Louise Curley

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<img align="left" border="0" height="276" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050117a.gif" width="366">
Consumer confidence in Japan declined in December to 44.3 from 47.9 in Novemberand was almost 10% below the peak reached in August of this year. It was also below consensus. The outlook for overall livelihood, income growth, employment and willingness to buy durable goods--components that make up the index--are all down almost 10% or more from August as shown in the table below.
A value below 50 indicates that consumers expect conditions to be somewhat worse. Consumers are asked to rate the prospects for their general livelihood, income growth, employment and their willingness to buy durable goods. If the expectation is for better, it is given a !; if slightly better, .75; if no change, .50; if slightly worse, .25; and if worse; 0.
Monthly data are available only since April of last year. In June of 2004, the Economic and Social Research Institute of the Cabinet Office combined the old Quarterly Consumer Confidence Survey, the Monthly Consumer Confidence Survey covering Tokyo and the One-person Household Consumer Survey into one survey called the Monthly Consumer Confidence Survey covering all Japan. Monthly data from April 2004 on are now available for All Households, One-person Households and 2 or More Persons Households. For each type of household, data are available on consumers&#39; appraisals of the outlook for their over all livelihood, income growth, employment, willingness to buy durable goods, and the value of their assets. An appraisal of leisure prospects is also available quarterly. Prior to that time, there are quarterly data based on the discontinued Quarterly Consumer Confidence Survey covering 5040 households, excluding single-person households. These data, available in the Haver Japan data base under the Consumer Confidence Index (Households with 2 or More Persons) are shown in the attached chart, together with the quarterly values of the new monthly data.
In spite of the dip in the fourth quarter, the level of confidence among Japanese consumers is relative high. According to the quarterly data Japanese consumers have rarely scored a level of confidence above the 50 level.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Japan Consumer Sentiment Diffusion Indexes</th>
<th scope="col">Dec 04</th>
<th scope="col">Nov&nbsp;04</th>
<th scope="col">Oct 04</th>
<th scope="col">Sep 04</th>
<th scope="col">Aug 04</th>
<th scope="col">% Chg Dec/Aug 04</th>
<th scope="col">% Chg&nbsp; Q4/Q3 04</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">All Households</td>
<td>44.3</td>
<td>47.9</td>
<td>47.7</td>
<td>46.7</td>
<td>49.1</td>
<td>-9.8</td>
<td>-2.9</td>
</tr>
<tr>
<td class="firstcol">2 or more person households</td>
<td>44.0</td>
<td>48.0</td>
<td>47.7</td>
<td>46.1</td>
<td>49.2</td>
<td>-10.6</td>
<td>-3.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Overall livelihood</td>
<td>43.0</td>
<td>46.4</td>
<td>46.6</td>
<td>45.1</td>
<td>47.5</td>
<td>-9.5</td>
<td>-2.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Income growth</td>
<td>41.8</td>
<td>46.2</td>
<td>46.1</td>
<td>43.3</td>
<td>46.6</td>
<td>-10.3</td>
<td>-1.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment</td>
<td>44.0</td>
<td>49.1</td>
<td>48.2</td>
<td>46.9</td>
<td>50.7</td>
<td>-13.2</td>
<td>-4.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Willingness to buy durable goods</td>
<td>47.3</td>
<td>50.1</td>
<td>50.0</td>
<td>49.2</td>
<td>51.9</td>
<td>-8.9</td>
<td>-3.5</td>
</tr>
</tbody>
</table>
</body>
</html>

Consumer confidence in Japan declined in December to 44.3 from 47.9 in Novemberand was almost 10% below the peak reached in August of this year. It was also below consensus. The outlook for overall livelihood, income growth, [...]

Japanese Consumers' Confidence Declines

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050117a.jpg" width="353">
Consumer confidence in Japan declined in December to 44.3 from 47.9 in Novemberand was almost 10% below the peak reached in August of this year. It was also below consensus. The outlook for overall livelihood, income growth, employment and willingness to buy durable goods--components that make up the index--are all down almost 10% or more from August as shown in the table below.
A value below 50 indicates that consumers expect conditions to be somewhat worse. Consumers are asked to rate the prospects for their general livelihood, income growth, employment and their willingness to buy durable goods. If the expectation is for better, it is given a !; if slightly better, .75; if no change, .50; if slightly worse, .25; and if worse; 0.
Monthly data are available only since April of last year. In June of 2004, the Economic and Social Research Institute of the Cabinet Office combined the old Quarterly Consumer Confidence Survey, the Monthly Consumer Confidence Survey covering Tokyo and the One-person Household Consumer Survey into one survey called the Monthly Consumer Confidence Survey covering all Japan. Monthly data from April 2004 on are now available for All Households, One-person Households and 2 or More Persons Households. For each type of household, data are available on consumers&#39; appraisals of the outlook for their over all livelihood, income growth, employment, willingness to buy durable goods, and the value of their assets. An appraisal of leisure prospects is also available quarterly. Prior to that time, there are quarterly data based on the discontinued Quarterly Consumer Confidence Survey covering 5040 households, excluding single-person households. These data, available in the Haver Japan data base under the Consumer Confidence Index (Households with 2 or More Persons) are shown in the attached chart, together with the quarterly values of the new monthly data.
In spite of the dip in the fourth quarter, the level of confidence among Japanese consumers is relative high. According to the quarterly data Japanese consumers have rarely scored a level of confidence above the 50 level.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Japan Consumer Sentiment Diffusion Indexes</th>
<th scope="col">Dec 04</th>
<th scope="col">Nov&nbsp;04</th>
<th scope="col">Oct 04</th>
<th scope="col">Sep 04</th>
<th scope="col">Aug 04</th>
<th scope="col">% Chg Dec/Aug 04</th>
<th scope="col">% Chg&nbsp; Q4/Q3 04</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">All Households</td>
<td>44.3</td>
<td>47.9</td>
<td>47.7</td>
<td>46.7</td>
<td>49.1</td>
<td>-9.8</td>
<td>-2.9</td>
</tr>
<tr>
<td class="firstcol">2 or more person households</td>
<td>44.0</td>
<td>48.0</td>
<td>47.7</td>
<td>46.1</td>
<td>49.2</td>
<td>-10.6</td>
<td>-3.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Overall livelihood</td>
<td>43.0</td>
<td>46.4</td>
<td>46.6</td>
<td>45.1</td>
<td>47.5</td>
<td>-9.5</td>
<td>-2.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Income growth</td>
<td>41.8</td>
<td>46.2</td>
<td>46.1</td>
<td>43.3</td>
<td>46.6</td>
<td>-10.3</td>
<td>-1.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment</td>
<td>44.0</td>
<td>49.1</td>
<td>48.2</td>
<td>46.9</td>
<td>50.7</td>
<td>-13.2</td>
<td>-4.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Willingness to buy durable goods</td>
<td>47.3</td>
<td>50.1</td>
<td>50.0</td>
<td>49.2</td>
<td>51.9</td>
<td>-8.9</td>
<td>-3.5</td>
</tr>
</tbody>
</table>
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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/050114g.jpg" width="353">
Back in the 1970s, when the first energy crisis occurred, the striking phenomenon for many economists was that inflation responded around the world. Many countries saw price indexes accelerate dramatically. Moreover, labor contracts in many places included automatic accelerator clauses tied to inflation. The CPI in some countries -- including the US -- included mortgage rates as part of the measure of housing costs, so that, ironically, as central banks raised interest rates to combat inflation, the reported inflation figures rose. These factors, plus the widespread pricing-power of producers to pass energy costs on to their customers rather than absorb them, made the energy cost-price inflation process self-reinforcing.
Today, these conditions are vastly different, and it may be just as remarkable that resistance of generalized consumer price inflation to rising energy costs is as widespread now as the vulnerability to them was 30 years ago. December CPI reports for five quite different countries give examples. There&#39;s evidence of some pick-up in 2004 compared with 2003 performance, but these seem restrained. In Spain, the December 2004 CPI is up 3.2% from a year ago, 0.6 percentage point faster than 2003&#39;s rise. But inflation is less than in 2002 and not much more than in 2001. Excluding unprocessed food and energy products, Spain&#39;s core CPI is notably slower than either 2002 or 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050114h.jpg" width="353">
Finland has seen a progressive slowing of its CPI throughout this period, as has Brazil. Inflation conditions are vastly different in these two countries, of course. And the Brazilian central bank came under fire in markets and the press this morning for missing its annual inflation target once again. Even so, inflation in both of these countries is being kept at bay. In Slovakia, the CPI trend is uneven, but after it surged in 2003, it moderated in 2004, indicating that self-reinforcement mechanisms are not in play there either. In Israel, the 2004 CPI rise contrasts with 2003&#39;s outright decline, but shifts in regulated prices, not in energy, were the main ingredient in that seesaw pattern.
In fact, the only country in our table which is showing a persistent pick-up in inflation rates is the United States, which we included here for reference and perspective. Lower energy costs for December may help restrain the 2004 outcome (due to be published Wednesday, January 19) but the year still looks to show just about the highest inflation in four years.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Consumer Price Indexes, NSA, Yr/Yr % Chg</th>
<th scope="col">Dec 2004</th>
<th scope="col">Nov 2004</th>
<th scope="col">Oct 2004</th>
<th scope="col">Dec 2003</th>
<th scope="col">Dec 2002</th>
<th scope="col">Dec 2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>3.2</td>
<td>3.5</td>
<td>3.5</td>
<td>2.6</td>
<td>4.5</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">ex Food &amp; Energy</td>
<td>3.0</td>
<td>2.9</td>
<td>2.9</td>
<td>2.5</td>
<td>4.1</td>
<td>3.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Finland</td>
<td>0.4</td>
<td>0.5</td>
<td>0.9</td>
<td>0.6</td>
<td>1.7</td>
<td>1.8</td>
</tr>
<tr>
<td class="firstcol">Slovakia</td>
<td>6.0</td>
<td>6.3</td>
<td>6.6</td>
<td>9.2</td>
<td>3.4</td>
<td>6.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Israel</td>
<td>1.2</td>
<td>0.9</td>
<td>0.8</td>
<td>-1.9</td>
<td>6.5</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">Brazil</td>
<td>7.6</td>
<td>7.2</td>
<td>6.9</td>
<td>9.3</td>
<td>12.5</td>
<td>7.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo: US</td>
<td>NA</td>
<td>3.5</td>
<td>3.2</td>
<td>1.9</td>
<td>2.4</td>
<td>1.6</td>
</tr>
</tbody>
</table>
</body>
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Back in the 1970s, when the first energy crisis occurred, the striking phenomenon for many economists was that inflation responded around the world. Many countries saw price indexes accelerate dramatically. Moreover, labor contracts [...]

Moderate 2004 Inflation in Several Countries, Despite Stronger Energy Costs

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050114e.jpg" width="353">
Total business inventories jumped 1.0% in November. The increase lifted the y/y gain to 7.9%, the strongest since 1995, in marked contrast to the decumulation of just a few years ago.
Wholesale inventories again jumped by 1.1%. 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.
Retail inventories surged 1.1% due to across the board accumulation. Motor vehicle inventories rose 1.6% (7.8% y/y) and non-auto retail inventories nearly doubled the October increase with a 0.9% rise. Strong m/m gains were logged for furniture (+3.9% y/y), a general merchandise (5.5% y/y) and building materials (15.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050114f.jpg" width="353">
Overall business sales added 0.4% (+10.6% y/y) to the 11.4% pop in October.
The ratio of inventories-to-sales ticked up slightly to 1.31.

<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">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1.0%</td>
<td>0.4%</td>
<td>7.9%</td>
<td>1.9%</td>
<td>1.5%</td>
<td>-4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>1.1%</td>
<td>-0.4%</td>
<td>6.2%</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>0.9%</td>
<td>0.5%</td>
<td>5.4%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>1.1%</td>
<td>1.1%</td>
<td>11.5%</td>
<td>2.2%</td>
<td>0.4%</td>
<td>-4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.7%</td>
<td>0.9%</td>
<td>7.2%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
</tbody>
</table>
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Total business inventories jumped 1.0% in November. The increase lifted the y/y gain to 7.9%, the strongest since 1995, in marked contrast to the decumulation of just a few years ago. Wholesale inventories again jumped by 1.1%. During [...]

U.S. Inventories Gain Strongest Since 1995

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050114c.jpg" width="353">
Industrial production finished 2004 on a strong note and surged 0.8%. The gain followed a downwardly revised 0.2% November increase but it doubled Consensus expectations had been for a 0.4% increase. The 4.1% gain in production for all of last year was the strongest since a 4.3% rise in 2000.
A 2.7% rise in electric &amp; gas utilities last month boosted the production gain, but the factory sector nevertheless performed well. The 0.6% (5.1% y/y) rise in December factory sector output raised production 4.8% for the full year, the strongest since 1999.
The high tech sector contributed to the 2004 output gain with a 19.1% rise for the full year. Output of semiconductors &amp; related equipment rose by nearly one third for the year though that rate of gain is half the growth logged during the late 1990s. Outside the technology sector, the 3.9% full year gain in factory output excluding high tech was the largest since 1997.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050114d.jpg" width="353">
Output of appliances, furniture &amp; carpeting added 0.6% (2.8% y/y) to a downwardly revised 0.9% November gain and for the year grew 4.8%. Clothing output turned in the best showing since April with a 0.8% (-4.2% y/y) rise but output still fell 6.2% for the year, the tenth down year in a row.
Total capacity utilization rose to 79.2% from an upwardly revised November. Capacity grew 1.2% y/y.

<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">Production &amp; Capacity</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Industrial Production</td>
<td>0.8%</td>
<td>0.2%</td>
<td>4.3%</td>
<td>4.1%</td>
<td>-0.0%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>79.2%</td>
<td>78.6%</td>
<td>76.8% (12/03)</td>
<td>78.1%</td>
<td>75.5%</td>
<td>75.3%</td>
</tr>
</tbody>
</table>
</body>
</html>

Industrial production finished 2004 on a strong note and surged 0.8%. The gain followed a downwardly revised 0.2% November increase but it doubled Consensus expectations had been for a 0.4% increase. The 4.1% gain in production for [...]

Industrial Production Surged

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050114a.jpg" width="353">
The PPI for finished goods fell 0.7% in December, reversed all of the prior month&#39;s gain and dropped more than Consensus expectations for a 0.1% dip. The indication of tame pricing power extended to a 0.1% rise in prices less food &amp; energy which was half the Consensus expectation and the weakest figure since July.
Finished energy prices fell whopping 4.0% (+13.5% y/y) as gasoline prices fell 14.4% (+27.4% y/y), fuel oil prices fell 10.0% (+41.0% y/y) and residential natural gas prices slipped 0.2% (+15.7% y/y).
Though the trend in prices less food &amp; energy firmed last year, the gain in December was under control as a 0.1% (2.0% y/y) rise in core finished consumer goods was the weakest since August. Unchanged or lower prices for apparel, passenger cars (+1.7% y/y), toys (+1.0% y/y) and furniture (+3.4% y/y) offset gains in prices for books (+4.6% y/y) and home electronics (-5.5% y/y). Finished capital goods prices also rose a modest 0.1% (2.4% y/y), the weakest gain since July.
Finished food prices also were well behaved. The 0.1% (2.9% y/y) gain was the weakest since September.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050114b.jpg" width="353">
Intermediate goods prices fell for the first time in over a year. The 0.3% decline reflected a 3.8% (+14.7% y/y) drop in energy prices but a 0.8% (-1.9% y/y) gain in food prices. Core intermediate prices rose a firm 0.5% reflecting strength across categories, although recent weakness in housing construction has eased the earlier pressure on wood prices.
Crude prices slumped 2.9% as lower oil prices pulled crude energy prices down 7.3% (+37.3% y/y). The 1.7% decline in core crude prices reflected lower prices for iron &amp; steel scrap (+48.6% y/y) but prices for copper scrap rose (35.5% y/y) as did aluminum scrap prices (+12.3 y/y). During the last thirty years &quot;core&quot; crude prices have been a fair indicator of industrial sector activity with a 48% correlation between the six month change in core crude prices and the change in factory sector industrial production.

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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.7%</td>
<td>0.5%</td>
<td>4.1%</td>
<td>3.6%</td>
<td>3.2%</td>
<td>-1.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>1.5%</td>
<td>0.2%</td>
<td>0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-0.3%</td>
<td>0.8%</td>
<td>9.0%</td>
<td>6.6%</td>
<td>4.7%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.5%</td>
<td>0.4%</td>
<td>8.3%</td>
<td>5.7%</td>
<td>2.0%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-2.9%</td>
<td>8.7%</td>
<td>18.2%</td>
<td>17.6</td>
<td>25.1%</td>
<td>-10.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-1.7%</td>
<td>2.5%</td>
<td>20.4%</td>
<td>26.5%</td>
<td>12.4%</td>
<td>3.8%</td>
</tr>
</tbody>
</table>
</body>
</html>

The PPI for finished goods fell 0.7% in December, reversed all of the prior month's gain and dropped more than Consensus expectations for a 0.1% dip. The indication of tame pricing power extended to a 0.1% rise in prices less food & [...]

Producer Prices Fell in December, Core Tame

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050114a.jpg" width="353">
The PPI for finished goods fell 0.7% in December, reversed all of the prior month&#39;s gain and dropped more than Consensus expectations for a 0.1% dip. The indication of tame pricing power extended to a 0.1% rise in prices less food &amp; energy which was half the Consensus expectation and the weakest figure since July.
Finished energy prices fell whopping 4.0% (+13.5% y/y) as gasoline prices fell 14.4% (+27.4% y/y), fuel oil prices fell 10.0% (+41.0% y/y) and residential natural gas prices slipped 0.2% (+15.7% y/y).
Though the trend in prices less food &amp; energy firmed last year, the gain in December was under control as a 0.1% (2.0% y/y) rise in core finished consumer goods was the weakest since August. Unchanged or lower prices for apparel, passenger cars (+1.7% y/y), toys (+1.0% y/y) and furniture (+3.4% y/y) offset gains in prices for books (+4.6% y/y) and home electronics (-5.5% y/y). Finished capital goods prices also rose a modest 0.1% (2.4% y/y), the weakest gain since July.
Finished food prices also were well behaved. The 0.1% (2.9% y/y) gain was the weakest since September.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050114b.jpg" width="353">
Intermediate goods prices fell for the first time in over a year. The 0.3% decline reflected a 3.8% (+14.7% y/y) drop in energy prices but a 0.8% (-1.9% y/y) gain in food prices. Core intermediate prices rose a firm 0.5% reflecting strength across categories, although recent weakness in housing construction has eased the earlier pressure on wood prices.
Crude prices slumped 2.9% as lower oil prices pulled crude energy prices down 7.3% (+37.3% y/y). The 1.7% decline in core crude prices reflected lower prices for iron &amp; steel scrap (+48.6% y/y) but prices for copper scrap rose (35.5% y/y) as did aluminum scrap prices (+12.3 y/y). During the last thirty years &quot;core&quot; crude prices have been a fair indicator of industrial sector activity with a 48% correlation between the six month change in core crude prices and the change in factory sector industrial production.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.7%</td>
<td>0.5%</td>
<td>4.1%</td>
<td>3.6%</td>
<td>3.2%</td>
<td>-1.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>1.5%</td>
<td>0.2%</td>
<td>0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-0.3%</td>
<td>0.8%</td>
<td>9.0%</td>
<td>6.6%</td>
<td>4.7%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.5%</td>
<td>0.4%</td>
<td>8.3%</td>
<td>5.7%</td>
<td>2.0%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-2.9%</td>
<td>8.7%</td>
<td>18.2%</td>
<td>17.6</td>
<td>25.1%</td>
<td>-10.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-1.7%</td>
<td>2.5%</td>
<td>20.4%</td>
<td>26.5%</td>
<td>12.4%</td>
<td>3.8%</td>
</tr>
</tbody>
</table>
Industrial Production Surged 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 14, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050114c.jpg" width="353">
Industrial production finished 2004 on a strong note and surged 0.8%. The gain followed a downwardly revised 0.2% November increase but it doubled Consensus expectations had been for a 0.4% increase. The 4.1% gain in production for all of last year was the strongest since a 4.3% rise in 2000.
A 2.7% rise in electric &amp; gas utilities last month boosted the production gain, but the factory sector nevertheless performed well. The 0.6% (5.1% y/y) rise in December factory sector output raised production 4.8% for the full year, the strongest since 1999.
The high tech sector contributed to the 2004 output gain with a 19.1% rise for the full year. Output of semiconductors &amp; related equipment rose by nearly one third for the year though that rate of gain is half the growth logged during the late 1990s. Outside the technology sector, the 3.9% full year gain in factory output excluding high tech was the largest since 1997.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050114d.jpg" width="353">
Output of appliances, furniture &amp; carpeting added 0.6% (2.8% y/y) to a downwardly revised 0.9% November gain and for the year grew 4.8%. Clothing output turned in the best showing since April with a 0.8% (-4.2% y/y) rise but output still fell 6.2% for the year, the tenth down year in a row.
Total capacity utilization rose to 79.2% from an upwardly revised November. Capacity grew 1.2% y/y.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Industrial Production</td>
<td>0.8%</td>
<td>0.2%</td>
<td>4.3%</td>
<td>4.1%</td>
<td>-0.0%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>79.2%</td>
<td>78.6%</td>
<td>76.8% (12/03)</td>
<td>78.1%</td>
<td>75.5%</td>
<td>75.3%</td>
</tr>
</tbody>
</table>
U.S. Inventories Gain Strongest Since 1995 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 14, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050114e.jpg" width="353">
Total business inventories jumped 1.0% in November. The increase lifted the y/y gain to 7.9%, the strongest since 1995, in marked contrast to the decumulation of just a few years ago.
Wholesale inventories again jumped by 1.1%. 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.
Retail inventories surged 1.1% due to across the board accumulation. Motor vehicle inventories rose 1.6% (7.8% y/y) and non-auto retail inventories nearly doubled the October increase with a 0.9% rise. Strong m/m gains were logged for furniture (+3.9% y/y), a general merchandise (5.5% y/y) and building materials (15.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050114f.jpg" width="353">
Overall business sales added 0.4% (+10.6% y/y) to the 11.4% pop in October.
The ratio of inventories-to-sales ticked up slightly to 1.31.

<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">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1.0%</td>
<td>0.4%</td>
<td>7.9%</td>
<td>1.9%</td>
<td>1.5%</td>
<td>-4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>1.1%</td>
<td>-0.4%</td>
<td>6.2%</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>0.9%</td>
<td>0.5%</td>
<td>5.4%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>1.1%</td>
<td>1.1%</td>
<td>11.5%</td>
<td>2.2%</td>
<td>0.4%</td>
<td>-4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.7%</td>
<td>0.9%</td>
<td>7.2%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050113e.jpg" width="353">
The Small Business Optimism Index published by the National Federation of Independent Business (NFIB) slipped 1.5% in December from the twenty year high to 106.1.
During the last ten years there has been a 68% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percentage of firms expecting the economy to improve fell ten points to 37 but the 4Q level was the highest of the year. The percent of firms planning to raise employment also fell to a still high 17%. During the last ten years there has been a 65% correlation between these hiring plans and the three month growth in nonfarm payrolls. The percentage of firms with one or more job openings rose back to 23%, the highest level since 2001. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050113f.jpg" width="353">
The percentage of firms expecting higher real sales in 6 months remained at an elevated 35%. The net of firms expecting higher earnings this quarter slipped.
The percentage of firms raising average selling prices fell to 15%, the lowest since February.
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%">
<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">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>106.1</td>
<td>107.7</td>
<td>-0.7%</td>
<td>104.6</td>
<td>101.3</td>
<td>101.2</td>
</tr>
</tbody>
</table>
</body>
</html>

The Small Business Optimism Index published by the National Federation of Independent Business (NFIB) slipped 1.5% in December from the twenty year high to 106.1. During the last ten years there has been a 68% correlation between the [...]

Small Business Optimism Slipped

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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

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

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

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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

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

Andrew Cates

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

250501Z1.jpg

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

250501Z2.jpg

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

250501Z3.jpg

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

250501Z4.jpg

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

250501Z5.jpg

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

250501Z6.jpg

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

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Charts of the Week: Tariff Truce, Tenuous Trust

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

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

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

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

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

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

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

U.S. Light Vehicle Sales Fall in April

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The ISM Purchasing Managers Index of activity in the manufacturing sector slipped to 48.7 in April from 49.0 during March and 50.3 in February. It remained up from a low of 46.9 in October of last year. A level of 50 is the break-even point between a rising and falling level of activity. The Action Economics Forecast Survey expected a reading of 47.8 for April. The series reached a monthly high of 63.8 in March 2021.

Two of the five component indexes weakened last month. The April production index fell to 44.0 after declining to 48.3 in March. It was the lowest level since May 2020. A lessened 19.8% (NSA) of respondents reported higher production while an increased 24.2% reported lower output. The inventories index declined to 50.8 last month from 53.4 in March. The index remained up from a low of 43.2 in October of last year.

Moving higher, the new orders index rose to 47.2 last month from 45.2 in March. The index remained below a January high of 55.1. Twenty-eight percent (NSA) of respondents reported higher new orders while 26.7% reported a decline. The employment index rose to 46.5 from 44.7 in March. It was below a high of 50.3 in January. A greater 13.1% (NSA) of respondents reported more hiring while a fewer 16.2% indicated less. The supplier delivery index rose to 55.2 from 53.5 in March. A higher 16.6% (NSA) of respondents reported slower delivery speeds while a fairly steady 6.2% reported a quickening.

The prices index, which is not part of the composite series, edged up to 69.8 (NSA) in April after increasing to 69.4 in March. It was the highest level since June 2022, up from a December 2022 low of 39.4. An increased 49.2% of respondents reported higher prices last month, up from 12.2% in November, while a higher 9.7% reported lower prices.

In other series, the export orders index plummeted to 43.1 in April from 49.6 during March. It was down from the high of 52.4 in January. The imports index fell sharply to 47.1 from 50.1 in March. It was the lowest reading since December 2023. The order backlog index dropped to 43.7 (NSA) last month from 44.5 in March. It was the lowest level in five months.

The ISM figures are based on responses from over 400 purchasing executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These indexes are diffusion indexes where a reading above 50 indicates expansion and a reading below 50 points to contraction. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- Declines in last three months follow earlier improvement.
- Production & inventories account for m/m shortfall.
- Prices index edges up to another three-year high.

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

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The value of construction put in place unexpectedly fell 0.5% m/m in March after rises of 0.6% in February (+0.7% initially) and 0.1% in January (-0.5% previously), data from the U.S. Census Bureau showed. The March reading was the first m/m fall following five straight m/m gains. A 0.3% m/m March rise had been expected in the Action Economics Forecast Survey. The year-on-year rate of increase decelerated to 2.8% in March, the lowest since May 2019, after registering at 3.4% in February and January. The latest y/y figure was lower than 8.7% in March 2024; thus, having remained below its recent high of 9.8% in January 2024 and a peak of 18.6% in April 2022.

Private construction slid 0.6% (+2.3% y/y) in March, down for the first time since September, following increases of 0.7% in February (+0.9% initially) and 0.1% in January (-0.7% previously). Residential private construction fell 0.4% (+2.8% y/y) in March, the first m/m fall in six months, after an unrevised 1.3% gain in February. Home improvement building dropped 1.2% (+13.4% y/y), the first m/m decline since December, following a 2.3% February gain; it was 41.1% of the residential private construction. Single-family building edged up 0.1% (-0.8% y/y), the smallest of seven consecutive m/m increases, after a 0.8% February rise; it was 46.6% of the residential private construction. Meanwhile, multi-family building was essentially unchanged m/m (-12.1% y/y) in March following 15 straight m/m decreases; it was 12.3% of the residential private construction.

Nonresidential private construction fell 0.8% (+1.6% y/y) in March after a 0.1% increase in February (+0.4% initially) and a 0.1% easing in January (-0.2% previously). The March fall reflected m/m drops in the following nonresidential private constructions. These included religious (-2.9%; +16.4% y/y), health care (-2.2%; -5.2% y/y), office (-1.8%; +2.7% y/y), educational (-1.7%; -4.2% y/y), lodging (-1.6%; -1.0% y/y), commercial (-1.0%; -5.8% y/y), manufacturing (-0.4%; +3.6% y/y), communication (-0.3%; +2.2% y/y), and utilities (-0.1%; +7.0% y/y). In contrast, private constructions for amusement & recreation (1.5%; 7.0% y/y) and transportation (0.7%; 10.2% y/y) rose m/m in March.

The value of public construction declined 0.2% (+4.7% y/y) in March after holding steady in February (+0.2% initially), reflecting a 0.2% increase (-1.9% y/y) in residential public construction and a 0.2% easing (+4.8% y/y) in nonresidential public construction. The March decline reflected m/m drops in the following nonresidential public constructions. These included utilities (-4.8%; -12.8% y/y), commercial (-1.6%; +40.3% y/y), amusement & recreation (-1.0%; +19.1% y/y), educational (-0.6%; +7.6% y/y), sewage & waste disposal (-0.6%; +10.6% y/y), and health care (-0.4%; +13.0% y/y). Notably, spending on highways & streets, which made up 28.7% of public construction spending, fell 0.5% (-2.4% y/y) in March, the first m/m fall since October, following a 0.9% increase in February. To the upside, the following public constructions rose m/m in March: office (1.6%; 6.0% y/y), transportation (1.4%; 7.3% y/y), public safety (0.7%; 4.1% y/y), conservation & development (0.6%; 4.7% y/y), and water supply (0.6%; 12.2% y/y).

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

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- March construction spending -0.5% m/m; +2.8% y/y, the lowest y/y rate since May ’19.
- Residential private construction -0.4% m/m, led by a 1.2% drop in home improvement building.
- Nonresidential private construction -0.8% m/m, down for the second month in three.
- Public sector construction -0.2% m/m, reflecting a 0.2% decline in nonresidential public building.

Economy in Brief: January 2005

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Japanese Consumers' Confidence Declines

Japanese Consumers' Confidence Declines

Moderate 2004 Inflation in Several Countries, Despite Stronger Energy Costs

U.S. Inventories Gain Strongest Since 1995

Industrial Production Surged

Producer Prices Fell in December, Core Tame

Producer Prices Fell in December, Core Tame

Small Business Optimism Slipped