Louise Curley

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<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112i.jpg" style="width: 353px; height: 265px;" align="right">Industrial
production in India increased 3.0% from 298.8 (FY 1993=100) in October
to 307.8 in November and was 11.7% greater than November
2008.&nbsp; This follows October's year over year increase of
10.4%.&nbsp; The production of electricity was down 1.7% for the
month but was 3.3% above the year ago level.&nbsp; Mining
production increased less than a third of a percent in November but was
almost 10 above the year ago level.&nbsp; Production in the
manufacturing sector was strong, increasing 4.2% in the month and 12.7%
over a year ago.&nbsp; The trends in total production and its major
components over the past six years are shown in the first
chart.&nbsp; The rising trend in production halted in 2008 and
early 2009, but never actually reversed into a decline.</p>
<p>Industrial
production for India is also reported for Market Groups, some of which
are shown in the second chart.&nbsp; (Recent levels and percentage
changes for those market groups not shown in the chart are shown in the
table below.) Production of consumer durables was a standout in
November with production up 14.0%.&nbsp; A steadily increasing rate
of production has brought the production of consumer durable goods
37.4% above that of November 2008&nbsp;&nbsp; Although capital
goods production increased only 0.39% in the month of November it was
11.6% greater than in November 2008.&nbsp; There was a similar
pattern in the production of Intermediate Goods, which increased 1.5%
in November but was 19.4% above the year ago
level.</p>
<p> Rising industrial production in the first
two months of the fourth quarter bodes well for growth in the total
economy in the fourth quarter.&nbsp; Industrial production has
accounted for between 18% and 20% of GDP over the past six years as
shown in the third chart.&nbsp;&nbsp;</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112j.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112k.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Industrial
Production (FY1993=100)</b></th>
<th scope="col"><b>Nov 09</b></th>
<th scope="col"><b>Oct 09</b></th>
<th scope="col"><b>Nov 08</b></th>
<th scope="col"><b>M/M % Chg</b></th>
<th scope="col"><b>Y/Y % Chg</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
<th scope="col"><b>2006</b></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total</td>
<td>307.8</td>
<td>298.8</td>
<td>275.5</td>
<td>3.01</td>
<td>11.72</td>
<td>275.0</td>
<td>263.3</td>
<td>239.6</td>
</tr>
<tr>
<td class="firstcol">Mining</td>
<td>194.0</td>
<td>193.4</td>
<td>176.6</td>
<td>0.31</td>
<td>9.85</td>
<td>175.5</td>
<td>169.2</td>
<td>159.9</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>333.0</td>
<td>319.7</td>
<td>295.5</td>
<td>4.16</td>
<td>12.69</td>
<td>294.9</td>
<td>282.0</td>
<td>255.0</td>
</tr>
<tr>
<td class="firstcol">Electricity</td>
<td>232.2</td>
<td>236.7</td>
<td>224.7</td>
<td>-1.69</td>
<td>3.34</td>
<td>222.1</td>
<td>214.1</td>
<td>201.5</td>
</tr>
<tr>
<td class="firstcol">Basic Goods</td>
<td>243.3</td>
<td>241.7</td>
<td>229.5</td>
<td>0.66</td>
<td>6.01</td>
<td>229.5</td>
<td>221.2</td>
<td>203.5</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>440.1</td>
<td>438.4</td>
<td>394.5</td>
<td>0.39</td>
<td>11.56</td>
<td>392.7</td>
<td>359.6</td>
<td>300.5</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>305.7</td>
<td>291.7</td>
<td>256.0</td>
<td>1.46</td>
<td>19.41</td>
<td>260.8</td>
<td>259.7</td>
<td>234.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Goods</td>
<td>335.4</td>
<td>329.2</td>
<td>302.2</td>
<td>1.88</td>
<td>10.99</td>
<td>306.4</td>
<td>288.3</td>
<td>269.6</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp;
Durable&nbsp;</td>
<td>516.9</td>
<td>453.3</td>
<td>376.1</td>
<td>14.03</td>
<td>37.44</td>
<td>389.7</td>
<td>377.9</td>
<td>378.5</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp;
Nondurable</td>
<td>294.4</td>
<td>298.0</td>
<td>286.0</td>
<td>-1.21</td>
<td>2.94</td>
<td>287.3</td>
<td>267.7</td>
<td>244.4</td>
</tr>
</tbody>
</table>
</span>
</body></html>

Industrial production in India increased 3.0% from 298.8 (FY 1993=100) in October to 307.8 in November and was 11.7% greater than November 2008. This follows October's year over year increase of 10.4%. The production of electricity [...]

Industrial Production In India Continues To Advance

Tom Moeller

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<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112g.jpg" style="width: 353px; height: 265px;" align="right">The holiday
spirit faded last week. That was reflected in a 3.0% w/w decline in
chain store sales which left purchases at the lowest level since March
of last year. Nevertheless, sales rose 1.7% y/y. Most likely the latest
weakness as much reflects post-holiday price discounts as a decline in
sales' volume.</p><p>The
ICSC-Goldman Sachs retail chain-store sales index is constructed using
the same-store sales (stores open for one year) 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 69% correlation between the year-to-year growth in
chain store sales and the growth in general merchandise retail sales.<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112h.jpg" style="width: 353px; height: 265px;" align="right">
<span>
The weekly figures are available in Haver's <b>SURVEYW </b>database.</span></p><p>
Also suffering from post-Holiday blues was the leading indicator of
chain store sales. It slipped marginally early in January but its level
was near the highest since January of last year. This composite leading
economic indicator is compiled from four series: (1) the MBA's volume
index of mortgage applications for home purchase (2) the ABC News/Money
magazine's survey of consumer buying conditions (3) new filings for
jobless benefits and (4) the 30-year government bond yield</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM" style="color: rgb(0, 0, 0);"><span>ICSC-UBS (SA,
1977=100)</span></a></b></th>
<th scope="col"><b>01/09/10</b></th>
<th scope="col"><b>01/02/10</b></th>
<th scope="col"><b>12/26/09</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>482.6</td>
<td>497.6</td>
<td>490.1</td>
<td>1.7%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
</span></body></html>

The holiday spirit faded last week. That was reflected in a 3.0% w/w decline in chain store sales which left purchases at the lowest level since March of last year. Nevertheless, sales rose 1.7% y/y. Most likely the latest weakness as [...]

Weekly Chain Store Sales Likely Suffered From Price Discounting

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<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112d.jpg" style="width: 353px; height: 265px;" align="right">Energy
prices are responding to evidence of economic recovery. Last week the <b>pump
price for regular gasoline </b>rose to $2.75 per gallon, the
highest level since October 2008 and up 71% from the December 2008 low
of $1.61. Yesterday, strength in gasoline prices eased somewhat. The
spot market price for a gallon of regular gasoline held at $2.12 per
gallon, the same as last week's level. The figures are reported by the
U.S. Department of Energy and can be found in Haver's <b>WEEKLY
&amp; DAILY </b>databases.</p>
<p>Earlier gains in the price for a
barrel of light sweet crude (WTI) oil also stabilized. Yesterday, the
spot price of $82.52 was roughly unchanged from the prior week.
Nevertheless, prices have risen from $71.53 averaged in early-December.
Moreover, prices were up sharply from the December 2008 low of $32.37.
</p>
<p>Demand for gasoline last week posted a 0.9% decline versus one
year
ago. That decline compared to a 3.9% increase at the beginning of
October. Breaking away from earlier y/y strength, the demand for
residual fuel oil fell a sharp 50.4% y/y while distillate demand fell
10.9% y/y, a decline more moderate than the 21.6% y/y shortfall at the
beginning of last July. Inventories of crude oil and petroleum products
fell in early-January by 6.2% from the July high and were up a
diminished 3.1% from one year ago. </p>
<p> Reflecting the cold temperatures
throughout the U.S. natural gas prices also strengthened significantly.
Last week prices averaged $6.50 per mmbtu (11.1% y/y), up from $3.35 in
November and triple the September low. Nevertheless, prices remained
down by half from the high reached in early-July of 2008 of
$13.19/mmbtu.</p>
<p>The energy price data can be found in Haver's <b>WEEKLY
</b>database while the daily figures are in <b>DAILY</b>.
The gasoline demand figures are in <b>OILWKLY</b>.</p>
<p> <b>The
Case for "Inflation First" Monetary Policy</b> from the Federal
Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/es/09/ES0947.pdf">here</a>&nbsp;</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112e.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112e.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM"><b>Weekly
Prices</b></a></th>
<th scope="col"><b>01/11/10</b></th>
<th scope="col"><b>01/04/10</b></th>
<th scope="col"><b>12/28/09</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
<th scope="col"><b>2006</b></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.75</td>
<td>2.67</td>
<td>2.61</td>
<td>54.2%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>82.59</td>
<td>79.14</td>
<td>75.09</td>
<td>85.6%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</span>
</body></html>

Energy prices are responding to evidence of economic recovery. Last week the pump price for regular gasoline rose to $2.75 per gallon, the highest level since October 2008 and up 71% from the December 2008 low of $1.61. Yesterday, [...]

Weekly Chain Store Sales LikelySuffered From Price Discounting

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<p>
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112a.jpg" align="right" border="0" height="265" width="353">
Economic
recovery hit the U.S. trade accounts with a double-whammy during
November. It generated a 2.6% m/m rise in imports and it increased the
international trade deficit to $36.4B which was the highest since
January. The rise followed October's deficit of $33.2B which&nbsp;
was revised up slightly from the initial estimate. Export growth lagged
with a 0.9% increase that followed two months of stronger increase. The
latest figure was quite a bit higher than Consensus expectations for a
deficit of $34.5B.</p><p>Imports rose 2.6% in part due to a rise in crude
oil prices to $72.54 per barrel which was the highest level since
October of 2008. Overall, however, the gain in petroleum imports was
held back by a 4.6% m/m decline (-8.2% y/y) in the quantity of
energy-related products. U.S. economic recovery continued to be
apparent in a 1.5% increase (-6.3% y/y) in real nonoil imports which
was the fifth increase in six months. Real non-auto capital goods
imports jumped 3.5% (-13.0% y/y) after a 2.8% September rise. Real
nonauto consumer goods imports surged 3.7% and by 12.5% since June.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112b.jpg" align="right" border="0" height="265" width="353">
These are turnarounds from earlier sharp declines. Real automotive
vehicles &amp; parts imports, however, slipped 0.4% (-0.1% y/y) but
they were up by one-half since the spring. Real capital goods imports
also have been strong and rose 3.6% for the fourth increase in five
months. They have risen 14.5% since June. Finally, services imports
rose a modest 0.3% (-4.0% y/y) for the fifth increase in six months.
U.S. travels abroad were discouraged by the lower dollar. Travel
imports slipped 0.9% (-7.1% y/y and passenger fares rose 1.5% (-25.6%
y/y).</p><p> Reflecting the competitive value of the dollar, nominal exports
rose 0.9% m/m and by 13.6% from the April low. Adjusted for price
inflation, however, the gain is more impressive. Though real
merchandise exports slipped 0.6% during November (-4.4% y/y), they have
risen 13.9% since April. Offsetting a 5.4% decline (-2.3% y/y) decline
in real non-auto consumer goods exports was a 9.0% rise in auto exports
(-6.1% y/y) and a 0.4% uptick (-7.6% y/y) uptick in real capital goods
exports. Exports of services ticked up 0.2% (-0.8% y/y) following
earlier strong monthly gains.</p><p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112c.jpg" align="right" border="0" height="265" width="353">
By country, the trade deficit
with mainland China lessened to $20.2B, its least since June, as
exports rose 41.4% y/y and imports fell 2.5%. With Japan, the trade
deficit deteriorated to $5.4B from 5.1B one year earlier as exports
fell 16.3% while imports fell just 4.4%. With the European Union, the
trade deficit deteriorated to $6.4B as exports declined 9.4% y/y and
imports fell a lesser 5.3%.</p><p> The international
trade data can be found in Haver's <b>USECON </b>database.
Detailed figures are available in the <b>USINT</b>
database.</p><p><b>The Determinants of International Flows of U.S.
Currency </b>from the Federal Reserve Bank of New York can be
found <a href="http://www.newyorkfed.org/research/staff_reports/sr400.pdf">
here</a>.&nbsp;</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">Foreign
Trade&nbsp;</a></b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>October</b></th>
<th scope="col"><b>September</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
<th scope="col"><b>2006</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">U.S. Trade Deficit</td>
<td>$36.4</td>
<td>$33.2</td>
<td>$35.7B</td>
<td>$43.2B (11/08)</td>
<td>$695.9</td>
<td>$701.4</td>
<td>$760.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Exports - Goods
&amp; Services</td>
<td>0.9%</td>
<td>2.7%</td>
<td>2.8%</td>
<td>-2.3%</td>
<td>11.2%</td>
<td>13.2%</td>
<td>13.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Imports - Goods
&amp; Services</td>
<td>2.6%</td>
<td>0.7%</td>
<td>5.6%</td>
<td>-5.5%</td>
<td>7.6</td>
<td>6.0%</td>
<td>10.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>7.3%</td>
<td>-10.6%</td>
<td>20.7%</td>
<td>1.0%</td>
<td>37.0%</td>
<td>9.4%</td>
<td>20.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonpetroleum Goods</td>
<td>2.4%</td>
<td>3.2%</td>
<td>4.2%</td>
<td>-6.9%</td>
<td>1.5%</td>
<td>4.8%</td>
<td>9.1%</td>
</tr>
</tbody>
</table>
</span></body></html>

Economic recovery hit the U.S. trade accounts with a double-whammy during November. It generated a 2.6% m/m rise in imports and it increased the international trade deficit to $36.4B which was the highest since January. The rise [...]

U.S. Trade Deficit Increases With Economic Recovery

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<p></p>
<p>
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112a.jpg" align="right" border="0" height="265" width="353">Economic
recovery hit the U.S. trade accounts with a double-whammy during
November. It generated a 2.6% m/m rise in imports and it increased the
international trade deficit to $36.4B which was the highest since
January. The rise followed October's deficit of $33.2B which&nbsp;
was revised up slightly from the initial estimate. Export growth lagged
with a 0.9% increase that followed two months of stronger increase. The
latest figure was quite a bit higher than Consensus expectations for a
deficit of $34.5B.</p>
<p>Imports rose 2.6% in part due to a rise in crude
oil prices to $72.54 per barrel which was the highest level since
October of 2008. Overall, however, the gain in petroleum imports was
held back by a 4.6% m/m decline (-8.2% y/y) in the quantity of
energy-related products. U.S. economic recovery continued to be
apparent in a 1.5% increase (-6.3% y/y) in real nonoil imports which
was the fifth increase in six months. Real non-auto capital goods
imports jumped 3.5% (-13.0% y/y) after a 2.8% September rise. Real
nonauto consumer goods imports surged 3.7% and by 12.5% since June.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112b.jpg" align="right" border="0" height="265" width="353">These are turnarounds from
earlier sharp declines. Real automotive
vehicles &amp; parts imports, however, slipped 0.4% (-0.1% y/y) but
they were up by one-half since the spring. Real capital goods imports
also have been strong and rose 3.6% for the fourth increase in five
months. They have risen 14.5% since June. Finally, services imports
rose a modest 0.3% (-4.0% y/y) for the fifth increase in six months.
U.S. travels abroad were discouraged by the lower dollar. Travel
imports slipped 0.9% (-7.1% y/y and passenger fares rose 1.5% (-25.6%
y/y).</p>
<p> Reflecting the competitive value of the dollar, nominal
exports
rose 0.9% m/m and by 13.6% from the April low. Adjusted for price
inflation, however, the gain is more impressive. Though real
merchandise exports slipped 0.6% during November (-4.4% y/y), they have
risen 13.9% since April. Offsetting a 5.4% decline (-2.3% y/y) decline
in real non-auto consumer goods exports was a 9.0% rise in auto exports
(-6.1% y/y) and a 0.4% uptick (-7.6% y/y) uptick in real capital goods
exports. Exports of services ticked up 0.2% (-0.8% y/y) following
earlier strong monthly gains.</p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112c.jpg" align="right" border="0" height="265" width="353">By
country, the trade deficit
with mainland China lessened to $20.2B, its least since June, as
exports rose 41.4% y/y and imports fell 2.5%. With Japan, the trade
deficit deteriorated to $5.4B from 5.1B one year earlier as exports
fell 16.3% while imports fell just 4.4%. With the European Union, the
trade deficit deteriorated to $6.4B as exports declined 9.4% y/y and
imports fell a lesser 5.3%.</p>
<p> The international
trade data can be found in Haver's <b>USECON </b>database.
Detailed figures are available in the <b>USINT</b>
database.</p>
<p><b>The Determinants of International Flows of U.S.
Currency </b>from the Federal Reserve Bank of New York can be
found <a href="http://www.newyorkfed.org/research/staff_reports/sr400.pdf">
here</a>.&nbsp;</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">Foreign
Trade&nbsp;</a></b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>October</b></th>
<th scope="col"><b>September</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
<th scope="col"><b>2006</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">U.S. Trade Deficit</td>
<td>$36.4</td>
<td>$33.2</td>
<td>$35.7B</td>
<td>$43.2B (11/08)</td>
<td>$695.9</td>
<td>$701.4</td>
<td>$760.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Exports - Goods
&amp; Services</td>
<td>0.9%</td>
<td>2.7%</td>
<td>2.8%</td>
<td>-2.3%</td>
<td>11.2%</td>
<td>13.2%</td>
<td>13.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Imports - Goods
&amp; Services</td>
<td>2.6%</td>
<td>0.7%</td>
<td>5.6%</td>
<td>-5.5%</td>
<td>7.6</td>
<td>6.0%</td>
<td>10.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>7.3%</td>
<td>-10.6%</td>
<td>20.7%</td>
<td>1.0%</td>
<td>37.0%</td>
<td>9.4%</td>
<td>20.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonpetroleum Goods</td>
<td>2.4%</td>
<td>3.2%</td>
<td>4.2%</td>
<td>-6.9%</td>
<td>1.5%</td>
<td>4.8%</td>
<td>9.1%</td>
</tr>
</tbody>
</table>
</span>
<span id="articletitle">Weekly Chain Store Sales
LikelySuffered From Price Discounting</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom
Moeller</a> January 12, 2010</span>
<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112d.jpg" style="width: 353px; height: 265px;" align="right">Energy
prices are responding to evidence of economic recovery. Last week the <b>pump
price for regular gasoline </b>rose to $2.75 per gallon, the
highest level since October 2008 and up 71% from the December 2008 low
of $1.61. Yesterday, strength in gasoline prices eased somewhat. The
spot market price for a gallon of regular gasoline held at $2.12 per
gallon, the same as last week's level. The figures are reported by the
U.S. Department of Energy and can be found in Haver's <b>WEEKLY
&amp; DAILY </b>databases.</p>
<p>Earlier gains in the price for a
barrel of light sweet crude (WTI) oil also stabilized. Yesterday, the
spot price of $82.52 was roughly unchanged from the prior week.
Nevertheless, prices have risen from $71.53 averaged in early-December.
Moreover, prices were up sharply from the December 2008 low of $32.37.
</p>
<p>Demand for gasoline last week posted a 0.9% decline versus one
year
ago. That decline compared to a 3.9% increase at the beginning of
October. Breaking away from earlier y/y strength, the demand for
residual fuel oil fell a sharp 50.4% y/y while distillate demand fell
10.9% y/y, a decline more moderate than the 21.6% y/y shortfall at the
beginning of last July. Inventories of crude oil and petroleum products
fell in early-January by 6.2% from the July high and were up a
diminished 3.1% from one year ago. </p>
<p> Reflecting the cold temperatures
throughout the U.S. natural gas prices also strengthened significantly.
Last week prices averaged $6.50 per mmbtu (11.1% y/y), up from $3.35 in
November and triple the September low. Nevertheless, prices remained
down by half from the high reached in early-July of 2008 of
$13.19/mmbtu.</p>
<p>The energy price data can be found in Haver's <b>WEEKLY
</b>database while the daily figures are in <b>DAILY</b>.
The gasoline demand figures are in <b>OILWKLY</b>.</p>
<p> <b>The
Case for "Inflation First" Monetary Policy</b> from the Federal
Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/es/09/ES0947.pdf">here</a>&nbsp;</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112e.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112e.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM"><b>Weekly
Prices</b></a></th>
<th scope="col"><b>01/11/10</b></th>
<th scope="col"><b>01/04/10</b></th>
<th scope="col"><b>12/28/09</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
<th scope="col"><b>2006</b></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.75</td>
<td>2.67</td>
<td>2.61</td>
<td>54.2%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>82.59</td>
<td>79.14</td>
<td>75.09</td>
<td>85.6%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</span>
<span id="articletitle">Weekly Chain Store Sales Likely
Suffered From Price Discounting</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom
Moeller</a> January 12, 2010</span>
<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112g.jpg" style="width: 353px; height: 265px;" align="right">The
holiday
spirit faded last week. That was reflected in a 3.0% w/w decline in
chain store sales which left purchases at the lowest level since March
of last year. Nevertheless, sales rose 1.7% y/y. Most likely the latest
weakness as much reflects post-holiday price discounts as a decline in
sales' volume.</p>
<p>The
ICSC-Goldman Sachs retail chain-store sales index is constructed using
the same-store sales (stores open for one year) 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 69% correlation between the year-to-year growth in
chain store sales and the growth in general merchandise retail sales.<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112h.jpg" style="width: 353px; height: 265px;" align="right">
<span>The weekly figures are available in Haver's <b>SURVEYW
</b>database.</span></p>
<p>Also suffering from post-Holiday blues was the leading
indicator of
chain store sales. It slipped marginally early in January but its level
was near the highest since January of last year. This composite leading
economic indicator is compiled from four series: (1) the MBA's volume
index of mortgage applications for home purchase (2) the ABC News/Money
magazine's survey of consumer buying conditions (3) new filings for
jobless benefits and (4) the 30-year government bond yield</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM" style="color: rgb(0, 0, 0);"><span>ICSC-UBS (SA,
1977=100)</span></a></b></th>
<th scope="col"><b>01/09/10</b></th>
<th scope="col"><b>01/02/10</b></th>
<th scope="col"><b>12/26/09</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>482.6</td>
<td>497.6</td>
<td>490.1</td>
<td>1.7%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
</span>
<span id="articletitle">Industrial Production In India
Continues To Advance</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Louise
Curley</a> January 12, 2010</span>
<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112i.jpg" style="width: 353px; height: 265px;" align="right">Industrial
production in India increased 3.0% from 298.8 (FY 1993=100) in October
to 307.8 in November and was 11.7% greater than November
2008.&nbsp; This follows October's year over year increase of
10.4%.&nbsp; The production of electricity was down 1.7% for the
month but was 3.3% above the year ago level.&nbsp; Mining
production increased less than a third of a percent in November but was
almost 10 above the year ago level.&nbsp; Production in the
manufacturing sector was strong, increasing 4.2% in the month and 12.7%
over a year ago.&nbsp; The trends in total production and its major
components over the past six years are shown in the first
chart.&nbsp; The rising trend in production halted in 2008 and
early 2009, but never actually reversed into a decline.</p>
<p>Industrial
production for India is also reported for Market Groups, some of which
are shown in the second chart.&nbsp; (Recent levels and percentage
changes for those market groups not shown in the chart are shown in the
table below.) Production of consumer durables was a standout in
November with production up 14.0%.&nbsp; A steadily increasing rate
of production has brought the production of consumer durable goods
37.4% above that of November 2008&nbsp;&nbsp; Although capital
goods production increased only 0.39% in the month of November it was
11.6% greater than in November 2008.&nbsp; There was a similar
pattern in the production of Intermediate Goods, which increased 1.5%
in November but was 19.4% above the year ago
level.</p>
<p> Rising industrial production in the first
two months of the fourth quarter bodes well for growth in the total
economy in the fourth quarter.&nbsp; Industrial production has
accounted for between 18% and 20% of GDP over the past six years as
shown in the third chart.&nbsp;&nbsp;</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112j.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100112k.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Industrial
Production (FY1993=100)</b></th>
<th scope="col"><b>Nov 09</b></th>
<th scope="col"><b>Oct 09</b></th>
<th scope="col"><b>Nov 08</b></th>
<th scope="col"><b>M/M % Chg</b></th>
<th scope="col"><b>Y/Y % Chg</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
<th scope="col"><b>2006</b></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total</td>
<td>307.8</td>
<td>298.8</td>
<td>275.5</td>
<td>3.01</td>
<td>11.72</td>
<td>275.0</td>
<td>263.3</td>
<td>239.6</td>
</tr>
<tr>
<td class="firstcol">Mining</td>
<td>194.0</td>
<td>193.4</td>
<td>176.6</td>
<td>0.31</td>
<td>9.85</td>
<td>175.5</td>
<td>169.2</td>
<td>159.9</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>333.0</td>
<td>319.7</td>
<td>295.5</td>
<td>4.16</td>
<td>12.69</td>
<td>294.9</td>
<td>282.0</td>
<td>255.0</td>
</tr>
<tr>
<td class="firstcol">Electricity</td>
<td>232.2</td>
<td>236.7</td>
<td>224.7</td>
<td>-1.69</td>
<td>3.34</td>
<td>222.1</td>
<td>214.1</td>
<td>201.5</td>
</tr>
<tr>
<td class="firstcol">Basic Goods</td>
<td>243.3</td>
<td>241.7</td>
<td>229.5</td>
<td>0.66</td>
<td>6.01</td>
<td>229.5</td>
<td>221.2</td>
<td>203.5</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>440.1</td>
<td>438.4</td>
<td>394.5</td>
<td>0.39</td>
<td>11.56</td>
<td>392.7</td>
<td>359.6</td>
<td>300.5</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>305.7</td>
<td>291.7</td>
<td>256.0</td>
<td>1.46</td>
<td>19.41</td>
<td>260.8</td>
<td>259.7</td>
<td>234.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Goods</td>
<td>335.4</td>
<td>329.2</td>
<td>302.2</td>
<td>1.88</td>
<td>10.99</td>
<td>306.4</td>
<td>288.3</td>
<td>269.6</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp;
Durable&nbsp;</td>
<td>516.9</td>
<td>453.3</td>
<td>376.1</td>
<td>14.03</td>
<td>37.44</td>
<td>389.7</td>
<td>377.9</td>
<td>378.5</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp;
Nondurable</td>
<td>294.4</td>
<td>298.0</td>
<td>286.0</td>
<td>-1.21</td>
<td>2.94</td>
<td>287.3</td>
<td>267.7</td>
<td>244.4</td>
</tr>
</tbody>
</table>
</span>
</body></html>

U.S. Trade Deficit Increases WithEconomic Recovery

Robert Brusca

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<span id="articletext">
<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100111e.jpg" align="left" border="0" height="265" width="353"></p>
<p>French IP is on the mend. Yr/Yr its decline has been reduced
to under a 5% drop, at -3.8%. Over six months IP is expanding at a
growth rate of 6.1%. Output of consumer durable goods is holding back
the recovery although output of consumer durables rose in November.
Auto output surged in November.</p>
<p>France is seeing output rise in Q4 at a very modest annual
rate pace of 0.5%. Consumer durables output is falling at a 7% annual
rate in Q4. Consumer nondurables and capital goods output are creeping
ahead in the new quarter. Intermediate goods output is rising at a
strong 6.3%.</p>
<p>The industrial sector globally is making a strong recovery
from a disastrous drop in the recession. France&#8217;s recovery is about as
advanced as that in any major industrial country. Still it has lost
some momentum. This recovery continues to go in fits and starts.
France&#8217;s IP advance in November is heartening but it does not turn up
the speed of the expansion in any clear way.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">French IP Excluding
Construction<br>
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar except m/m</td>
<td>Nov-09</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter -to-date</td>
</tr>
<tr>
<td class="firstcol">IP total</td>
<td>1.1%</td>
<td>-0.6%</td>
<td>-1.2%</td>
<td>-2.6%</td>
<td>6.1%</td>
<td>-3.8%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Consumer
Dur</td>
<td>1.2%</td>
<td>-1.5%</td>
<td>-3.1%</td>
<td>-12.9%</td>
<td>-9.1%</td>
<td>-11.7%</td>
<td>-7.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Consumer
Ndur</td>
<td>0.4%</td>
<td>-0.6%</td>
<td>1.9%</td>
<td>7.1%</td>
<td>3.1%</td>
<td>-2.2%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Capital</td>
<td>2.4%</td>
<td>-0.8%</td>
<td>-3.1%</td>
<td>-6.0%</td>
<td>12.4%</td>
<td>-0.7%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Intermed</td>
<td>2.1%</td>
<td>0.1%</td>
<td>-1.6%</td>
<td>2.4%</td>
<td>13.9%</td>
<td>-3.7%</td>
<td>6.3%</td>
</tr>
<tr class="grey2">
<td colspan="8" class="firstcol">Memo</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Auto</td>
<td>11.1%</td>
<td>-5.7%</td>
<td>-17.0%</td>
<td>-42.9%</td>
<td>75.5%</td>
<td>18.6%</td>
<td>-18.6%</td>
</tr>
</tbody>
</table>
</body></html>

French IP is on the mend. Yr/Yr its decline has been reduced to under a 5% drop, at -3.8%. Over six months IP is expanding at a growth rate of 6.1%. Output of consumer durable goods is holding back the recovery although output of [...]

French Industrial Output Recovers Lead By A Rebound In Investment Goods

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<span id="articletext">
<p></p>
<p>
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100111d.jpg" align="left" border="0" height="265" width="353"></p>
<p>Recession continues in Ireland as Industrial production,
announced today, declined 8.0% from 106.2 (2005=100) in Octoberto 97.7%
in November. Ireland makes a distinction between its traditional
industries and those of relatively recent origin. The "Modern" sector
includes the following NACE industries reproduction of recorded music
(182), manufacture of chemicals and chemical products (20), manufacture
of basic pharmaceutical products and pharmaceutical preparations (21),
manufacture of computers, electronic and optical products (26),
manufacture of electric equipment (27) and medical and dental
instruments and supplies (325). All the rest of the industries make up
the traditional sector.</p>
<p>Month to month production in the Modern Sector has been
volatile but has shown little trend. For instance production in the
Modern sector declined 10.5% in November, but was down only 3.8% from a
year ago. Production in the Traditional sector, on the contrary, has
shown a definite downward trend. Although production in the Traditional
sector was down only 2.2% in November, it was 17.7% below the year ago
level. The attached chart shows total Industrial Production for Ireland
and production in the Modern and Traditional sectors. The relative
stability of production in the Modern Sector and the sharp decline of
production in the Traditional Sector are apparent.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>&nbsp;IRELAND</b></th>
<th scope="col"><b>Nov 09</b></th>
<th scope="col"><b>Oct 09</b></th>
<th scope="col"><b>Nov&nbsp; 08</b></th>
<th scope="col"><b>M/M % Chg</b></th>
<th scope="col"><b>Y/Y/% Chg</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
<th scope="col"><b>2006</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial
Production (2005=100)</td>
<td>97.7</td>
<td>106.2</td>
<td>108.0</td>
<td>-8.00</td>
<td>-9.54</td>
<td>106.5</td>
<td>108.3</td>
<td>103.0</td>
</tr>
<tr>
<td class="firstcol">Traditional Sector</td>
<td>84.4</td>
<td>86.3</td>
<td>102.5</td>
<td>-2.20</td>
<td>-17.66</td>
<td>100.3</td>
<td>104.7</td>
<td>101.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Modern Sector</td>
<td>108.2</td>
<td>121.0</td>
<td>112.6</td>
<td>-10.50</td>
<td>-3.82</td>
<td>111.2</td>
<td>111.0</td>
<td>104.0</td>
</tr>
</tbody>
</table>
</body></html>

Recession continues in Ireland as Industrial production, announced today, declined 8.0% from 106.2 (2005=100) in Octoberto 97.7% in November. Ireland makes a distinction between its traditional industries and those of relatively [...]

Irish Industrial Production: Modern Vs Traditional Sectors

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<span id="articletext">
<p></p>
<p>
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100111a.jpg" align="right" border="0" height="265" width="353">Is the
consumer not attempting to borrow or is credit not being extended by
the lender? It's hard to say but the Federal Reserve reported
late-Friday that consumer credit outstanding fell by a record $17.5B
m/m during November following a $4.2B October decline that was revised
slightly deeper from the initial report. The latest was the fourteenth
monthly drop since summer 2008. Moreover, the 3.9% y/y pullback in
credit outstanding set another historic record as consumers retrenched
and took account of debt-laden personal balance sheets along with job
market deterioration. Consumer credit outstanding as a percentage of
disposable income fell to 22.1% from its 2005 high of 24.7%.
Nevertheless, these rates remain up from the low near 16% in
1992.</p>
<p>Usage of non-revolving credit (autos &amp; other
consumer durables), which accounts for nearly two-thirds of the total,
fell $3.8B after a $3.2B October increase. The 0.6% y/y decline
reflected a 13.2% drop in pools of securitized assets, an 11.2% decline
in finance company lending and a 7.2% drop in nonfinancial business
credit extensions. These were mostly offset by the federal government
&amp; Sallie Mae which expanded lending by more than two-thirds y/y
and commercial bank lending which rose 1.1%. The latter figure,
however, was down from 13% growth early in 2008.</p>
<p>Revolving credit
usage fell a record $13.7B during November as part of a pullback that
began late in 2008. The latest was part of a 9.3% y/y decline which
also was by far a record. Versus November 2009, finance companies
lowered lending by 37.9%, commercial bank lending fell 9.8%, pools of
securitized assets fell 5.8%, savings institutions pulled back 3.9%
y/y. Loans from credit unions offset some of these declines with a 6.2%
increase.</p>
<p> These figures are the major input to the Fed's quarterly
Flow of Funds accounts for the household sector.</p>
<p>Credit data are
available in Haver's <b>USECON</b> database. The Flow of
Funds data are in Haver's <b>FFUNDS</b> database.</p>
<p><b>Why
Are Banks Holding So Many Excess Reserves? </b>from the Federal
Reserve Bank of New York is available here <a href="http://www.newyorkfed.org/research/current_issues/ci15-8.pdf">here</a>.&nbsp;</p>
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100111b.jpg" border="0" height="265" width="312">
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100111c.jpg" border="0" height="265" width="312">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Consumer
Credit Outstanding (m/m Chg, SAAR)</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>October</b></th>
<th scope="col"><b>September</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
<th scope="col"><b>2006</b>&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$-17.5B</td>
<td>&nbsp;$-4.2B</td>
<td>$-8.9B</td>
<td>-3.9%</td>
<td>1.6%</td>
<td>5.6%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$-13.7B</td>
<td>$-7.3B</td>
<td>$-8.0B</td>
<td>-9.3%</td>
<td>1.9%</td>
<td>7.8%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non-revolving</td>
<td>$-3.8B</td>
<td>$3.2B</td>
<td>$-1.0B</td>
<td>-0.6%</td>
<td>1.4%</td>
<td>4.4%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
</span>
</body></html>

Is the consumer not attempting to borrow or is credit not being extended by the lender? It's hard to say but the Federal Reserve reported late-Friday that consumer credit outstanding fell by a record $17.5B m/m during November [...]

U.S. Consumer Credit Usage Decline Reaches Historic Proportion

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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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.

250501H20.jpg

250501I20.jpg

- 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.

250501L5.jpg

250501M5.jpg

- 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

250501N.jpg

250501O.jpg

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**.

250501P.jpg

250501Q.jpg

- 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.

U.S. Construction Spending Unexpectedly Drops in March, the First M/M Fall Since September

Carol Stone, CBE

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Initial claims for unemployment insurance rose 18,000 in the week ended April 26 to 241,000, seasonally adjusted.  This is higher by 16,000 than the Action Economics Forecast Survey amount of 225,000 and is the largest amount since the week of February 22. The previous week’s actual count was revised up by 1,000 to 223,000, from 222,000 reported initially.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” – in the week ended April 19 was 1.916 million, up 83,000 from the prior week’s 1.833 million; that earlier amount was revised down by 8,000.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, was 1.3% in the April 19 week, following 1.2% continuously since the week of January 6, 2024.

Economic conditions vary widely across states and territories.  In the week ended April 12, the highest unemployment rates were in New Jersey (2.39%), California (2.24%), Washington (2.19%), Rhode Island (2.17%) and Massachusetts (1.93%).  The lowest rates were in Florida (0.35%), South Dakota (0.40%), Alabama (0.41%), Virginia (0.45%) and Tennessee (0.48%).  Rates in other notable states include the Illinois (1.85%), New York (1.71%), Pennsylvania (1.54%) 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 U**SECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

250501C8.jpg

250501D8.jpg

- Actual initial claims amount is 16,000 more than forecast.
- Total beneficiaries rose by 83,000.
- Insured unemployment rate ticked up to 1.3% after 15 months at 1.2%.

Economy in Brief: January 2010

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