Tom Moeller

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050615f.jpg" width="353"></p>
<p>Total business inventories rose just 0.3% in April, the weakest monthly increase this year. The gain lowered the three month change in inventories to 5.5% (AR), less than half the 12.1% peak rate of accumulation through last August. The ratio of inventories-to-sales fell back to the record low of 1.30.</p>
<p>Retail inventories rose 0.2% in April, the same as during a downwardly revised March. The three month change in retail inventories fell to 3.1% versus the peak of 12.4% one year ago. Excluding autos inventories also repeated a 0.2% gain in April and the three month rate of accumulation fell to 3.9% from 11.0% just this past January. Growth in inventories of furniture &amp; electronics dropped to 4.3% from 18.5%, general merchandise inventory accumulation slowed to 7.3% from 12.1% and apparel inventories rose 5.8% versus a three month rate of gain of 12.2% through March.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050615e.jpg" width="353"></p>
<p>Factory sector inventories ticked up just 0.1% in April and three month growth fell to 5.8%, half the three month rate in March.</p>
<p>Wholesale inventories rose a strong 0.8% but here too the three month growth rate of 8.2% is less than half last summer&#39;s peak rate of gain. During the last ten years there has been a 64% correlation between the y/y change in wholesale inventories and the change in imports of merchandise.</p>
<p>Overall business sales rose a sharp 1.2% (8.3% y/y).</p>
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<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></b></th>
<th scope="col"><u><b>April</b></u></th>
<th scope="col"><u><b>March</b></u></th>
<th scope="col"><u><b>Y/Y</b></u></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><u><b>2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
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<td class="firstcol">Total</td>
<td>0.3%</td>
<td>0.5%</td>
<td>7.6%</td>
<td>7.7%</td>
<td>1.4%</td>
<td>1.6%</td>
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<td class="firstcol">&nbsp; Retail</td>
<td>0.2%</td>
<td>0.2%</td>
<td>3.6%</td>
<td>5.7%</td>
<td>3.9%</td>
<td>5.9%</td>
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<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.2%</td>
<td>0.2%</td>
<td>6.1%</td>
<td>5.9%</td>
<td>2.0%</td>
<td>2.3%</td>
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<td class="firstcol">&nbsp; Wholesale</td>
<td>0.8%</td>
<td>0.6%</td>
<td>11.8%</td>
<td>10.8%</td>
<td>2.0%</td>
<td>1.2%</td>
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<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.1%</td>
<td>0.7%</td>
<td>8.6%</td>
<td>7.5%</td>
<td>-1.3%</td>
<td>-1.8%</td>
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Total business inventories rose just 0.3% in April, the weakest monthly increase this year. The gain lowered the three month change in inventories to 5.5% (AR), less than half the 12.1% peak rate of accumulation through last August. [...]

U.S. Business Inventory Accumulation Slowing

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050615d.jpg" width="353"></p>
<p>The Empire State Index of General Business Conditions in New York&#39;s manufacturing industries turned positive in June with a rise to 11.65 following a one blip into negative territory during May.</p>
<p>The new orders component jumped to +8.23 following two months negative and the shipments index also was slightly positive after two months negative. The employment index recovered but still indicated little if any job growth. Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.</p>
<p>The prices paid index fell to the lowest level since last January.</p>
<p>Expectations for business conditions in six months continued the slide which began in late 2003. Expectations for future capital spending dropped sharply to the lowest since April 2003.</p>
<p>The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.</p>
<p>For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.</p>
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<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></b><b> </b></th>
<th scope="col"><u><b>June</b></u></th>
<th scope="col"><u><b>May</b></u></th>
<th scope="col"><b><u>June &#39;04</u></b></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><b><u>2003</u></b></th>
<th scope="col"><b><u>2002</u></b></th>
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<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>11.65</td>
<td>-11.06</td>
<td>30.19</td>
<td>28.76</td>
<td>16.17</td>
<td>7.19</td>
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The Empire State Index of General Business Conditions in New York's manufacturing industries turned positive in June with a rise to 11.65 following a one blip into negative territory during May. The new orders component jumped to [...]

Empire State Index Again Positive

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<p>With a 0.3% rise in May, industrial production recovered all of the prior month&#39;s deepened 0.3% decline. Consensus expectations had been for a 0.2% gain.</p>
<p>The headline figure masked a sharper improvement in factory sector output which rose 0.6% (3.3% y/y) following two months of modest decline. Scattered industry gains were strongest for machinery (6.7% y/y), electrical equipment (2.2% y/y) aerospace (7.9% y/y) and high tech (19.5% y/y). Excluding the high tech sector factory output rose 0.4% (2.3% y/y) and reversed the decline during the prior two months.</p>
<p>Motor vehicle output rose a slight 0.1% (+1.4% y/y) following two months of sharp decline. Output of furniture fell 0.2% (-3.6% y/y), the fourth monthly decline this year.</p>
<p>Total capacity utilization rose to 79.4% and capacity grew 1.2% y/y. Factory sector utilization rose to 78.2% versus 76.7% last May and capacity rose 1.4% y/y.<br><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050615c.jpg" width="353"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050615b.jpg" width="353"></p>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM"><b>Production &amp; Capacity</b></a></th>
<th scope="col"><b>May</b></th>
<th scope="col"><b>April</b></th>
<th scope="col"><u><b>Y/Y</b></u></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><u><b>2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
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<td class="firstcol">Industrial Production</td>
<td>0.3%</td>
<td>-0.3%</td>
<td>2.7%</td>
<td>4.1%</td>
<td>-0.0%</td>
<td>-0.3%</td>
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<td class="firstcol">&nbsp; Consumer Goods</td>
<td>0.5%</td>
<td>-0.9%</td>
<td>1.4%</td>
<td>2.7%</td>
<td>0.3%</td>
<td>1.4%</td>
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<td class="firstcol">&nbsp; Business Equipment</td>
<td>0.8%</td>
<td>1.0%</td>
<td>8.1%</td>
<td>9.5%</td>
<td>1.2%</td>
<td>-7.9%</td>
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<td class="firstcol">Capacity Utilization</td>
<td>79.4%</td>
<td>79.1%</td>
<td>78.2% (05/04)</td>
<td>78.1%</td>
<td>75.5%</td>
<td>75.3%</td>
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With a 0.3% rise in May, industrial production recovered all of the prior month's deepened 0.3% decline. Consensus expectations had been for a 0.2% gain. The headline figure masked a sharper improvement in factory sector output which [...]

Industrial Production Recovered

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050615a.jpg" width="353"></p>
<p>The CPI-U fell 0.1% in May, the first m/m decline since last July and compared to Consensus expectations for a 0.1% rise. During the first five months of 2005 the CPI is up 4.7% at an annual rate.</p>
<p>Pricing power less food &amp; energy continued modest. A 0.1% increase followed no change in April and during the first five months of this year the core CPI is up 2.4% at an annual rate. Consensus expectations had been for a 0.2% May increase.</p>
<p>The 0.2% increase in core goods prices recovered some of April&#39;s decline led by a 0.5% m/m gain in used car &amp; truck prices and a 0.5% gain in medical care commodities. Apparel prices were unchanged (-0.8% y/y) following April&#39;s 0.6% decline and home furnishings &amp; operation prices rose 0.6% (1.1% y/y) due to strength in the &quot;other&quot; category. New motor vehicle prices rose 0.1% (0.9% y/y).</p>
<p>Services price inflation eased from the low reading in April. Shelter prices were unchanged for the second consecutive month (2.4% y/y) and medical care services prices rose the same 0.3% as during April (5.0% y/y). Public transportation prices were strong for the third consecutive month though the 0.7% gain (3.5% y/y) was down from 1.7% and 1.3% during the prior two months. School tuition costs firmed 0.7% (6.7% y/y).</p>
<p>Energy prices fell 2.0% led by a 4.4% drop in gasoline prices which have fallen another 1.8% so far in June to an average $2.12 per gallon.</p>
<p>Food price inflation eased to 0.1% following the 0.7% jump in April.</p>
<p>The chained CPI which adjusts for shifts in the mix of consumer purchases was unchanged and less food &amp; energy chain prices fell 0.1%.</p>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a></th>
<th scope="col"><u><b>May</b></u></th>
<th scope="col"><u><b>April</b></u></th>
<th scope="col"><b><u>Y/Y</u></b></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><b><u>2003</u></b></th>
<th scope="col"><b><u>2002</u></b></th>
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<td class="firstcol">Total&nbsp;</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>2.8%</td>
<td>2.7%</td>
<td>2.3%</td>
<td>1.6%</td>
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<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.1%</td>
<td>0.0%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>2.3%</td>
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<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>0.6%</td>
<td>-0.9%</td>
<td>-2.0%</td>
<td>-1.1%</td>
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<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.7%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>3.8%</td>
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<td class="firstcol">&nbsp;Energy</td>
<td>-2.0%</td>
<td>4.5%</td>
<td>9.8%</td>
<td>10.9%</td>
<td>12.2%</td>
<td>-5.9%</td>
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<td class="firstcol">&nbsp;Food</td>
<td>0.1%</td>
<td>0.7%</td>
<td>2.4%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</td>
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<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a></td>
<td>0.0%</td>
<td>0.5%</td>
<td>2.5%</td>
<td>2.3%</td>
<td>2.0%</td>
<td>1.3%</td>
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<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>1.9%</td>
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The CPI-U fell 0.1% in May, the first m/m decline since last July and compared to Consensus expectations for a 0.1% rise. During the first five months of 2005 the CPI is up 4.7% at an annual rate. Pricing power less food & energy [...]

Consumer Price Inflation Eased

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<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050615a.jpg" width="353"></p>
<p>The CPI-U fell 0.1% in May, the first m/m decline since last July and compared to Consensus expectations for a 0.1% rise. During the first five months of 2005 the CPI is up 4.7% at an annual rate.</p>
<p>Pricing power less food &amp; energy continued modest. A 0.1% increase followed no change in April and during the first five months of this year the core CPI is up 2.4% at an annual rate. Consensus expectations had been for a 0.2% May increase.</p>
<p>The 0.2% increase in core goods prices recovered some of April&#39;s decline led by a 0.5% m/m gain in used car &amp; truck prices and a 0.5% gain in medical care commodities. Apparel prices were unchanged (-0.8% y/y) following April&#39;s 0.6% decline and home furnishings &amp; operation prices rose 0.6% (1.1% y/y) due to strength in the &quot;other&quot; category. New motor vehicle prices rose 0.1% (0.9% y/y).</p>
<p>Services price inflation eased from the low reading in April. Shelter prices were unchanged for the second consecutive month (2.4% y/y) and medical care services prices rose the same 0.3% as during April (5.0% y/y). Public transportation prices were strong for the third consecutive month though the 0.7% gain (3.5% y/y) was down from 1.7% and 1.3% during the prior two months. School tuition costs firmed 0.7% (6.7% y/y).</p>
<p>Energy prices fell 2.0% led by a 4.4% drop in gasoline prices which have fallen another 1.8% so far in June to an average $2.12 per gallon.</p>
<p>Food price inflation eased to 0.1% following the 0.7% jump in April.</p>
<p>The chained CPI which adjusts for shifts in the mix of consumer purchases was unchanged and less food &amp; energy chain prices fell 0.1%.</p>
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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a></th>
<th scope="col"><u><b>May</b></u></th>
<th scope="col"><u><b>April</b></u></th>
<th scope="col"><b><u>Y/Y</u></b></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><b><u>2003</u></b></th>
<th scope="col"><b><u>2002</u></b></th>
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</thead>
<tbody>
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<td class="firstcol">Total&nbsp;</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>2.8%</td>
<td>2.7%</td>
<td>2.3%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.1%</td>
<td>0.0%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>2.3%</td>
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<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>0.6%</td>
<td>-0.9%</td>
<td>-2.0%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.7%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>-2.0%</td>
<td>4.5%</td>
<td>9.8%</td>
<td>10.9%</td>
<td>12.2%</td>
<td>-5.9%</td>
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<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.1%</td>
<td>0.7%</td>
<td>2.4%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</td>
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<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a></td>
<td>0.0%</td>
<td>0.5%</td>
<td>2.5%</td>
<td>2.3%</td>
<td>2.0%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>1.9%</td>
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</tbody>
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<span id="articletitle">Industrial Production Recovered</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom Moeller</a> June 15, 2005</span>
<span id="articletext">
<p></p>
<p>With a 0.3% rise in May, industrial production recovered all of the prior month&#39;s deepened 0.3% decline. Consensus expectations had been for a 0.2% gain.</p>
<p>The headline figure masked a sharper improvement in factory sector output which rose 0.6% (3.3% y/y) following two months of modest decline. Scattered industry gains were strongest for machinery (6.7% y/y), electrical equipment (2.2% y/y) aerospace (7.9% y/y) and high tech (19.5% y/y). Excluding the high tech sector factory output rose 0.4% (2.3% y/y) and reversed the decline during the prior two months.</p>
<p>Motor vehicle output rose a slight 0.1% (+1.4% y/y) following two months of sharp decline. Output of furniture fell 0.2% (-3.6% y/y), the fourth monthly decline this year.</p>
<p>Total capacity utilization rose to 79.4% and capacity grew 1.2% y/y. Factory sector utilization rose to 78.2% versus 76.7% last May and capacity rose 1.4% y/y.<br><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050615c.jpg" width="353"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050615b.jpg" width="353"></p>
</span>
<table border="0" cellspacing="0" width="100%">

</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/@EA/@EA.HTM"><b>Production &amp; Capacity</b></a></th>
<th scope="col"><b>May</b></th>
<th scope="col"><b>April</b></th>
<th scope="col"><u><b>Y/Y</b></u></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><u><b>2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production</td>
<td>0.3%</td>
<td>-0.3%</td>
<td>2.7%</td>
<td>4.1%</td>
<td>-0.0%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>0.5%</td>
<td>-0.9%</td>
<td>1.4%</td>
<td>2.7%</td>
<td>0.3%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Business Equipment</td>
<td>0.8%</td>
<td>1.0%</td>
<td>8.1%</td>
<td>9.5%</td>
<td>1.2%</td>
<td>-7.9%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>79.4%</td>
<td>79.1%</td>
<td>78.2% (05/04)</td>
<td>78.1%</td>
<td>75.5%</td>
<td>75.3%</td>
</tr>
</tbody>
</table>
<span id="articletitle">U.S. Business Inventory Accumulation Slowing</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom Moeller</a> June 15, 2005</span>
<span id="articletext">
<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050615f.jpg" width="353"></p>
<p>Total business inventories rose just 0.3% in April, the weakest monthly increase this year. The gain lowered the three month change in inventories to 5.5% (AR), less than half the 12.1% peak rate of accumulation through last August. The ratio of inventories-to-sales fell back to the record low of 1.30.</p>
<p>Retail inventories rose 0.2% in April, the same as during a downwardly revised March. The three month change in retail inventories fell to 3.1% versus the peak of 12.4% one year ago. Excluding autos inventories also repeated a 0.2% gain in April and the three month rate of accumulation fell to 3.9% from 11.0% just this past January. Growth in inventories of furniture &amp; electronics dropped to 4.3% from 18.5%, general merchandise inventory accumulation slowed to 7.3% from 12.1% and apparel inventories rose 5.8% versus a three month rate of gain of 12.2% through March.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050615e.jpg" width="353"></p>
<p>Factory sector inventories ticked up just 0.1% in April and three month growth fell to 5.8%, half the three month rate in March.</p>
<p>Wholesale inventories rose a strong 0.8% but here too the three month growth rate of 8.2% is less than half last summer&#39;s peak rate of gain. During the last ten years there has been a 64% correlation between the y/y change in wholesale inventories and the change in imports of merchandise.</p>
<p>Overall business sales rose a sharp 1.2% (8.3% y/y).</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></b></th>
<th scope="col"><u><b>April</b></u></th>
<th scope="col"><u><b>March</b></u></th>
<th scope="col"><u><b>Y/Y</b></u></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><u><b>2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.3%</td>
<td>0.5%</td>
<td>7.6%</td>
<td>7.7%</td>
<td>1.4%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.2%</td>
<td>0.2%</td>
<td>3.6%</td>
<td>5.7%</td>
<td>3.9%</td>
<td>5.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.2%</td>
<td>0.2%</td>
<td>6.1%</td>
<td>5.9%</td>
<td>2.0%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.8%</td>
<td>0.6%</td>
<td>11.8%</td>
<td>10.8%</td>
<td>2.0%</td>
<td>1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.1%</td>
<td>0.7%</td>
<td>8.6%</td>
<td>7.5%</td>
<td>-1.3%</td>
<td>-1.8%</td>
</tr>
</tbody>
</table>
<span id="articletitle">Empire State Index Again Positive</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom Moeller</a> June 15, 2005</span>
<span id="articletext">
<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050615d.jpg" width="353"></p>
<p>The Empire State Index of General Business Conditions in New York&#39;s manufacturing industries turned positive in June with a rise to 11.65 following a one blip into negative territory during May.</p>
<p>The new orders component jumped to +8.23 following two months negative and the shipments index also was slightly positive after two months negative. The employment index recovered but still indicated little if any job growth. Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.</p>
<p>The prices paid index fell to the lowest level since last January.</p>
<p>Expectations for business conditions in six months continued the slide which began in late 2003. Expectations for future capital spending dropped sharply to the lowest since April 2003.</p>
<p>The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.</p>
<p>For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.</p>
</span>
<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></b><b> </b></th>
<th scope="col"><u><b>June</b></u></th>
<th scope="col"><u><b>May</b></u></th>
<th scope="col"><b><u>June &#39;04</u></b></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><b><u>2003</u></b></th>
<th scope="col"><b><u>2002</u></b></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>11.65</td>
<td>-11.06</td>
<td>30.19</td>
<td>28.76</td>
<td>16.17</td>
<td>7.19</td>
</tr>
</tbody>
</table>
<span id="articletitle">Mortgage Applications Surged As Rates Remained Low</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom Moeller</a> June 15, 2005</span>
<span id="articletext">
<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050615g.jpg" width="353"></p>
<p>Total mortgage applications surged 17.4% last week following a 6.5% rise the week prior. Applications so far in June are 12.6% ahead of the May average which rose 6.5% versus April, according to the Mortgage Bankers Association.</p>
<p>Applications to refinance rose by one quarter w/w and are 23.8% higher so far in June than in May which rose 11.2% from April.</p>
<p>Purchase applications rose 10.4% w/w and this month are 4.0% ahead of May which rose 3.1% from April. During the last ten years there has been a 50% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.</p>
<p>The effective interest rate on a conventional 30-year mortgage ticked up to 5.87% from 5.78% the week prior but remained down from the 5.92% averaged during May. The effective rate on a 15-year mortgage rose 10 basis points to 5.51%.</p>
<p>The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.</p>
</span>
<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/@S5/@S5.HTM"><b>MBA Mortgage Applications (3/16/90=100)</b></a></th>
<th scope="col"><u><b>06/10/05</b></u></th>
<th scope="col"><u><b>06/03/05</b></u></th>
<th scope="col"><u><b>Y/Y</b></u></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><u><b>2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>887.0</td>
<td>755.5</td>
<td>47.7%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>529.3</td>
<td>479.3</td>
<td>17.8%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,967.4</td>
<td>2,362.1</td>
<td>100.6%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
<span id="articletitle">Foreign Buying of US Securities Moderates, Especially Among Agency Debt</span><br>
<span id="byline">by <a href="/comment/Stone.html">Carol Stone</a> June 15, 2005</span>
<span id="articletext">
<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050615h.jpg" width="353"></p>
<p>Net purchases of securities by foreign investors in US markets totaled $47.4 billion in April, somewhat larger than March&#39;s $40.6 billion. These last two months, however, are well below recent trends, which generated an average of $62.5 billion over the last 12 months and $66.3 billion for 2004.</p>
<p>This most recent slowdown in net purchases has come mainly in federal agency securities, so-called &quot;GSEs&quot; (government-sponsored enterprises). March and April are the weakest two months since mid-2003, and they represent a general flattening of what had been building momentum in this sector until that time in mid-2003 when financial irregularities at Fannie Mae and Freddie Mac came to the fore. Importantly, and in contrast, the pace of net foreign purchases of US Treasuries has been sustained at about $25 billion a month. Corporate debt purchases have continued to trend higher, as evident in the first graph, which shows 12-month averages of corporate bonds along with the flattening pattern of GSE debt purchases.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050615i.jpg" width="353"></p>
<p>Among countries, monthly movements have been erratic. Japanese investors were net sellers of US securities in February and March, but in April, the beginning of their financial year, they came back in for $11.5 billion worth. This parallels the general pattern in the Japanese data that we discussed here last Friday. China&#39;s results are a bit surprising. Those investors were moving rapidly into US securities through mid-2003, but since then have slowed their participation. They sharply reduced purchases of both Treasuries and GSEs, while gradually picking up more corporate bonds. These last, however, remain quite modest. Over the last two years, then, the Chinese purchases of US securities have been smaller, even as their trade surplus with the US has continued to widen.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><b>Net Foreign Purchases of Securities in US Markets<br> (Billions US$)</b></th>
<th scope="col"><b>Apr 2005  </b></th>
<th scope="col"><b>Mar 2005  </b></th>
<th scope="col"><b>Feb 2005   </b></th>
<th scope="col"><b>Last 12 Months Average </b></th>
<b>Monthly Average</b>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><b>2004 </b></td>
<td><b>2003</b></td>
<td><b>2002</b></td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>47.4</td>
<td>40.6</td>
<td>84.1</td>
<td>62.5</td>
<td>66.3</td>
<td>56.1</td>
<td>47.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Treasuries</td>
<td>24.7</td>
<td>27.8</td>
<td>42.5</td>
<td>25.3</td>
<td>29.3</td>
<td>23.1</td>
<td>10.0</td>
</tr>
<tr>
<td class="firstcol">Federal Agencies (mostly &quot;GSEs&quot;)</td>
<td>6.7</td>
<td>7.5</td>
<td>16.1</td>
<td>17.6</td>
<td>18.9</td>
<td>13.3</td>
<td>16.3</td>
</tr>
<tr class="odd">
<td class="firstcol">US Corporate Bonds</td>
<td>18.0</td>
<td>21.9</td>
<td>32.0</td>
<td>26.3</td>
<td>24.8</td>
<td>22.3</td>
<td>15.2</td>
</tr>
<tr>
<td class="firstcol">US Corporate Stocks</td>
<td>4.3</td>
<td>1.7</td>
<td>7.4</td>
<td>4.5</td>
<td>2.3</td>
<td>3.0</td>
<td>4.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign Bonds</td>
<td>-4.6</td>
<td>-3.9</td>
<td>1.4</td>
<td>-3.2</td>
<td>-2.1</td>
<td>1.6</td>
<td>2.4</td>
</tr>
<tr>
<td class="firstcol">Foreign Stocks</td>
<td>-1.6</td>
<td>-14.5</td>
<td>-15.3</td>
<td>-8.0</td>
<td>-7.0</td>
<td>-7.1</td>
<td>-0.1</td>
</tr>
</tbody>
</table>
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Louise Curley

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050614b.jpg" width="353"></p>
<p>May Inflation rates in four European countries--France, Finland, Spain and the U.K. were released today. The consumer price index in the U.K. rose 1.9% continuing at the seven year high rate reached in March. In each of the Euro Zone countries the rate of inflation declined. In France from 1.9% in April to 1.6% in May, in Spain from 3.5% to 3.0% and in Finland from 1.2$ to 0.6%.</p>
<p>The contrast between inflation rates in the U.K. and in the Euro Zone as a whole is shown in the first chart. We have used the Flash Estimate series for the Euro Zone since it contains data for May while the overall index does not. The Flash Estimate series is a fairly good proxy for the actual series. The correlation between the two series is .86. (The actual May data for the overall index will be available on Thursday of this week.) In spite of its higher growth rate, the U. K. has had a lower inflation rate than the Euro Zone, but now the U. K. rate appears to be increasing while that in the Euro Zone is declining.<br><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050614a.jpg" width="353"></p>
<p>The rate of inflation within the Euro Zone has varied widely. Two of the countries reporting data today--Finland and Spain--represent two extremes and different trends in the rate of inflation as shown in the second chart. The trend in the relatively high rate of inflation in Spain appears to be stabilizing or decelerating, while the trend in the low rate of inflation in Finland shows some signs of increasing.</p>
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<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><b>Year over Year Change in CPI</b></th>
<th scope="col"><b>May 05</b></th>
<th scope="col"><b>Apr 05</b></th>
<th scope="col"><b>Mar 04</b></th>
<th scope="col"><b>Feb 05</b></th>
<th scope="col"><b>Jan 05</b></th>
<th scope="col"><b>&nbsp;2004&nbsp;&nbsp;</b></th>
<th scope="col"><b>&nbsp;2003</b></th>
<th scope="col"><b>&nbsp;2002</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro Zone Flash Estimate</td>
<td>2.00</td>
<td>2.10</td>
<td>2.10</td>
<td>2.00</td>
<td>2.10</td>
<td>n.a.</td>
<td>n.a.</td>
<td>n.a.</td>
</tr>
<tr>
<td class="firstcol">Euro Zone&nbsp; Overall Index</td>
<td>n.a.</td>
<td>2.08</td>
<td>2.09</td>
<td>2.10</td>
<td>1.93</td>
<td>2.14</td>
<td>2.07</td>
<td>2.25</td>
</tr>
<tr class="odd">
<td class="firstcol">United Kingdom</td>
<td>1.89</td>
<td>1.89</td>
<td>1.90</td>
<td>1.63</td>
<td>1.63</td>
<td>1.34</td>
<td>1.36</td>
<td>1.27</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>1.63</td>
<td>1.91</td>
<td>1.91</td>
<td>1.73</td>
<td>1.46</td>
<td>2.13</td>
<td>2.14</td>
<td>1.88</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>2.99</td>
<td>3.46</td>
<td>3.47</td>
<td>3.26</td>
<td>3.17</td>
<td>3.05</td>
<td>3.03</td>
<td>3.53</td>
</tr>
<tr>
<td class="firstcol">Finland</td>
<td>0.62</td>
<td>1.15</td>
<td>0.88</td>
<td>0.00</td>
<td>-0.14</td>
<td>0.14</td>
<td>1.30</td>
<td>2.01</td>
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May Inflation rates in four European countries--France, Finland, Spain and the U.K. were released today. The consumer price index in the U.K. rose 1.9% continuing at the seven year high rate reached in March. In each of the Euro Zone [...]

Divergent Inflation Trends in the U.K. and the Euro Zone

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050614h.jpg" width="353"></p>
<p>The Small Business Optimism Index reported by the National Federation of Independent Business (NFIB) improved 1.0% in May and recovered less than a third of the prior month&#39;s decline. The percentage of firms expecting the economy to improve remained unchanged at a low 5%.</p>
<p>During the last ten years there has been a 64% correlation between the level of the NFIB index and the two quarter change in real GDP.</p>
<p>The job outlook brightened a bit as the percentage of firms planning to raise employment rose to 15% but remained down from the 20% of December 2003. The percentage of firms with one or more job openings remained stable at 23% which was up from the low of 18% during 2003. During the last ten years there has been a 67% correlation between hiring plans and the three month growth in nonfarm payrolls.</p>
<p>The percentage of firms planning to raise capital spending ticked up to 33% but remained well off the 38% this past December.</p>
<p>The percentage of firms raising average selling prices remained down at 23%.</p>
<p>About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.</p>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col"><u><b>May</b></u></th>
<th scope="col"><u><b>April</b></u></th>
<th scope="col"><u><b>Y/Y</b></u></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><u><b>2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
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<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>100.8</td>
<td>99.8</td>
<td>-3.5%</td>
<td>104.6</td>
<td>101.3</td>
<td>101.2</td>
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The Small Business Optimism Index reported by the National Federation of Independent Business (NFIB) improved 1.0% in May and recovered less than a third of the prior month's decline. The percentage of firms expecting the economy to [...]

Small Business Optimism Up A Bit

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050614g.jpg" width="353"></p>
<p>The Manpower Employment Outlook Survey for 3Q &#39;05 indicated further growth in U.S. jobs. The index of hiring intentions held at 21 where it has been for three quarters, indicating that a net 21% of 16,000 employers expect to increase hiring activity.</p>
<p>Since 1980 there has been a 74% correlation between the Manpower index and the y/y change in non-farm payrolls.</p>
<p>Not seasonally adjusted, 31% of employers planned to raise employment in 3Q &#39;05, the highest since late 2000, while only 6% planned to decrease employment.</p>
<p>The latest press release from Manpower Inc. covering global employment prospects can be viewed <a href="http://www.manpower.com/mpcom/viewMeos?name=US_3q05PressRelease.doc">here</a>.</p>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@SC/@SC.HTM">Manpower Employment Survey</a></th>
<th scope="col"><u><b>3Q &#39;05</b></u></th>
<th scope="col"><u><b>2Q &#39;05</b></u></th>
<th scope="col"><u><b>3Q &#39;04</b></u></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><u><b>2003</b></u></th>
<th scope="col"><u><b>2002</b></u></th>
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<td class="firstcol">All Industries - Net Higher (SA)</td>
<td>21</td>
<td>21</td>
<td>20</td>
<td>19</td>
<td>11</td>
<td>11</td>
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The Manpower Employment Outlook Survey for 3Q '05 indicated further growth in U.S. jobs. The index of hiring intentions held at 21 where it has been for three quarters, indicating that a net 21% of 16,000 employers expect to increase [...]

More Jobs Suggested by Manpower Index

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

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

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Kathleen Stephansen, CBE

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Initial claims for unemployment insurance dropped 10,000 to 214,000 in the week of December 20, from 224,000 during the week of December 13. The four-week moving average of initial claims was 216,750, a decrease of 750 from the prior week’s unrevised 217,500.

Federal government employees initially filed 805 (NSA) jobless insurance claims in the week ended December 13, after filing 1091 claims in the week ended December 6.

Continuing claims for unemployment insurance rose 38,000 to 1.923 million in the week ending December 13, after rising 55,000 to 1.885 million, revised from 1.897 million in the week ending December 6. The four-week moving average was 1.894 million in the week ending December 13, down 5,250 from 1.899 million, revised from 1,902,000 in the week ending December 6. The insured unemployment rate stood at 1.3% in the week of December 13, up from 1.2% in the week of December 6.

Federal government employees’ continuing benefits claims were 12,887 (NSA) in the week ending December 6, from 14,077 (NSA) in the week of November 29. 

The insured unemployment rate varied greatly across individual states and territories. In the week ending December 6, the highest unemployment rates were in New Jersey and Washington (both 2.40%), Massachusetts and Minnesota (both 2.10%), California and Rhode Island (both 2.00%). The lowest rates were in Florida (0.30%), and Alabama, Louisiana, North Carolina (all 0.40%). Rates in other notable states include New York (1.80%), Illinois and Pennsylvania (both 1.70%), and Texas (1.10%). These state data are not seasonally adjusted.

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


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- Initial claims declined from the prior week.
- Continuing claims rose from the prior week.
- The insured unemployment rate edged up.


U.S. Initial Claims for Unemployment Insurance Dropped in Latest Week

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Mortgage applications dropped 5.0% w/w (+49.8% y/y) in the week of December 19, after a drop of 3.8% w/w (+40.9% y/y) in the week of December 12, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house fell 3.7% w/w (+15.9% y/y) in the latest week, the third consecutive weekly decline, following a drop of 2.8% w/w (+12.3% y/y) in the December 12 week. Applications for loan refinancing dropped 5.6% w/w (+110.1% y/y) in the December 19 week after a decline of 3.6% w/w (+86.0% y/y) in the week of December 12. 

The effective interest rate on a 30-year fixed-rate loan fell 8bps to 6.48% in the week ending December 19 from 6.56% in the week ending December 12. The rate on 15-year fixed-rate mortgages dropped 5bps to 5.86% in the latest week from 5.91% in the prior week. The 30-year Jumbo rate rose 8bps to 6.63% in the December 19 week from 6.55% in the December 12 week. The rate on a 5-year ARM jumped 20bps to 5.96% in the latest week from 5.76% in the December 12 week.

The share of applications for refinancing an existing loan edged up to 59.1% of total applications in the December19 week from 59.0% in the week ending December 12. The adjustable-rate mortgage (ARM) share of activity rose to 8.1% in the latest week from 7.2% in the December 12 week.

The average size of a mortgage loan edged down 0.1% w/w (+7.8% y/y) to $399,700 in the week ending December 19, following a rise of 1.5% w/w (6.4% y/y) to $400,000 in the December 12 week. The average size of a purchase loan rose 1.0% w/w (1.1% y/y) to $428,600 in the latest week, after rising 0.6% w/w (-0.3% y/y) to $424,200 in the prior week. The average size of a loan to refinance a mortgage declined 0.9% w/w (+24.9% y/y) to $379,700 in the December 19 week, following a rise of 2.3% w/w (19.8% y/y) to $383,300 in the week ending December 12.

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


- Both purchase applications and refinancing loan applications fell in the latest week.
- Effective interest rate on 30-year fixed loans fell to 6.48%.
- Average loan size edged down.


U.S. Mortgage Applications Dropped in the Week of December 19

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Real GDP grew 4.3% (SAAR) during the third quarter following a 3.8% Q2 gain, revised from 3.3% reported initially. These increases followed a minimally revised 0.6% decline in Q1. A 3.0% rise had been expected in the Action Economics Forecast Survey. Growth during the last four quarters of 2.3% compared to 2.1% y/y in Q2 and remained below its most recent high of 3.4% in Q4 2023.

After-tax corporate profits without IVA & CCA adjustment surged 7.0% (4.2% y/y) last quarter after edging 0.6% higher in Q2. Before-tax earnings with IVA & CCA rose 4.2% (9.1% y/y) after improving 0.2% in Q2. Financial sector earnings rose 6.2% (21.1% y/y) after rising 1.1% in Q2. Nonfinancial corporate profits rose 2.5% (3.3% y/y) after edging 0.5% higher in Q2. Earnings from abroad jumped 10.6% (26.3% y/y) following a 2.9% Q2  decline.

Foreign trade balance improvement added 1.59 percentage points to growth last quarter after adding 4.83 percentage points in Q2. Real exports increased 2.1% (1.5% y/y) after falling 0.5% in Q2. Real imports declined 1.2% (-1.8% y/y) after declining 8.3% in Q2. Inventories subtracted 0.22 percentage points from growth after subtracting 3.44 percentage point from Q2 growth.

Real final sales to private domestic purchasers grew 3.0% (2.6% y/y) last quartter after rising 2.9% in Q2, revised from 1.6%. Personal consumption expenditures rose 3.5% (2.6% y/y) after a 2.5% rise, revised from 1.6%. Durable goods spending rose 1.6% (3.2% y/y) after increasing 2.3% in Q2. Motor vehicle purchases declined 6.7% (+1.6% y/y) after strengthening 9.7% in Q2. Spending on home furnishings & appliances weakened 4.2% (+0.7% y/y) following a 2.0% fall. Recreational goods & vehicle buying surged 15.7% (7.0% y/y) last quarter after falling 2.5% in Q2.

Nondurable goods outlays in constant dollars rose 3.9% (3.0% y/y) last quarter following 2.2% growth in Q2. Apparel spending strengthened 6.7% (7.0% y/y) following a 5.8% rise. Food & beverage buying gained 2.0% (1.3% y/y) after edging 0.2% higher. Gasoline & fuel oil purchases improved 1.3% (-0.2% y/y) after falling 2.8% in Q2.



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Real spending on services increased 3.7% (2.4% y/y) in Q3 after a 2.6% Q2 gain. Outlays on housing & utilities edged 0.3% higher (1.0% y/y) after easing 0.2% in Q2. Health care expenditures surged 6.8% (4.5% y/y) after a 4.8% increase. Transportation outlays gained 3.1% both  q/q and y/y after a 7.0% rise, while recreation spending jumped 6.6% (2.4% y/y) following a 3.9% rise. Restaurant & hotel expenditures increased 1.2% (2.0% y/y) after strengthening 5.9% in Q2. Financial services expenditures rose 2.6% both q/q and y/y following a 4.8% Q2 increase.

Business fixed investment in constant dollars increased 2.8% (3.9% y/y) last  quarter following a 7.3% Q2 rise, revised from 5.7%. Expenditures on structures declined 6.3% both q/q and y/y, after falling for six consecutive quarters. Expenditures on producers’ durable equipment increased 5.4% (7.4% y/y), after strengthening 8.5% in Q2. Outlays on information processing equipment rose 8.4% (18.6% y/y), after strengthening 11.7% during Q2. Industrial equipment investment rose 2.0% (3.4% y/y) after a 6.5% rise. Transportation equipment investment fell  2.7% (+3.0% y/y) after strengthening 25.2%. Intellectual property product spending rose 5.4% last quarter (6.4% y/y), after surging 15.0% in Q2.

Residential structures investment in real terms declined 5.1% (-1.8% y/y), the same as in Q2. It was the third consecutive quartly decline.

Government spending rose 2.2% (1.1% y/y) during the third quarter after an unrevised 0.1% easing in Q2. Federal government expenditures rose 2.9% (-1.0% y/y) after falling 5.3% in Q2. National defense expenditures increased 5.8% (1.0% y/y) after rising 0.9% in Q2. State & local government spending rose 1.8% (2.4% y/y) following a 3.1% rise.

The GDP chain price index rose 3.8% (3.0% y/y) last quarter vs. 2.1% in Q2. The PCE chain price index increased 2.8% (2.7% y/y) following a 2.1% rise. The PCE price index excluding food and energy rose 2.9% (2.9% y/y) after increasing 2.6% in Q2. The business fixed investment price index rose 5.2% (1.5% y/y) in Q3 after a 0.4% decline. The residential price index rose 4.5% (3.3% y/y) last quarter after a 2.2% rise, while the government price index increased 4.4% (3.5% y/y) following a 3.3% rise.

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



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- Consumer spending strengthens; growth in business investment decelerates.
- Corporate profit growth led by earnings abroad.
- Rise in chain price index accelerates.


U.S. GDP Growth is Strong in Q3; Profits Jump

Sandy Batten

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Industrial production fell 0.1% m/m in October but rose 0.2% m/m (2.5% y/y) in November. The Action Economics Forecast Survey expected 0.1% monthly gains in both months. Manufacturing activity was tepid with manufacturing production falling 0.4% m/m in October and unchanged in November. Manufacturing output has not posted a monthly gain since July. Mining output fell 0.8% m/m in October but rebounded 1.7% m/m in November. Utilities output surged 2.6% m/m in October but fell 0.4% m/m in November. Compared to a year ago, manufacturing production is up 1.9%; mining output is up 3.9%; and utilities output is up 4.8%.

By market group, output of durable consumer goods plunged 2.6% m/m in October and fell another 0.2% in November. Production of durable consumer goods has declined in five of the previous six months. Production of nondurable consumer goods rose 0.5% m/m in both October and November. Compared to a year ago, durable consumer goods production has fallen 5.9% while nondurable consumer goods output has risen 2.7%. Business equipment production fell 0.3% m/m in October but rebounded 0.3% m/m in November and is up 11.2% y/y. Production of nonindustrial supplies fell 0.3% m/m in both October and November.

By industry group, output of durable goods fell 0.5% m/m in October and declined 0.1% m/m in November but were up 3.2% from a year ago. Motor vehicle and parts production slumped 5.1% m/m in October and declined 1.0% m/m in November to be down 5.6% from a year ago. Monthly motor vehicle output has declined in five of the previous six months. In contrast, production of computers and electronic products increased 1.5% m/m in October and rose 0.8% m/m in November. Aerospace production continued to rise, increasing 2.0% m/m in October and 1.1% m/m in November to be up 25.2% from a year ago. Output of nondurable goods fell 0.2% m/m in October and edged up 0.1% m/m in November. Their output is up 0.9% from a year ago. Apparel output fell 1.3% m/m in October but recovered in November, rising 2.3% m/m. Food and beverage output rose 0.3% m/m in October and another 1.2% in November.

Output of selected high-technology industries rebounded in October and November. After having declined 1.0% m/m in both August and September, production jumped 1.9% m/m in October and 1.1% m/m in November to stand 11.8% higher than a year ago. Manufacturing output excluding selected high-tech industries fell 0.4% m/m in October and was unchanged in November. It has risen only 1.6% over the past year. Manufacturing excluding motor vehicle production was unchanged in October and edged up 0.1% m/m in November; it is up 2.6% y/y.

Total industry capacity utilization edged down to 75.9% in October from 76.0% in September and then recovered the decline in November, edging up to 76.0%. In the manufacturing sector, the utilization rate slumped to 75.4% in October from 75.8% in September and remained at 75.4% in November. The October/November reading is the lowest since January.

Industrial production and capacity data are in Haver’s **USECON** database. Additional detail on production and capacity utilization can be found in the **IP** database. The expectations figures come from the **AS1REPNA** database.



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- Today’s release contained figures for both October and November that had been delayed by the federal government shutdown.
- IP fell in October but recovered in November.
- Manufacturing output was tepid, falling in October and unchanged in November.
- A surge in utilities output in October prevented a larger decline in total production.
- A jump in mining output in November accounted for all of the increase in total production.


U.S. Industrial Production Fell in October and Recovered in November

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New orders for durable goods fell a more-than-expected 2.2% (+4.8% y/y) in October following an upwardly revised 0.7% m/m rise in September (previously +0.5% m/m) and a 3.0% monthly jump in August. The Action Economics Forecast Survey expected a 1.5% m/m decline. A 23.7% m/m drop in aircraft orders more than accounted for the overall decline. Orders excluding aircraft increased 0.2% m/m (4.0% y/y) in October on top of a 0.5% monthly increase in September.

More generally, transportation orders fell 6.5% m/m (+7.3% y/y) in October following a 0.6% m/m increase in September and an 8.0% monthly jump in August. In addition to the drop in aircraft orders, orders for motor vehicles and parts edged up 0.1% m/m in October, their sixth consecutive monthly increase. Across other sectors, orders for primary metals fell 0.7% m/m, their first monthly decline in ten months. Orders for electrical equipment and appliances slumped 1.5% m/m, their first monthly decline in seven months. In contrast, orders for fabricated metal products rose 0.5% m/m, their fourth consecutive monthly gain. Machinery orders increased 0.8% m/m, their eighth consecutive monthly rise. Orders for computers and electronic products increased a solid 1.0% m/m on top of a 1.2% monthly increase in September.

Shipments of core capital goods (nondefense capital goods shipments excluding aircraft) are a reliable coincident indicator of business spending on equipment in the national accounts. They rose 0.7% m/m in October following an upwardly revised 1.2% monthly gain in September (previously +0.9%). The was the second consecutive monthly increase and the fifth in the past six months. The strong end to Q3 and the continued rise in the first month of Q4 provides a solid starting point for all of Q4. The October shipments figure was 5.9% at an annual rate above the Q3 average. Core capital goods orders rose 0.5% m/m in October on top of an upwardly revised 1.1% m/m increase in September (previously +0.9%). This was the fourth consecutive monthly rise.

Total manufacturing shipments edged up 0.1% m/m (+2.8% y/y) in October after having been essentially unchanged in September. Shipments of durable goods increased 0.6% m/m (5.9% y/y), led by 1.4% monthly jump in transportation shipments. However, apart from a 0.1% m/m decline in shipments of other durable goods, all of the other major sectors posted monthly gains in October. In contrast, shipments of nondurable goods fell 0.4% m/m (-0.3% y/y) in October for their third consecutive monthly decline. The monthly decline was led by a 2.4% m/m fall in shipments of petroleum and coal products although it was relatively widely spread across major sectors. The one exception was a 2.1% m/m increase in leather product shipments, but this came after four consecutive sizeable monthly declines.

Unfilled durable goods orders increased 0.2% m/m (7.9% y/y) in October for their third consecutive monthly gain following a 0.8% m/m rise in September and a 0.7% m/m increase in August. Total factory inventories were unchanged in October (+1.4% y/y) following 0.1% monthly declines in both August and September. Durable goods inventories edged up 0.1% m/m in October while inventories of nondurable goods fell 0.2% m/m, the third consecutive monthly decline.

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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- New orders for durable goods slumped 2.2% m/m in October following increases in both August and September
- A 24% monthly drop in aircraft orders drove the overall decline
- Orders excluding aircraft rose 0.2% m/m in October
- Core capital goods shipments and orders continued to rise in October with small upward revisions to September


Economy in Brief: 2005

Jump to:

U.S. Business Inventory Accumulation Slowing

Empire State Index Again Positive

Industrial Production Recovered

Consumer Price Inflation Eased

Consumer Price Inflation Eased

Divergent Inflation Trends in the U.K. and the Euro Zone

Small Business Optimism Up A Bit

More Jobs Suggested by Manpower Index