Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040416a.jpg" width="353">
The University of Michigan&#146;s consumer sentiment index fell in mid-April to 93.2 from 95.8 in March. Consensus expectations had been for a firmer reading of 96.0.
During the last ten years there has been an 76% correlation between the level of consumer sentiment and the y/y change in real PCE. That correlation has risen to 84% during the last five years.
Perceptions of current economic conditions slipped 2.5% to 104.1. The expectations index fell 2.9% to 86.2.
The University of Michigan survey is not seasonally adjusted.It is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM"> University of Michigan</a></th>
<th scope="col"> Mid-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>93.2</td>
<td>95.8</td>
<td>8.4%</td>
<td>87.6</td>
<td>89.6</td>
<td>89.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>104.1</td>
<td>106.8</td>
<td>8.0%</td>
<td>97.2</td>
<td>97.5</td>
<td>100.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>86.2</td>
<td>88.8</td>
<td>8.7%</td>
<td>81.4</td>
<td>84.6</td>
<td>82.3</td>
</tr>
</tbody>
</table>
U.S. Industrial Production Fell With Lower Utility Output 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 16, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040416b.jpg" width="353">
Industrial production fell 0.2% last month as utility output fell 2.4% for the second consecutive monthly decline. Consensus expectations had been for a 0.4% March increase.
Production in the factory sector was unchanged (3.6% y/y) following the unrevised 1.0% February surge.
Output in selected high-technology industries jumped 1.4% m/m (26.6% y/y), but that was only about half the monthly gains during the prior two months. Output of semiconductors &amp; related equipment rose 2.5% (49.1% y/y) and output of computers &amp; peripheral equipment jumped 2.4% (20.2% y/y). Output of communications equipment fell 1.9% (-3.6% y/y).
Excluding high-tech factory output fell 0.1% (+2.2% y/y) following the 0.9% February spike. Output of motor vehicles &amp; parts fell 2.2% (+6.7% y/y) and reversed the February increase. Machinery output added 0.5% (9.0% y/y) to an upwardly revised 2.9% February. Output of furniture jumped 1.1% (-0.2% y/y) but non-durables output added only 0.1% (0.4% y/y).
Total capacity utilization fell to 76.5%. Growth in capacity remained at a low 1.1% y/y.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM"> Production &amp; Capacity</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>
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</thead>
<tbody>
<tr>
<td class="firstcol">Industrial Production</td>
<td>-0.2%</td>
<td>0.8%</td>
<td>3.3%</td>
<td>0.3%</td>
<td>-0.6%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>76.5%</td>
<td>76.7%</td>
<td>74.8%(3/03)</td>
<td>74.8%</td>
<td>75.6%</td>
<td>77.4%</td>
</tr>
</tbody>
</table>
Housing Starts Strong 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 16, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040416c.jpg" width="353">
Housing starts jumped 6.4% last month, recovering from a 2.6% drop in February that was revised shallower. March starts were just 2.3% below the record high level in November 2003. Consensus forecasts had been for 1.91M starts.
Single family starts surged 5.5% following three consecutive months of decline. In March single family starts were 4.4% below the record of November 2003.
Multi-family starts jumped 9.7% to a four year high. The previously reported decline in February was revised to a slight increase.
Starts rose across the country&#39;s regions last month except the Northeast where starts fell 4.9% (12.3% y/y) after the 22.9% spike in February. In the South starts rose 8.5% (+16.1% y/y) and in the West they rose 3.7% (+19.0% y/y). In the Midwest starts rose 10.6% (+13.0% y/y).
Building permits rose a moderate 1.9% m/m (+15.3% y/y) following two months of decline.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM"> Housing Starts (000s, AR)</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>
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<td class="firstcol">Total</td>
<td>2,007</td>
<td>1,887</td>
<td>15.2%</td>
<td>1,848</td>
<td>1,711</td>
<td>1,601</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,599</td>
<td>1,515</td>
<td>14.8%</td>
<td>1,501</td>
<td>1,364</td>
<td>1,272</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>408</td>
<td>372</td>
<td>16.9%</td>
<td>347</td>
<td>347</td>
<td>330</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,946</td>
<td>1,909</td>
<td>15.3%</td>
<td>1,831</td>
<td>1,750</td>
<td>1,637</td>
</tr>
</tbody>
</table>
Housing Market Index Rebounded 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 16, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040416d.jpg" width="353">
The Composite Housing Market Index reported by the National Association of Home Builders (NAHB) surged five points in April to 69 and returned to the high for 2004.
During the last fifteen years there has been a 79% correlation between the y/y change in the NAHB index and the change in single family housing starts.
The sub index which measures expected home sales in six months also returned to the high for 2004.
The index of current market conditions for home sales similarly rebounded to the high for the year.
Traffic of prospective buyers fell modestly in April (+37.1% y/y).
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the National Association of Home Builders using this <a href="http://www.nahb.org">link</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM"> Nat&#39;l Association of Home Builders</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>
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<td class="firstcol">Composite Housing Market Index</td>
<td>69</td>
<td>64</td>
<td>52</td>
<td>64</td>
<td>61</td>
<td>56</td>
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The University of Michigans consumer sentiment index fell in mid-April to 93.2 from 95.8 in March. Consensus expectations had been for a firmer reading of 96.0. During the last ten years there has been an 76% correlation between the [...]

U.S. Consumer Sentiment Down

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/040415d.jpg" width="353">
Employment in Japan in February showed further signs of recovery, as a jobs index released today by the Ministry of Health, Labor and Welfare ticked up to 98.6 (seasonally adjusted, 2000=100), its highest level since March of last year. Further, it is only 0.1 point below its year-ago value, the best (or least bad) performance since August 1998. Japan has indeed endured more than 5-1/2 years of job shrinkage. And 1997 was the last full calendar year that saw a rise.
Employment patterns remain inconsistent, however. Only the service sector is showing outright increases in employment, while finance and construction are still declining markedly. Manufacturing jobs are still decreasing, too, but at a much slower pace than anytime since early 1998. The year-on-year reduction in February of just 1.4% extends a progressive improvement from a 5.1% plunge in May 2002.
Thus, Japan&#39;s job market continues to struggle, but appears to be working its way back toward growth. Similarly, wage rates are also approaching stability, but they too are uneven from month to month and recently have been particularly erratic.

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<th scope="col" class="firstcol">NSA, Yr/Yr %Chg, except where noted</th>
<th scope="col">Feb 2004</th>
<th scope="col">Jan 2004</th>
<th scope="col">Feb 2003</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
<tbody>
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<td class="firstcol">Employment Index,&nbsp; (SA, 2000=100)</td>
<td>98.6</td>
<td>98.5</td>
<td>98.7</td>
<td>98.4</td>
<td>98.9</td>
<td>99.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/Yr %Chg</td>
<td>-0.1</td>
<td>-0.1</td>
<td>&nbsp;</td>
<td>-0.5</td>
<td>-0.7</td>
<td>-0.4</td>
</tr>
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<td class="firstcol">Construction</td>
<td>-6.4</td>
<td>-7.1</td>
<td>&nbsp;</td>
<td>-1.5</td>
<td>-0.4</td>
<td>+0.6</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>-1.4</td>
<td>-1.4</td>
<td>&nbsp;</td>
<td>-2.2</td>
<td>-4.6</td>
<td>-2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Finance</td>
<td>-3.0</td>
<td>-3.6</td>
<td>&nbsp;</td>
<td>-2.3</td>
<td>-2.4</td>
<td>-4.3</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>+2.0</td>
<td>+2.2</td>
<td>&nbsp;</td>
<td>+1.3</td>
<td>+2.3</td>
<td>+2.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Wage Index, (SA, 2000=100)</td>
<td>98.4</td>
<td>96.4</td>
<td>98.9</td>
<td>97.4</td>
<td>98.0</td>
<td>99.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/Yr %Chg</td>
<td>-0.4</td>
<td>-1.4</td>
<td>&nbsp;</td>
<td>-0.6</td>
<td>-1.9</td>
<td>-0.5</td>
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Employment in Japan in February showed further signs of recovery, as a jobs index released today by the Ministry of Health, Labor and Welfare ticked up to 98.6 (seasonally adjusted, 2000=100), its highest level since March of last [...]

Japanese Job Market Struggles Toward Recovery

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040415c.jpg" width="353">
The Philadelphia Fed&#146;s April index of general business conditions in the manufacturing sector rose 8.3 points to 32.5 and recovered all of last month&#39;s decline. Consensus expectations had been for little change at 25.0.
During the last twenty years there has been a 62% correlation between the level of the Philadelphia Fed Business Conditions Index and quarterly growth in real GDP. The correlation with quarterly growth in factory sector industrial production has been 76%.
A separate survey indicated that the index of expected business conditions in six months fell for the seventh month in eight to 33.6, the lowest level since February 2003.
Amongst the sub indexes, shipments rose sharply to 27.7, adding to the March gain. New orders also improved moderately. The employment index again was roughly stable at 12.2 where it has been for the last three months.
The business conditions index reflects a separate survey question, not the sub indexes.
The prices paid index fell slightly to a still strong 51.9.
The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0404.html">here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM"> Philadelphia Fed Business Outlook</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>
<td class="firstcol">General Activity Index</td>
<td>32.5</td>
<td>24.2</td>
<td>-6.2</td>
<td>10.6</td>
<td>7.7</td>
<td>-17.2</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>51.9</td>
<td>53.4</td>
<td>22.0</td>
<td>16.7</td>
<td>12.2</td>
<td>-0.9</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Jumped 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 15, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040415a.jpg" width="353">
Initial claims for jobless insurance jumped 30,000 last week to 360,000 and reversed all of the 13,000 drop the prior week. The prior week&#39;s decline was revised slightly shallower. Consensus expectations had been for 330,000 initial claims.
The 4-week moving average of initial claims rose to 344,250 (-18.5% y/y).
Continuing claims for unemployment insurance dropped 22,000 in the week ended 4/3 and the prior week&#39;s decline was deepened to 48,000.
The insured rate of unemployment was unchanged at 2.4% for the sixth consecutive week.
From the Federal Reserve Bank of San Francisco is this <a href="http://www.frbsf.org/publications/economics/letter/2004/el2004-10.html">paper</a> titled &quot;Workplace Practices and the New Economy.&quot;

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<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"> 04/10/04</th>
<th scope="col">4/03/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
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<td class="firstcol">Initial Claims</td>
<td>&nbsp;&nbsp; 360</td>
<td>330</td>
<td>-17.2%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>2,980</td>
<td>-16.3%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
Empire State Index Improved 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 15, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040415b.jpg" width="353">
The Empire State Index of General Business Conditions improved in April to 36.05. The 10.72 point m/m rise recouped more than half of the prior month&#39;s decline from the record high.
The new orders index jumped sharply and recovered most of the prior month&#39;s drop. The shipments index surged to a new series&#39; high. The employment index also improved and recovered most of the prior two months&#39; decline.
The prices paid index surged to 56.19, a series&#39; record.
The April index of expectations for business conditions six months ahead fell to the lowest level in a year. Expectations for capital expenditures improved for the third month in a row.
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.
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question, not the components.
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>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM"> Empire State Manufacturing Survey</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">4/03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col"> 2001</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>36.05</td>
<td>25.33</td>
<td>-17.20</td>
<td>16.30</td>
<td>7.02</td>
<td>-13.57</td>
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</body>
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The Philadelphia Feds April index of general business conditions in the manufacturing sector rose 8.3 points to 32.5 and recovered all of last month's decline. Consensus expectations had been for little change at 25.0. During the [...]

Philadelphia Fed Index Recovered

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040414e.jpg" width="353">
In addition to the US, a cluster of countries reported March CPI data today. For most, there was little movement in overall inflation on a year-to-year basis. Rates were steady between February and March, as in Italy, where divergent moves among food (faster) and communications prices (slower) were offsetting. France saw a slight downtick and Sweden, less deflation. (Finland, Hungary and Malaysia also released CPI data today, and while those data are updated in Haver databases, we make no comment on them here.)
A common thread among the European nations is the role of energy prices in recent months. In the US, consumer energy prices surged in January, February and March. As seen in the table below, they added notably to inflation in January, 0.4%, and February, 0.2%. They continued rising in March, but a rapidly rising base for the 12-month rate in early 2003 reduced the year-on-year increase. This impact contrasts with European energy prices. The table shows that for both Germany and France, total CPI inflation is LESS than inflation ex energy, that is, the prices for the same energy products which raised inflation in the US reduced inflation in Europe.
The steeply falling dollar must surely be a major cause of this divergence, since the world prices of crude oil and refined products are quoted in dollars. The chart above illustrates this impact. The right-hand scale shows the strengthening Euro. The left-hand scale shows a ratio of the energy component in the German CPI to that in the US data. As the euro has risen, this ratio has fallen markedly. And in fact, energy prices in Germany have actually been lower than a year ago in the last three months. It&#39;s not just that there&#39;s been less inflation in the energy sector in Germany, but price levels have fallen outright. The same situation exists in France. However, the dollar began to firm in March, so perhaps this seeming anomaly of oil that is simultaneously more expensive and cheaper will dissipate. 

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol">12-mo % Changes</th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Jan</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">US</td>
<td>1.7</td>
<td>1.7</td>
<td>1.9</td>
<td>1.9</td>
<td>2.4</td>
<td>1.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Ex Energy</td>
<td>1.8</td>
<td>1.5</td>
<td>1.5</td>
<td>1.5</td>
<td>1.9</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Exchange Rate (avg.)</td>
<td>1.2261</td>
<td>1.2640</td>
<td>1.2638</td>
<td>1.1317</td>
<td>0.9453</td>
<td>0.8955</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>1.1</td>
<td>0.9</td>
<td>1.2</td>
<td>1.1</td>
<td>1.2</td>
<td>1.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Ex Energy</td>
<td>1.4</td>
<td>1.2</td>
<td>1.3</td>
<td>0.8</td>
<td>1.1</td>
<td>1.9</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>1.7</td>
<td>1.8</td>
<td>2.0</td>
<td>2.2</td>
<td>2.3</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Ex Energy</td>
<td>2.1</td>
<td>2.1</td>
<td>2.2</td>
<td>2.4</td>
<td>2.1</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>2.3</td>
<td>2.3</td>
<td>2.2</td>
<td>2.5</td>
<td>2.8</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Sweden</td>
<td>-0.1</td>
<td>-0.4</td>
<td>0.7</td>
<td>1.3</td>
<td>2.1</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">Underlying Inflation Rate</td>
<td>0.4</td>
<td>0.1</td>
<td>1.1</td>
<td>1.7</td>
<td>2.2</td>
<td>3.4</td>
</tr>
</tbody>
</table>


</html>

In addition to the US, a cluster of countries reported March CPI data today. For most, there was little movement in overall inflation on a year-to-year basis. Rates were steady between February and March, as in Italy, where divergent [...]

Strong Euro Reduces Energy Impact on European Inflation

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040414a.jpg" width="353">
The Consumer Price Index (CPI-U) jumped 0.5% in March versus Consensus expectations for a 0.3% gain. Core consumer prices also rose a strong 0.4%, twice the Consensus expectation.
A 0.6% (2.6% y/y) surge in shelter costs, which accounts for 33% of the CPI, was the strongest since January 1991 and lifted core services prices by 0.5%.
Other service prices were strong. Prices for medical care services again rose 0.7% (5.2% y/y) and public transportation prices rose 0.3% (+1.9% y/y), the strongest monthly gain since October. Tuition costs also rose a strong 0.6% (7.5% y/y).
Prices of core consumer goods edged up just 0.1% despite a 0.9% (-0.2% y/y) spike in apparel prices. New &amp; used vehicle prices fell 0.2% (-4.0% y/y) and prices for home furnishings &amp; operation slid 0.2% (-1.2% y/y). Medical care commodities rose a moderate 0.2% (2.3% y/y).
Energy prices again were firm, up 1.9%. Gasoline prices rose 5.5% (+1.6% y/y) and are up another 2.7% so far in April. Fuel oil prices fell 1.8% (-9.8% y/y) and piped gas prices fell 1.4%% (0.0% y/y).
Food prices again rose 0.2% reflecting higher prices (+0.5%) for cereal &amp; bakery products.
The chained CPI which adjusts for shifts in consumer buying behavior surged 0.6%. It is similar to the PCE price deflator. The core chain price measure jumped 0.7%, a record gain for this series which dates only to 2000.
&quot;Does Inflation Targeting Make A Difference?&quot; from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20040401/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM"> Consumer Price Index</a></th>
<th scope="col">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&nbsp;</td>
<td>0.5%</td>
<td>0.3%</td>
<td>1.7%</td>
<td>2.3%</td>
<td>1.6%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.4%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>1.5%</td>
<td>2.3%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.1%</td>
<td>0.2%</td>
<td>-1.6%</td>
<td>-2.0%</td>
<td>-1.1%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.5%</td>
<td>0.1%</td>
<td>2.9%</td>
<td>2.9%</td>
<td>3.8%</td>
<td>3.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>1.9%</td>
<td>1.7%</td>
<td>0.4%</td>
<td>12.2%</td>
<td>-5.8%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.2%</td>
<td>0.2%</td>
<td>3.2%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM"> Chained CPI: Total (NSA)</a></td>
<td>0.6%</td>
<td>0.6%</td>
<td>1.4%</td>
<td>1.9%</td>
<td>1.3%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.7%</td>
<td>0.5%</td>
<td>1.2%</td>
<td>1.1%</td>
<td>1.9%</td>
<td>&nbsp;2.0%</td>
</tr>
</tbody>
</table>
U.S. Trade Deficit Eased From Record 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 14, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040414d.jpg" width="353">
The U.S. foreign trade deficit eased to $42.1B in February from the upward revised record $43.5B of a month earlier. Consensus expectations had been for a deficit of $42.3B.
In the first two months of 1Q04 the deficit averaged $42.8B versus $40.9B in 4Q03.
Exports surged 4.0% in February as exports of capital goods ballooned 5.9% (+13.4% y/y). Non-auto consumer goods exports also rose a strong 4.2% (15.5% y/y). Each category of exports registered a strong m/m gain.
Imports rose a moderate 1.6% and the gain was led by a 7.4% jump in imports of industrial supplies &amp; materials. Imports of petroleum &amp; coal products rose 5.7% as the per barrel price of crude oil rose 2.2% to $29.17. Capital goods imports fell 2.9% (+12.6% y/y) and imports of non-auto consumer goods also were down 2.1% (+6.5% y/y).
By country, the US trade deficit with China eased to $8.3B ($123.9B in 2003) but the US trade deficit with Japan deepened to $6.1B ($66.0B in 2003). The deficit with the European Union deepened to $7.4B after falling to a low $5.9B in January ($94.3B in 2003).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE03/@EE03.HTM"> Foreign Trade</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Deficit</td>
<td>$42.1B</td>
<td>$43.5B</td>
<td>$38.6B(2/03)</td>
<td>$489.9</td>
<td>$418.0B</td>
<td>$357.8B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>4.0%</td>
<td>-1.4%</td>
<td>11.7%</td>
<td>4.6%</td>
<td>-3.3%</td>
<td>-5.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>1.6%</td>
<td>-0.4%</td>
<td>10.9%</td>
<td>8.4%</td>
<td>2.0%</td>
<td>-5.5%</td>
</tr>
</tbody>
</table>
U.S. Budget Deficit Eased in March 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 14, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040414b.jpg" width="353">
The U.S. Government budget deficit eased to 72.7B in March, about as expected. For the first six months of FY04 the deficit of $299.5B was 18% larger than last year.
So far this fiscal year the deficit is running 5.3% of US GDP versus 3.5% last year and a peak of 6.0% in 1983. Adjusted for economic and other fluctuations, the standardized budget deficit is projected to hit 3.4% this year versus 2.8% last year and a peak of 4.8% in 1986.
Net receipts for the first six months of FY04 improved 3.1% versus the first six months of FY03. The gain reflected a 51.1% rise in corporate tax receipts but the y/y decline in individual tax receipts eased to -1.2%. Contributions for social insurance, estate taxes, and miscellaneous taxes rose.
Federal net expenditures rose 6.6% versus the first six months of last fiscal year. Defense expenditures surged 17.2% and Medicare outlays grew 6.6%. Interest expense fell 4.1% y/y.
&quot;Budget Deficits and Interest Rates&quot; from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20040301/cover.pdf"> here</a>.

<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/@E1/@E106/@E10602/@E10602.HTM"> US Government Finance</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#39;03</th>
<th scope="col">FY2003</th>
<th scope="col">FY2002</th>
<th scope="col">FY2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$-72.7B</td>
<td>$-96.7B</td>
<td>$-58.9B</td>
<td>$-374.2B</td>
<td>$-157.8B</td>
<td>$127.3B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revenues</td>
<td>$140.0B</td>
<td>$85.3B</td>
<td>16.4%</td>
<td>-3.8%</td>
<td>-6.9%</td>
<td>-1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Outlays</td>
<td>$212.7B</td>
<td>$182.0B</td>
<td>18.7%</td>
<td>7.2%</td>
<td>7.9%</td>
<td>4.2%</td>
</tr>
</tbody>
</table>
 Mortgage Applications Plunge As Interest Rates Rose 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 14, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040414c.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association plunged 22.1% last week following steep declines the prior two weeks.
Applications to refinance fell 30.7% (-48.4% y/y), double the decline of the prior week.
The effective interest rate on a conventional 30-Year mortgage rose to 6.03% from 6.01% the week prior, but that&#39;s up from 5.65% averaged in March. The effective rate on a 15-year mortgage rose to 5.45%.
Purchase applications dropped 9.5% w/w (+14.9% y/y) and so far in April are 2.6% ahead of the March average.
During the last ten years there has been a 56% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">04/09/04</th>
<th scope="col">04/02/04</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>788.6</td>
<td>1,012.9</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>432.2</td>
<td>477.5</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,861.6</td>
<td>4,126.7</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
</body>
</html>

The Consumer Price Index (CPI-U) jumped 0.5% in March versus Consensus expectations for a 0.3% gain. Core consumer prices also rose a strong 0.4%, twice the Consensus expectation. A 0.6% (2.6% y/y) surge in shelter costs, which [...]

Consumer Prices Lifted By Shelter Costs

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040513d.jpg" width="353">
After long periods of sluggishness, the economies in Europe seemed finally to be recouping some strength during the first quarter. Reports for Germany, France, Italy and the Netherlands all showed decent growth in Q1, in some cases the best performances in three years or more.
Germany, for example, had its largest quarterly increase since Q1 2001 and the best year-on-year gain since then as well. German statisticians did not report any details today, but their commentary indicates that foreign demand is the driving force. This corroborates our analysis of the German manufacturing sector a week ago, which shows notably larger increases in foreign orders than in domestic ones.
France, in its &quot;flash&quot; estimate, reports GDP up 0.8% on the quarter, the largest rise since Q1 2002. Year-to-year growth appears to be 1.8% (calculated by applying the new Q1 percent change &quot;flash&quot; to the Q4 2003 level of GDP), the best since mid-2001. Domestic demand may have helped in France, where separate data show that household spending on manufactured goods grew 2.0% on the quarter (quarterly rate).
In Italy, GDP increase 0.43% in Q1 over Q4 and 0.8% over the year-earlier period. Its recent behavior is similar to its neighbors, as seen in the graph.
The Netherlands is also seeing a turn toward healthier growth. In the most recent period, the advance has come in private capital spending. This is the only country reporting GDP details today, and they show a sharp 2.2% quarterly gain in business investment. Government investment also rose, but more slowly. Consumption edged lower overall with nearly offsetting moves in private (up) and government (down). Exports fell, although they are up 1.4% from a year earlier.
All of these countries&#39; economies showed improvement in Q1, and the driving force seems to have been different in each one. The gains remain small compared to the boom times of the late 1990s, but the diversity of sources for the growth is encouraging, especially in the face of the common burden of rising energy costs.[Details for Germany, France and Italy will be reported by their respective statistical agencies over the coming two weeks.]

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Percent Changes</th>
Qtr/Qtr
<th scope="col">Year/ Year</th>
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">1st Qtr 2004</td>
<td>4th Qtr 2003</td>
<td>3rd Qtr 2003 &nbsp;</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.44</td>
<td>0.26</td>
<td>0.21</td>
<td>1.47</td>
<td>0.22</td>
<td>0.34</td>
<td>0.42</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>0.80</td>
<td>0.67</td>
<td>0.69</td>
<td>1.80e</td>
<td>1.19</td>
<td>1.37</td>
<td>0.44</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>0.43</td>
<td>0.04</td>
<td>0.41</td>
<td>0.80</td>
<td>0.12</td>
<td>0.91</td>
<td>0.64</td>
</tr>
<tr class="odd">
<td class="firstcol">Netherlands</td>
<td>0.43</td>
<td>0.48</td>
<td>0.00</td>
<td>0.77</td>
<td>-0.37</td>
<td>0.13</td>
<td>0.51</td>
</tr>
</tbody>
</table>
</body>
</html>

After long periods of sluggishness, the economies in Europe seemed finally to be recouping some strength during the first quarter. Reports for Germany, France, Italy and the Netherlands all showed decent growth in Q1, in some cases [...]

Good Q1 Gains in GDP in 4 European Countries

Louise Curley

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040413c.jpg">
It is too early to say that deflation in Japan is at an end; however, there are signs that some deflationary forces are beginning to weaken.Although the Corporate Goods Price Index was still below year ago levels, it rose 0.63% in March from February. The domestic price index was up 0.2% in March over February and was also up 0.2% over March, 2003, the first year over year increase since July, 2000. Corporate import prices rose 2.32% in March and export prices rose 1.26%.The rise in the corporate goods prices indexes has yet to be reflected in consumer prices. Nevertheless, consumer prices in February, the latest month available were unchanged from January and from February of a year ago.<center></center>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"></th>
<th scope="col">Mar 04</th>
<th scope="col">Feb 04</th>
<th scope="col">Mar 03</th>
<th scope="col">M/M&nbsp; %</th>
<th scope="col"> Y/Y&nbsp; %</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">Corporate Good Price Index (2000=100)</td>
<td>&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>
<td class="firstcol">&nbsp; Total</td>
<td>96.3</td>
<td>95.7</td>
<td>96.8</td>
<td>0.63</td>
<td>-0.52</td>
<td>96.0</td>
<td>97.2</td>
<td>99.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic</td>
<td>95.5</td>
<td>95.3</td>
<td>95.0</td>
<td>0.21</td>
<td>0.21</td>
<td>95.0</td>
<td>95.7</td>
<td>97.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports</td>
<td>96.5</td>
<td>95.3</td>
<td>99.2</td>
<td>1.26</td>
<td>-2.72</td>
<td>97.8</td>
<td>101.9</td>
<td>103.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports</td>
<td>101.3</td>
<td>999.0</td>
<td>103.5</td>
<td>2.32</td>
<td>-2.13</td>
<td>100.1</td>
<td>101.0</td>
<td>102.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Feb 04</td>
<td>Jan 04</td>
<td>Feb 03</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Price Index (2000=100)</td>
<td>97.7</td>
<td>97.7</td>
<td>97.7</td>
<td>0.0</td>
<td>0.0</td>
<td>98.1</td>
<td>98.3</td>
<td>99.3</td>
</tr>
</tbody>
</table>
</body>
</html>

It is too early to say that deflation in Japan is at an end; however, there are signs that some deflationary forces are beginning to weaken.Although the Corporate Goods Price Index was still below year ago levels, it rose 0.63% in [...]

Is Deflation In Japan Starting To Subside?

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040413b.jpg" width="353">
Retail sales surged 1.8% last month on the heels of a 1.0% jump in February. This surprising strength far exceeded Consensus expectations for a 0.7% March gain. Sales&#39; gains in both February and January were revised up.
Retail sales excluding motor vehicles &amp; parts dealers exploded with a 1.7% jump and February was revised to a 0.6% increase from the advance report of little change. Consensus expectations had been for a 0.6% increase in March.
A 10.6% m/m jump in sales for building materials, garden equipment &amp; supply dealers (20.8% y/y) led the March sales strength and February as revised to +16.7% from the advance report of no change.
Clothing and accessory store sales also were strong and exploded 1.9% (9.6% y/y).Sales of furniture/home furnishings &amp; electronics/appliances rose 0.7% (10.3% y/y) after an upwardly revised 0.4% February increase. Sales at general merchandise stores added another 0.3% (7.4% y/y) to the huge gains of the prior two months.
Motor vehicle dealers&#39; sales rose a moderate 2.1% m/m as unit sales of light vehicles rose 1.9% to 16.68M. Sales at gasoline service stations rose 0.8% (3.9% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">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>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM"> Retail Sales &amp; Food Services</a></td>
<td>1.8%</td>
<td>1.0%</td>
<td>8.2%</td>
<td>5.4%</td>
<td>2.5%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>1.7%</td>
<td>0.6%</td>
<td>8.5%</td>
<td>5.2%</td>
<td>3.2%</td>
<td>3.1%</td>
</tr>
</tbody>
</table>
Chain Store Sales Rose in Early April, But ... 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 13, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040413a.jpg" width="353">
Chain store sales rose 0.8% in the week just before Easter following a 0.3% gain the period earlier, according to the International Council of Shopping Centers (ICSC)-UBS survey.
The level of sales so far in April, however, is disappointing. Due to a sharp 1.9% drop in late March, April sales are down 0.5% from the March average.
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.
During the last ten years there has been a 51% correlation between the year-to-year percent change in the ICSC-UBS measure of chain store sales and consumer sentiment.

<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">04/10/04</th>
<th scope="col">04/03/04</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>436.1</td>
<td>432.5</td>
<td>6.9%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Small Business Optimism Dipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 13, 2004


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040413d.jpg">
The Small Business Optimism Index published by the National Federation of Independent Business (NFIB) dipped 0.1% in March. The decline was the third in a row and pulled optimism 4.1% below December which was near the record high.
The m/m decline reflected another drop, to 22%, in the percent of firms expecting the economy to improve. Nevertheless, the percentage of firms expecting higher sales in six months rose to 29% and the percentage of firms planning to add to capital expenditures rose to 35%. The percentage planning to raise employment was stable at 13%, a figure much improved versus the lows of early last year.
During the last ten years there has been a 47% correlation between the level of the NFIB index and the y/y change in real GDP.
The percent of owners raising average selling prices rose to 19%, the highest level since June 2000.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

<table border="0" cellspacing="0" width="100%">

</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/SURVEYS/@S7/@S7.HTM"> Nat&#39;l Federation of Independent Business</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>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>102.5</td>
<td>102.6</td>
<td>8.2%</td>
<td>101.3</td>
<td>101.2</td>
<td>98.4</td>
</tr>
</tbody>
</table>
U.S. Business Inventories Up Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 13, 2004


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040413e.jpg">
Total business inventories rose 0.7% in February for the sixth consecutive monthly increase. Consensus expectations were for a 0.3% increase.
Inventory additions lead production gains. During the last ten years there has been a 46% correlation between the three month change in business inventories and the three month change in US factory production. That correlation rises to 66% when the production gain is lagged six months.
Retail inventories rose 0.4% in February. The gain was mostly due to a rise in auto inventories. Non-auto inventories ticked just 0.1% higher. Recently, inventory accumulation has been scattered across retail sectors but year-to-year furniture/home furnishings (+6.5%), building materials (+9.9%) and motor vehicles (+6.3%) have been strong.
Overall business sales surged 0.5% (7.8% y/y) in February following a 0.3% January increase.
The inventory-to-sales ratio was unchanged at a record low 1.33.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM"> Business Inventories</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.7%</td>
<td>0.2%</td>
<td>2.0%</td>
<td>1.9%</td>
<td>1.5%</td>
<td>-4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.4%</td>
<td>-0.0%</td>
<td>3.7%</td>
<td>4.9%</td>
<td>6.0%</td>
<td>-2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>2.5%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>1.2%</td>
<td>0.2%</td>
<td>1.2%</td>
<td>2.2%</td>
<td>0.4%</td>
<td>-4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.5%</td>
<td>0.3%</td>
<td>-0.8%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

Retail sales surged 1.8% last month on the heels of a 1.0% jump in February. This surprising strength far exceeded Consensus expectations for a 0.7% March gain. Sales' gains in both February and January were revised up. Retail sales [...]

U.S. Retail Sales Surge

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

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Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

260205Z1.jpg

**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

260205Z2.jpg

**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

260205Z3.jpg

**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

260205Z4.jpg

**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

260205Z5.jpg

**An AI Bubble?** 
The final chart draws on the latest Blue Chip Financial Forecasts special questions, highlighting market participants’ perceptions of the economic gains likely to be delivered by artificial intelligence. While a sizeable share of respondents still believe that financial markets may be overestimating AI’s potential benefits, an increasing proportion now judge current expectations to be broadly accurate, with only a small minority viewing the gains as underestimated. Notably, this represents a softening in scepticism compared with the survey results from last month, when concerns about excessive market optimism were more pronounced. The shift suggests a growing acceptance that AI-related investment and innovation could translate into meaningful economic impacts—though uncertainty remains high around the scale, timing and distribution of these gains.

260205Z6.jpg

Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

Robert Brusca

260206E.jpg

With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

260206.jpg

**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

260205X15.jpg

260205Y15.jpg

**Total job openings** fell 5.6% m/m (-12.9% y/y) to 6.542 million in December after a downwardly revised 7.0% decline to 6.928 million in November (previously -4.1% m/m; 7.146 million), according to the Job Openings and Labor Turnover Survey. December marked the third consecutive m/m fall and the lowest level since September 2020. The job openings rate declined to 3.9% in December, the lowest since April 2020, from 4.2% in November, remaining below a record-high 7.4% in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings. Significantly, the drop in job openings also lowered the **ratio of job openings to unemployed individuals** to 0.872 in December—the lowest since March 2021—from 0.890 in November, down from 1.085 in December 2024 and a pre-pandemic 1.211 in February 2020. A reading of 0.872 implies there were about 0.87 open jobs per unemployed person—indicating fewer openings than unemployed workers. December was the fifth time in six months that this ratio remained below 1.0.

**Private sector job openings** fell 6.8% (-12.5% y/y) to 5.804 million in December after a 6.6% fall to 6.227 million in November, registering the third successive m/m decline and the lowest level since September 2020. The private sector job openings rate fell to 4.1% in December, the lowest since April 2020, from 4.4% in November. The December m/m decline in private sector openings reflected drops of 27.7% (-36.9% y/y) in financial activities, 20.2% (-25.5% y/y) in professional & business services, 14.4% (-5.1% y/y) in trade, transportation & utilities, and 5.2% (-12.4% y/y) in private educational & health services. To the upside, private sector openings in the following categories rose m/m in December: other services (21.1%; 11.0% y/y), mining & lodging (17.6%; 0.0% y/y), information (13.5%; -4.7% y/y), manufacturing (8.5%; 0.5% y/y), leisure & hospitality (7.5%; -17.2% y/y), and construction (2.8%; 42.4% y/y). Meanwhile, government job openings rose 5.3% (-15.6% y/y) in December, the first m/m rise in three months, after a 10.6% drop in November.

**Total hiring** rebounded 3.4% (-1.5% y/y) to 5.293 million in December, the first m/m increase since September, following a 4.6% decrease to 5.121 million in November. The hiring rate edged up to 3.3% in December from 3.2% in November, though it remained below pre-pandemic levels. **Private sector hiring** rose 3.1% (-0.4% y/y) to 4.978 million in December, the third m/m rise in four months, after a 4.0% decline to 4.826 million in November. The private sector hiring rate rose to 3.7% in December from 3.5% in November, the same as in October and September. The December m/m increase in private sector hiring was led by a 32.1% jump (42.3% y/y) in information, followed by gains of 24.0% (-4.6% y/y) in financial activities, 23.5% (0.0% y/y) in mining & lodging, 6.5% (-4.8% y/y) in private educational & health services, 4.2% (-4.9% y/y) in trade, transportation & utilities, 3.6% (6.1% y/y) in construction, 3.4% (7.9% y/y) in leisure & hospitality, and 1.8% (-4.3% y/y) in manufacturing. To the downside, private sector hiring in professional & business services (-5.2%; +0.5% y/y) and other services (-4.3%; -16.5% y/y) declined m/m in December. Meanwhile, government hiring rebounded 6.4% (-16.3% y/y) in December, the first m/m rise since September, following a 13.5% drop in November.

**Total separations** rose 2.1% (3.3% y/y) to 5.251 million in December after a 1.5% rise to 5.144 million in November, marking the third m/m increase in four months and the highest level since September. The total separations rate edged up to 3.3% after holding at 3.2% in November and October. Private sector separations rose 1.6% (4.2% y/y) to 4.932 million in December, the highest level since June, while government sector separations jumped 10.4% (-9.1% y/y) to 319,000 following two consecutive m/m declines. **Total quits** (voluntary separations initiated by the employee) increased 0.3% (3.5% y/y) to 3.204 million in December, the third m/m rise in four months and the highest level since June, after a 7.4% rebound in November. The quits rate (a measure of workers’ willingness or ability to leave jobs) held at 2.0% in December and November, slightly below 2.3% in February 2020. Private sector quits eased 0.2% (+4.5% y/y) following an 8.4% November rebound. **Layoffs and discharges** (involuntary separations initiated by the employer) increased 3.6% (5.6% y/y) to 1.762 million in December, up for the third time in four months, after an 8.1% drop in November. The layoffs & discharges rate remained at 1.1% in December and November, marginally below 1.3% in February 2020. Private sector layoffs grew 4.3% (7.8% y/y) following a 7.3% November decrease.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

260205C15.jpg

260205D15.jpg

- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

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

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

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

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

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

U.S. Initial Unemployment Claims Surged in Latest Week

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

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

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

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

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

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

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

Economy in Brief: 2004

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