&#39; Household Spending* (2000=100)</td>
<td>94.4</td>
<td>101.2</td>
<td>98.4</td>
<td>95.0</td>
<td>95.6</td>
<td>97.0</td>
<td>98.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>-6.7</td>
<td>2.8</td>
<td>4.1</td>
<td>-0.6</td>
<td>-1.5</td>
<td>-1.3</td>
<td>-1.7</td>
</tr>
</tbody>
</table>
</body>
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A couple of weeks ago, we commented on Japanese industry employment data that showed some improvement through February, although the gain was narrowly focused on the service sector. Today, the comprehensive labor force survey for [...]

More Japanese Labor Data Extend Mixed Improvement

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040430a.jpg" width="353">
Personal income rose 0.4% (+4.9% y/y) last month following an upwardly revised 0.5% gain in February. Consensus expectations had been for a 0.4% rise.
Wage &amp; salary growth cooled to 0.2% (+3.7% y/y) after 0.5% and 0.7% gains in the prior two months. A modest decline in manufacturing wages (1.8% y/y) was accompanied by a slower 0.2% (4.4% y/y) rise in service industry wages.
Personal disposable income rose 0.4% (5.7% y/y) following a 0.5% February increase. Tax payments rose 0.4% (-1.1% y/y).
Consumer spending rose the same 0.4% in March as during the month prior. A 0.7% gain in PCE had been the Consensus expectation. Services PCE slowed to a modest 0.2% (5.5% y/y) versus 0.4% and 0.8% gains in the prior two months. Durable spending rose 0.4% (6.0% y/y) as unit light vehicle sales rose 1.7% (2.9% y/y). 
The PCE chain price index rose 0.3%. Less food &amp; energy prices rose 0.2% (1.4% y/y) in March. Since October monthly increases in the core PCE price index have been either 0.1% or 0.2%. 
The savings rate held steady at 1.9%. 

<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/@E7/@E711/@E71102/@E71102.HTM"> Disposition of Personal Income</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">Personal Income</td>
<td>0.4%</td>
<td>0.5%</td>
<td>4.9%</td>
<td>3.3%</td>
<td>2.3%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.4%</td>
<td>0.4%</td>
<td>5.9%</td>
<td>5.0%</td>
<td>4.8%</td>
<td>4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>1.9%</td>
<td>1.9%</td>
<td>2.0%</td>
<td>2.1%</td>
<td>2.3%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.3%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>1.8%</td>
<td>1.4%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Improved Late in April, But Fell For The Month 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 30, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040430b.jpg" width="353">
The University of Michigan&#146;s consumer sentiment index for the full month of April fell to 94.2 from 95.8 in March. The reading about equaled Consensus expectations and represented an improvement from the mid-month reading of 93.2.
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 slipped 1.7% in April to 105.0. The expectations index fell 1.7% to 87.3. Both figures were slightly improved from the mid-month readings.
The figures contrasted with the moderate improvement in Consumer Confidence in April reported earlier by the Conference Board. During the last ten years there has been an 84% correlation between the y/y change in the two measures.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<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"> 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">Consumer Sentiment</td>
<td>94.2</td>
<td>95.8</td>
<td>9.5%</td>
<td>87.6</td>
<td>89.6</td>
<td>89.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>105.0</td>
<td>106.8</td>
<td>8.9%</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>87.3</td>
<td>88.8</td>
<td>10.1%</td>
<td>81.4</td>
<td>84.6</td>
<td>82.3</td>
</tr>
</tbody>
</table>
Chicago Purchasing Agents' Index Strong 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 30, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040430c.jpg" width="353">
The April Chicago Purchasing Managers Business Barometer rose to 63.9 from 57.6 in March. The increase beat Consensus expectations for a gain to 61.0 and was to a level just short of the ten year high in January.
During the last ten years there has been an 83% correlation between the level of the Chicago Business Barometer and quarterly growth in factory sector industrial output. There has been a 48% correlation with growth in real GDP.
The new orders index jumped to 65.1 from 60.4, recovering much of the 7.1 point drop in March. Production rose 5.7 points to 64.8 but this index still is well off the January high of 76.5.
Employment improved modestly to 50.9 versus 49.2 in March and versus 50.8 in 1Q. During the last twenty years there has been a 71% correlation between the level of this employment index and the y/y change in factory sector payroll employment.
The index of prices paid was again firm and rose to 76.1.

<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/@EF05/@EF05.HTM"> Chicago Purchasing Managers Index, SA</a></th>
<th scope="col"> April</th>
<th scope="col">Mar</th>
<th scope="col">April&nbsp; &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Barometer</td>
<td>63.9</td>
<td>57.6</td>
<td>47.3</td>
<td>54.7</td>
<td>52.7</td>
<td>41.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>65.1</td>
<td>60.4</td>
<td>44.0</td>
<td>58.0</td>
<td>56.2</td>
<td>42.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>76.1</td>
<td>75.7</td>
<td>54.9</td>
<td>55.8</td>
<td>56.9</td>
<td>50.4</td>
</tr>
</tbody>
</table>
</body>
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Personal income rose 0.4% (+4.9% y/y) last month following an upwardly revised 0.5% gain in February. Consensus expectations had been for a 0.4% rise. Wage & salary growth cooled to 0.2% (+3.7% y/y) after 0.5% and 0.7% gains in the [...]

U.S. Personal Income & Spending Rose Moderately

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040429e.jpg" width="353">
Business leaders in France and Italy tend to think alike, as suggested by the chart at left. The French &quot;General Outlook&quot; index for production has a 75% correlation with the Business Confidence Indicator in Italy.
However, in recent months, these gauges have had opposing moves. In France, a firm recovery in business sentiment during much of 2003 looks to be fading, as the INSEE outlook measure for April slipped back below zero. In Italy, though, improvement persists after a brief setback right at year-end 2003. The &quot;business outlook indicator&quot; sits at 96.5, its highest since May 2002. The accompanying measure of the current assessment of orders for total industry gained from -17 in February and March to -12 in April, also the best reading since the spring of 2002.
Possibly, these divergent movements -- and they&#39;re not dramatic, so we shouldn&#39;t make too much of them -- are tied to currently uncertain prospects for prices. In France, the &quot;general industrial price level trend&quot; jumped in April to +18 from +6 in both prior months, but expectations for selling prices deteriorated to -6, the weakest in seven months. We can surmise that rising commodity prices, especially for energy, are pushing up input prices, but clearly businesses in France are not optimistic about being able to pass those through to their customers.
In Italy, though, forecast sales prices remain firm. At +11 in both March and April, this is the most favorable outlook for pricing in over three years. Thus, it looks that a better market tone is keeping Italian business executives relatively more upbeat than those in France.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">% Balance, except where noted</th>
<th scope="col">Apr 2004</th>
<th scope="col">Mar 2004</th>
<th scope="col">Feb 2004</th>
<th scope="col">Year Ago</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">France INSEE Survey: Outlook for Production Trend</td>
<td>-10</td>
<td>5</td>
<td>11</td>
<td>-60</td>
<td>-29</td>
<td>-22</td>
<td>-23</td>
</tr>
<tr>
<td class="firstcol">Price Trend</td>
<td>18</td>
<td>6</td>
<td>6</td>
<td>1</td>
<td>-7</td>
<td>3</td>
<td>12</td>
</tr>
<tr class="odd">
<td class="firstcol">Likely Sales Price</td>
<td>-6</td>
<td>-3</td>
<td>-1</td>
<td>-6</td>
<td>-7</td>
<td>-5</td>
<td>-1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy ISAE Survey: Business Confidence Indicator (1995=100)</td>
<td>96.5</td>
<td>93.6</td>
<td>92.7</td>
<td>90.5</td>
<td>92.4</td>
<td>93.9</td>
<td>91.9</td>
</tr>
<tr>
<td class="firstcol">Total Industry Assessment of Orders</td>
<td>-12</td>
<td>-17</td>
<td>-17</td>
<td>-23</td>
<td>-19</td>
<td>-15</td>
<td>-14</td>
</tr>
<tr class="odd">
<td class="firstcol">Production Forecast</td>
<td>20</td>
<td>19</td>
<td>18</td>
<td>11</td>
<td>14</td>
<td>16</td>
<td>13</td>
</tr>
<tr>
<td class="firstcol">Selling Prices</td>
<td>11</td>
<td>11</td>
<td>9</td>
<td>8</td>
<td>6</td>
<td>6</td>
<td>8</td>
</tr>
</tbody>
</table>
</body>
</html>

Business leaders in France and Italy tend to think alike, as suggested by the chart at left. The French "General Outlook" index for production has a 75% correlation with the Business Confidence Indicator in Italy. However, in recent [...]

Business Sentiment Up in Italy, Down in France

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040429a.jpg" width="353">
US real GDP grew a less than expected 4.2% last quarter, about the same as in 4Q03. During the last four quarters GDP growth of 4.9% is an improvement from 0.0% at the end of 2001 and the fastest since 1984. The Consensus expectation was for 5.0% growth in 1Q.
Personal consumption expenditures grew at a 3.8% (4.3% y/y) rate, up a bit from 3.2% growth in 4Q. The increase was held back by a 4.7% decline in durables spending, down due to lower light vehicle sales.
Nonresidential fixed investment rose 7.2% (AR, 9.4% y/y), down slightly from the 10.9% and 12.8% growth during the prior two quarters. Structures investment fell for the third straight quarter but equipment &amp; software investment held firm at 11.4% (12.9% y/y).
Residential investment growth was light at 2.1% (8.8% y/y), down from 7.9% and 21.9% growth in the prior two quarters. The rise actually was a bit better than suggested by the monthly reports on construction.
Government spending rose at only a 2.0% rate due to a 2.6% (-0.5% y/y) decline in state &amp; local. Federal spending jumped 10.1% (8.5% y/y) on a 15.1% (13.5% y/y) rise in defense spending.
Additional investment in inventories added 0.3 percentage points to GDP growth, half the contribution in 4Q.
Trade sector improvement added marginally to GDP growth as exports grew 3.2% (7.8% y/y) and imports rose 2.0% (6.9% y/y).
Corporate profits for 4Q03 were unrevised. Operating profits rose 7.2% (29.0% y/y) following a 9.9% jump in 3Q. &quot;Recent Revisions to Corporate Profits: What We Know and When We Knew It&quot; from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/newsevents/news/research/2004/rp040323.html"> here</a>.
Prices rose at the fastest clip since 2Q 2001. The 2.5% rise in the chain price index was goosed by a 3.2% rise in the PCE price index. Non-durable prices surged 5.3% on higher gasoline prices. Durable goods prices have been falling since 1995 though the rate of decline was a modest 0.3% in 1Q. Business equipment &amp; software prices fell 0.5% (-0.0% y/y). <table border="1" cellpadding="0" cellspacing="0" width="100%"><tr><td valign="top" width="211"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM"> Chained 2000$, % AR</a></td><td align="center" valign="top" width="118"> 1Q &#39;04 (Advance)</td><td align="center" valign="top" width="86"> 4Q &#39;03 (Final)</td><td align="center" valign="top" width="60"> Y/Y</td><td align="center" valign="top" width="60">2003</td><td align="center" valign="top" width="60">2002</td><td align="center" valign="top" width="60">2001</td></tr><tr><td valign="top" width="211">GDP</td><td align="center" valign="top" width="118">4.2%</td><td align="center" valign="top" width="86">4.1%</td><td align="center" valign="top" width="60">4.9%</td><td align="center" valign="top" width="60">3.1%</td><td align="center" valign="top" width="60">2.2%</td><td align="center" valign="top" width="60">0.5%</td></tr><tr><td valign="top" width="211"> Inventory Effect</td><td align="center" valign="top" width="118">0.3%</td><td align="center" valign="top" width="86">0.7%</td><td align="center" valign="top" width="60">0.2%</td><td align="center" valign="top" width="60">-0.1%</td><td align="center" valign="top" width="60">0.4%</td><td align="center" valign="top" width="60">-0.9%</td></tr><tr><td valign="top" width="211">Final Sales</td><td align="center" valign="top" width="118">3.9%</td><td align="center" valign="top" width="86">3.4%</td><td align="center" valign="top" width="60">4.7%</td><td align="center" valign="top" width="60">3.2%</td><td align="center" valign="top" width="60">1.8%</td><td align="center" valign="top" width="60">1.4%</td></tr><tr><td valign="top" width="211"> Trade Effect</td><td align="center" valign="top" width="118">0.0%</td><td align="center" valign="top" width="86">-0.3%</td><td align="center" valign="top" width="60">0.0%</td><td align="center" valign="top" width="60">-0.2%</td><td align="center" valign="top" width="60">-0.6%</td><td align="center" valign="top" width="60">-0.2%</td></tr><tr><td valign="top" width="211">Domestic Final Demand</td><td align="center" valign="top" width="118">3.7%</td><td align="center" valign="top" width="86">3.6%</td><td align="center" valign="top" width="60">4.7%</td><td align="center" valign="top" width="60">3.4%</td><td align="center" valign="top" width="60">2.4%</td><td align="center" valign="top" width="60">1.6%</td></tr><tr><td valign="top" width="211">Chained GDP Price Index</td><td align="center" valign="top" width="118">2.5%</td><td align="center" valign="top" width="86">1.5%</td><td align="center" valign="top" width="60">1.7%</td><td align="center" valign="top" width="60">1.7%</td><td align="center" valign="top" width="60">1.5%</td><td align="center" valign="top" width="60">2.4%</td></tr></table>

<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/@E7/@E701/@E701.HTM"> Chained 2000$, % AR</a></th>
<th scope="col"> 1Q &#39;04 (Advance)</th>
<th scope="col"> 4Q &#39;03 &nbsp; &nbsp;(Final)</th>
<th scope="col"> Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>4.2%</td>
<td>4.1%</td>
<td>&nbsp;4.9%</td>
<td>3.1%</td>
<td>2.2%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.3%</td>
<td>0.7%</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>0.4%</td>
<td>-0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>3.9%</td>
<td>3.4%</td>
<td>4.7%</td>
<td>3.2%</td>
<td>1.8%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>0.0%</td>
<td>-0.2%</td>
<td>-0.6%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>3.7%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>3.4%</td>
<td>2.4%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.5%</td>
<td>1.5%</td>
<td>1.7%</td>
<td>1.7%</td>
<td>1.5%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>
Benefits Drove 1Q'04 Employment Cost Index 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 29, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040429c.jpg" width="353">
The employment cost index for workers in private industry jumped 1.1% last quarter, ahead of Consensus expectations for a 0.9% gain.
Benefit costs in private industry surged 2.6% in 1Q, the fastest quarterly increase since 1982. The gain was driven by a rise in payments by companies to defined benefit pension plans. Health insurance benefit inflation cooled slightly to 9.3% y/y from 10.5% in 2003.
Wages and salaries, which account for roughly 70% of the compensation index, grew 0.6% last quarter versus 0.5% gain in 4Q.

<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/@EB08/@EB08.HTM"> ECI- Private Industry Workers</a></th>
<th scope="col"> 1Q&#39;04</th>
<th scope="col">4Q&#39;03</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">Compensation</td>
<td>1.1%</td>
<td>0.8%</td>
<td>3.9%</td>
<td>4.0%</td>
<td>3.2%</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp; Salaries</td>
<td>0.6%</td>
<td>0.5%</td>
<td>2.6%</td>
<td>3.0%</td>
<td>2.7%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>2.6%</td>
<td>1.4%</td>
<td>7.0%</td>
<td>6.4%</td>
<td>4.7%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
Jobless Claims Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 29, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040429d.jpg" width="353">
Initial claims for jobless insurance fell 18,000 last week to 338,000, the lowest level in three weeks. Consensus expectations had been for a decline to 345,000 claims. Claims during the prior week were revised up slightly.
The 4-week moving average of initial claims fell slightly to 346,500 (-20.0% y/y).
Continuing claims for unemployment insurance rose 3,000 but the prior week&#39;s jump was revised down to 43,000.
The insured rate of unemployment was unchanged at 2.4% for the eighth consecutive week. This unemployment rate averaged 2.8% during 2002 and 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/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col"> 4/24/04</th>
<th scope="col">4/17/04</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; 338</td>
<td>356</td>
<td>-23.0%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>3,013</td>
<td>-17.3%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
Help-Wanted Advertising Dipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 29, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040429b.jpg" width="353">
The Conference Board&#146;s National Index of Help-Wanted Advertising ticked lower to 39 last month versus 40 in February. Despite the drop, the 1Q average improved slightly versus most of last year.
Improvement in the Manpower Employment Outlook Survey for 2Q04 portends a gain in the help wanted index. During the last ten years there has been a 74% correlation between the help wanted index and the Manpower Survey.
There has been a 93% correlation between the level of help-wanted advertising and the year-to-year change in non-farm payrolls.
A note of caution came as the proportion of labor markets with rising want-ad volume fell sharply to 22% from over 60% in January &amp; February.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#39;03</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>39</td>
<td>40</td>
<td>39</td>
</tr>
</tbody>
</table>
</body>
</html>

US real GDP grew a less than expected 4.2% last quarter, about the same as in 4Q03. During the last four quarters GDP growth of 4.9% is an improvement from 0.0% at the end of 2001 and the fastest since 1984. The Consensus expectation [...]

Q1 2004 GDP Light at 4.2%

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

260205A2.jpg

260205B2.jpg

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

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

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

260205C2.jpg

260205D2.jpg

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

U.S. Initial Unemployment Claims Surged in Latest Week

260205E.jpg

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

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

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

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

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

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

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

Economy in Brief: 2004

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