Tom Moeller

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051017c.jpg">
The U.S. federal government ran a budget deficit of $318.6B during FY05, down nearly one quarter from the record deficit of $412.1B during the prior fiscal year.As a percentage of GDP, the deficit fell to 2.6% from 3.6% in FY04.
Net receipt growth of 14.6% during FY05 was capped by a 62.5% m/m spike in September. That gain was led by a 31.6% m/m rise in individual income taxes (44% of total receipts) which followed an 18.3% August increase. For the fiscal year, the 14.6% rise in individual income taxes was the strongest since 1981.
Corporate income taxes (10% of total receipts) also reflected the improved economy and spiked higher in September. The 47.0% y/y gain during FY05 was the strongest since 1952 and followed a 43.7% jump the prior year. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051017d.jpg" width="353">
The improved job market raised employment taxes (36% of total receipts) 8.8% y/y during all of FY 2005, the strongest increase since 1988. 
U.S. net outlays grew 7.9% during FY05. Federal outlays on defense (19% of total outlays) continued to surge but the 8.3% gain during FY05 actually was down from 12.8% growth during FY04 and from 15.9% during FY 03. Medicare spending (12% of total outlays) surged during the last two months and lifted FY05 growth to 10.9%, the strongest since 1992. Spending on social security (21% of total outlays) fell in September and the decline limited the increase during FY 05 to a still high 5.6%. Spending on health programs (10% of the total) rose 4.3% during FY05 while spending on education &amp; training (4% of the total) surged 11.3%. interest expense (8% of the total) grew 14.9% with higher interest rates versus a modest rise last year and declines during the prior six fiscal years. 
Do Budget Deficits Cause Inflation? from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/files/br/Q3_05_Sill.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E10602.HTM">US Government Finance</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">FY 2005 </th>
<th scope="col">FY2004</th>
<th scope="col">FY2003</th>
<th scope="col">FY2002</th>
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<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$35.8B</td>
<td>$-51.6B</td>
<td>$-318.6B</td>
<td>$-412.1B</td>
<td>$-377.6B</td>
<td>$-157.8B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Net Revenues</td>
<td>$252.6B</td>
<td>$155.4B</td>
<td>14.6%</td>
<td>5.5%</td>
<td>-3.8%</td>
<td>-6.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Outlays</td>
<td>$216.8B</td>
<td>$207.0B</td>
<td>7.9%</td>
<td>6.2%</td>
<td>7.4%</td>
<td>7.9%</td>
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</table>
October Empire State Index Fell Unexpectedly 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 17, 2005


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051017a.jpg">
The Empire State Index of General Business Conditions in New York&#39;s manufacturing industries for October fell unexpectedly to 12.08 from a downwardly revised 15.58 in September. Consensus expectations had been for improvement to 19.0.
Since the series&#39; inception in 2001 there has been a close 80% correlation between the index level and the three month change in factory sector production.
Lower shipments and employment indexes figured largely in the October report, although the new orders index recovered more than half of the prior month&#39;s sharp decline. Prices paid rose to near the record high levels of late last year. <img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051017b.jpg">
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
The index of expectations for business conditions in six months fell to the lowest level since 2001 and expectations for future capital spending fell slightly.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Oct &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>12.08</td>
<td>15.58</td>
<td>23.75</td>
<td>28.76</td>
<td>16.17</td>
<td>7.19</td>
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Rising Producer and Wholesale Price Indexes:  A Prelude to Rising Consumer Price Indexes? 
by <a href="/comment/Curley.html">Louise Curley</a> October 17, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051017f.jpg" width="353">
Among industrial countries the rise in inflation as measured by the year over year increase in the consumer price index has, to date, been relatively well contained in spite of the rise in energy costs. Inflation at the wholesale and producer levels where the impact of higher energy costs are more directly felt has, however, begun to accelerate. If past relationships hold, the pace of consumer price inflation should begin to step up. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051017e.jpg" width="353">
Denmark and Finland, two countries reporting wholesale and producer price indexes today are illustrative of these trends. Most countries no longer distinguish between wholesale and producer price indexes, publishing only the producer price index, but these countries still publish both indexes. The composition of the indexes are not strictly comparable. In September, the Danish index of fuel and oil in the wholesale index rose 47.32% over September, 2004 the wholesale index was up 5.32%, the producer price index, 7.12% and the consumer price index, 2.39%. The first chart shows the year over year increases in the producer price and the consumer price indexes for Denmark. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051017g.jpg" width="353">
The September Finnish index of energy costs was 15.50% above the index of September, 2004. The wholesale price index was up 3.83%, the producer price index, 2.67% and the consumer price index, 1.14% The second chart shows the year over year increases in the producer price and consumer price indexes for Finland.
Inflation in Finland has been lower than that in Denmark since late 2001. One factor accounting for the difference could be different monetary policies in the two countries. As a member of the Euro Zone, Finland has been subject to a somewhat tighter monetary policy than that in Denmark, which is outside the Euro Zone. The third chart shows the official base rates in the two countries as an indicator of monetary policy. Since late 2001, the base rate in Finland has been above that in Denmark.

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<th scope="col" class="firstcol">&nbsp;Price Indexes (2000=100)</th>
<th scope="col">Sep 05&nbsp;</th>
<th scope="col">Aug 05</th>
<th scope="col">Sep 04</th>
<th scope="col">M/M&nbsp; %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2004 &nbsp;%</th>
<th scope="col">2003 %</th>
<th scope="col">2002 %</th>
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<td class="firstcol">Denmark</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
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<td class="firstcol">&nbsp; Fuel and Oil Prices (PPI)</td>
<td>165.8</td>
<td>157.9</td>
<td>116.5</td>
<td>5.04</td>
<td>42.33</td>
<td>107.8</td>
<td>92.9</td>
<td>89.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Producer Price Index</td>
<td>111.3</td>
<td>110.5</td>
<td>103.9</td>
<td>0.72</td>
<td>7.12</td>
<td>103.0</td>
<td>100.8</td>
<td>101.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale Price Index</td>
<td>110.9</td>
<td>110.3</td>
<td>105.3</td>
<td>0.54</td>
<td>5.32</td>
<td>104.5</td>
<td>102.3</td>
<td>102.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Price Index</td>
<td>111.2</td>
<td>110.3</td>
<td>108.6</td>
<td>0.82</td>
<td>2.39</td>
<td>108.3</td>
<td>107.0</td>
<td>104.8</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
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<td class="firstcol">&nbsp;Finland</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Energy Costs (WPI)</td>
<td>&nbsp;136.4</td>
<td>134.6&nbsp;</td>
<td>118.1</td>
<td>1.34</td>
<td>15.50</td>
<td>&nbsp;113.9</td>
<td>107.5&nbsp;</td>
<td>101.1&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Producer Price Index</td>
<td>96.1</td>
<td>65.6</td>
<td>63.6</td>
<td>0.52</td>
<td>2.67</td>
<td>93.1</td>
<td>92.8</td>
<td>94.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale Price Index</td>
<td>102.9</td>
<td>102.7</td>
<td>99.1</td>
<td>0.19</td>
<td>3.83&nbsp;</td>
<td>98.3&nbsp;</td>
<td>97.4&nbsp;</td>
<td>97.7&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Price Index</td>
<td>&nbsp;106.9</td>
<td>106.3&nbsp;</td>
<td>105.7</td>
<td>.0.56</td>
<td>1.14&nbsp;</td>
<td>105.3&nbsp;</td>
<td>105.1&nbsp;</td>
<td>104.2&nbsp;</td>
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</tbody>
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The U.S. federal government ran a budget deficit of $318.6B during FY05, down nearly one quarter from the record deficit of $412.1B during the prior fiscal year.As a percentage of GDP, the deficit fell to 2.6% from 3.6% in FY04. Net [...]

FY 2005 U.S. Budget Deficit Fell Due To Higher Receipts

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/051014g.jpg" width="353">
Retail trade in Brazil decreased slightly in August, according to data reported this morning by Brazil&#39;s Institute of Geography and Statistics (IBGE). The total value of sales, seasonally adjusted, eased 0.3% from July, and the volume of sales was down by 0.4%. However, press reports highlighted a stronger move in year-on-year growth. Sales volume, not seasonally adjusted, was up 6.5% from August 2004, the best such performance since March.
The strongest sectors included furniture and appliances and computers and peripherals. Supermarket and food store sales are expanding less than they did last year. Fuel outlets have also seen persistent declines in volume this year -- on a year-over-year basis -- but the August figure, at -6.0%, was the smallest of these decreases. Notably, a price deflator for the fuel category calculated from the value and volume indexes was slowing through August, suggesting that the reduced volume of fuel purchases was not a direct response to accelerating prices. This may have changed in September, however.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051014h.jpg" width="353">
The general price situation in Brazilian retail sales continues to look favorable. A broad deflator based on the ratio of total value to total volume of sales stood at only 109.3 in August, an annualized increase of 4.5% from the middle of 2003, the base period for these data. Moreover, this index has been virtually flat for four months, and if calculated from raw data before seasonal adjustment, it has been declining mildly in the latest months. This sluggish tendency is a far cry from the double- digit pace that prevailed as recently as 2003. Again, as with fuel prices themselves, this result may have deteriorated in September as world energy prices surged. Even so, the moderation of inflation can only help the underlying health of Brazil&#39;s consumers and overall economy.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGELA/@E2/@E2.HTM">Brazil: </a>&nbsp;Index, 2003=100</th>
<th scope="col">Aug 2005*</th>
<th scope="col">July 2005*</th>
<th scope="col">Aug 2004*</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">Retail Sales Value</td>
<td>125.52</td>
<td>125.92</td>
<td>115.84</td>
<td>113.13</td>
<td>100.14</td>
<td>88.30</td>
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<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>-0.3</td>
<td>0.3</td>
<td>10.0</td>
<td>13.0</td>
<td>13.4</td>
<td>7.3</td>
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<tr class="odd">
<td class="firstcol">Retail Sales Volume</td>
<td>114.84</td>
<td>115.27</td>
<td>109.47</td>
<td>109.25</td>
<td>100.00</td>
<td>103.81</td>
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<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>-0.4</td>
<td>0.2</td>
<td>6.5</td>
<td>9.2</td>
<td>-3.7</td>
<td>-0.7</td>
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<td class="firstcol">Implicit Price Index**</td>
<td>109.30</td>
<td>109.24</td>
<td>105.82</td>
<td>103.36</td>
<td>100.11</td>
<td>84.77</td>
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<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>0.1</td>
<td>0.0</td>
<td>3.3</td>
<td>3.2</td>
<td>18.1</td>
<td>7.9</td>
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Retail trade in Brazil decreased slightly in August, according to data reported this morning by Brazil's Institute of Geography and Statistics (IBGE). The total value of sales, seasonally adjusted, eased 0.3% from July, and the volume [...]

Brazil's Retail Sales Ease in August, But Show Good Gain from Year Ago

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051014f.jpg" width="353">
August total business inventories reversed the prior month&#39;s decline and rose 0.4%. The increase was double Consensus expectations, the first since May and the largest since March. Nevertheless, the ratio of inventories-to-sales remained at the record low of 1.26 due to a 0.4% (7.1% y/y) rise in business sales.
The 0.9% rise in retail inventories gained back half of the prior month&#39;s decline due to a 1.7% increase in motor vehicle inventories but excluding autos inventories jumped 0.6% (5.9% y/y). Furniture inventories fell 0.3% (+6.1% y/y) but general merchandise surged 1.3% (6.9% y/y).
Factory sector inventories fell slightly after a sharp 0.6% July gain.
Wholesale inventories increased 0.5%. 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.
Economic Flexibility, a speech by Federal Reserve Chairman Alan Greenspan, is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2005/20051012/default.htm"> here</a>.

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<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">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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</thead>
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<td class="firstcol">Total</td>
<td>0.4%</td>
<td>-0.4%</td>
<td>3.8%</td>
<td>7.7%</td>
<td>1.4%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.9%</td>
<td>-1.8%</td>
<td>-0.4%</td>
<td>5.7%</td>
<td>3.9%</td>
<td>5.9%</td>
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<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.6%</td>
<td>-0.0%</td>
<td>5.9%</td>
<td>5.9%</td>
<td>2.0%</td>
<td>2.3%</td>
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<td class="firstcol">&nbsp; Wholesale</td>
<td>0.5%</td>
<td>0.1%</td>
<td>7.7%</td>
<td>10.8%</td>
<td>2.0%</td>
<td>1.2%</td>
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<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.1%</td>
<td>0.6%</td>
<td>5.3%</td>
<td>7.7%</td>
<td>-1.1%</td>
<td>-5.4%</td>
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August total business inventories reversed the prior month's decline and rose 0.4%. The increase was double Consensus expectations, the first since May and the largest since March. Nevertheless, the ratio of inventories-to-sales [...]

U.S. Business Inventories Rebuilt

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051014e.jpg" width="353">
Industrial output last month fell 1.3% reflecting the effects of Hurricane&#39;s Katrina &amp; Rita and the decline by far outpaced Consensus expectations for a 0.4% drop. Utility output (-0.9%) and mining output (-9.1%) again reflected the worst damage. Factory sector production fell a lesser 0.6% (+2.9% y/y).
The Federal Reserve indicated that storm-related production declines may have reduced the change in total industrial production about 1.7 percentage points and by nearly 0.4 percentage points in August. Additionally, the strike in the aircraft industry reduced the change in total industrial output by almost 0.5 percentage points.
Output of computers, peripheral equipment &amp; semiconductors jumped 3.7% (24.6% y/y). Excluding the high tech sector factory output fell 0.9% (+1.6% y/y).
Output of appliances, furniture &amp; carpeting rose 0.3% (4.1% y/y) but business equipment output dropped a sharp 3.7% reflecting a 24.3% drop in transit equipment and a 3.4% decline in defense &amp; space.
Total capacity utilization fell sharply to 78.6% and capacity grew 1.1% y/y. Factory sector utilization fell to 77.9% while capacity rose 1.4% y/y.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">Industrial Production</td>
<td>-1.3%</td>
<td>0.2%</td>
<td>2.0%</td>
<td>4.1%</td>
<td>-0.0%</td>
<td>-0.3%</td>
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<tr>
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>0.3%</td>
<td>0.5%</td>
<td>3.6%</td>
<td>2.7%</td>
<td>0.3%</td>
<td>1.4%</td>
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<td class="firstcol">&nbsp; Business Equipment</td>
<td>-3.7%</td>
<td>-0.4%</td>
<td>4.0%</td>
<td>9.5%</td>
<td>1.2%</td>
<td>-7.9%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>78.6%</td>
<td>79.8%</td>
<td>78.0% (9/04)</td>
<td>78.1%</td>
<td>75.5%</td>
<td>75.3%</td>
</tr>
</tbody>
</table>
</body>
</html>

Industrial output last month fell 1.3% reflecting the effects of Hurricane's Katrina & Rita and the decline by far outpaced Consensus expectations for a 0.4% drop. Utility output (-0.9%) and mining output (-9.1%) again reflected the [...]

Hurricanes Curtailed Industrial Output

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051014d.jpg" width="353">
The preliminary October reading of consumer sentiment at 75.4 from the University of Michigan slipped 2.0% from September to the lowest level since 1992 and contrasted to Consensus expectations for improvement to 80.0.
During the last ten years there has been a 78% correlation between the level of consumer sentiment and the y/y change in real consumer spending.
The current conditions index fell 2.4% m/m (-8.0% y/y) as sentiment regarding buying conditions for large household goods fell 4.6% (-8.9% y/y) but the read of personal finances improved 1.0% m/m (-7.1% y/y).
Consumer expectations slipped 1.4% after two months of double digit decline. Expected personal finances fell 3.5% (-12.6% y/y) but expected business conditions during the next 12 months improved a slight 3.2% (-43.4% y/y).
The mean expected inflation rate for the next twelve months was about stable at 5.4% but still up from 3.4% during all of last year.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">October (Prelim.)</th>
<th scope="col">Sept</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">Consumer Sentiment</td>
<td>75.4</td>
<td>76.9</td>
<td>-17.8%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>95.7</td>
<td>98.1</td>
<td>-8.0%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>62.4</td>
<td>63.3</td>
<td>-25.5%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
</table>
</body>
</html>

The preliminary October reading of consumer sentiment at 75.4 from the University of Michigan slipped 2.0% from September to the lowest level since 1992 and contrasted to Consensus expectations for improvement to 80.0. During the last [...]

Depressed U.S. Consumer Sentiment Fell Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051014c.jpg" width="353">
The consumer price index (CPI-U) was a bit stronger than Consensus expectations for a 0.9% rise last month. The 1.2% gain was the strongest for any month since 1980 and lifted the y/y increase to its strongest (4.7%) since 1991.
Higher energy prices continued to fuel the m/m increase and rose 12.0%, an all-time record. The 17.9% m/m rise in gasoline prices to an average $2.90 per gallon also was a record advance but prices have fallen slightly in October. Fuel oil prices also were strong, up 11.8% (46.0% y/y), while natural gas &amp; electricity prices jumped 4.6% (13.5% y/y).
Prices less food &amp; energy rose the same 0.1% as during the prior four months and again the gain was less than Consensus expectations for a 0.2% increase. Core goods prices rose 0.1% for the second consecutive month. Apparel prices fell 0.1% (-0.7% y/y) and most household furnishings prices fell as well. New vehicle prices rose 0.4% (0.7% y/y) and tobacco prices rose 0.7% (5.6% y/y).
Core services prices rose 0.1% for the second consecutive month as shelter prices fell 0.1% (+2.0% y/y) offset by a 0.3% (4.4% y/y) gain in medical care services prices. Public transportation prices rose 0.1% (7.5% y/y) for the second month and school tuition costs jumped 0.7% (6.3% y/y).
The chained CPI which adjusts for shifts in the mix of consumer purchases rose 0.8% and less food &amp; energy chain prices rose 0.2%.
Update on the U.S. Economy and Fiscal Outlook, a speech made yesterday by Federal Reserve Board Governor Mark W. Olson, is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2005/200510123/default.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> </th>
<th scope="col">Sept</th>
<th scope="col">Aug</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">Total&nbsp;</td>
<td>1.2%</td>
<td>0.5%</td>
<td>4.7%</td>
<td>2.7%</td>
<td>2.3%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.0%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.6%</td>
<td>-0.9%</td>
<td>-2.0%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.5%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>12.0%</td>
<td>5.0%</td>
<td>35.1%</td>
<td>10.9%</td>
<td>12.2%</td>
<td>-5.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.3%</td>
<td>0.0%</td>
<td>2.5%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a> </td>
<td>0.8%</td>
<td>0.4%</td>
<td>3.5%</td>
<td>2.3%</td>
<td>2.0%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>1.9%</td>
</tr>
</tbody>
</table>
</body>
</html>

The consumer price index (CPI-U) was a bit stronger than Consensus expectations for a 0.9% rise last month. The 1.2% gain was the strongest for any month since 1980 and lifted the y/y increase to its strongest (4.7%) since 1991. [...]

Record Gain in Energy Prices Lifted CPI; Core Prices Tame

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051014b.jpg" width="353">
US retail sales rose 0.2% last month following a 1.9% August drop that was slightly shallower than initially reported. Consensus expectations had been for a 0.4% increase. Less autos, however, retail sales beat expectations for a 0.7% gain and increased 1.1% after an unrevised 1.0% August rise.
Sales at gasoline service stations surged 4.0%, about the same pace as during the prior three months, as the retail price of gasoline rose 16.8% m/m to an average $2.90 per gallon. So far in October gas prices have averaged $2.88.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051014a.jpg" width="353">
Less gasoline, nonauto retail sales rose the same 0.6% (6.7% y/y) as in August. The increase was boosted by a 1.0% (8.6% y/y) jump in building material sales which followed a 0.7% August rise.
Sales at furniture &amp; electronics stores jumped 1.0% (7.2% y/y) after an upwardly revised 0.8% August increase. Sales of nonstore retailers (internet &amp; catalogue) added 0.2% (11.1% y/y) to the prior month&#39;s 2.9% pop and general merchandise store sales rose 0.9% (6.8% y/y). Apparel store sales lagged the pace and fell 0.2% (+5.7% y/y).
Oil Prices and Consumer Spending from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/summer2005/mehrapetersen.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Sept</th>
<th scope="col">Aug</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"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>0.2%</td>
<td>-1.9%</td>
<td>6.5%</td>
<td>7.3%</td>
<td>4.3%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>1.1%</td>
<td>1.0%</td>
<td>9.6%</td>
<td>8.3%</td>
<td>4.7%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
</body>
</html>

US retail sales rose 0.2% last month following a 1.9% August drop that was slightly shallower than initially reported. Consensus expectations had been for a 0.4% increase. Less autos, however, retail sales beat expectations for a 0.7% [...]

U.S. Retail Sales Up; Core Spending Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051014c.jpg" width="353">
The consumer price index (CPI-U) was a bit stronger than Consensus expectations for a 0.9% rise last month. The 1.2% gain was the strongest for any month since 1980 and lifted the y/y increase to its strongest (4.7%) since 1991.
Higher energy prices continued to fuel the m/m increase and rose 12.0%, an all-time record. The 17.9% m/m rise in gasoline prices to an average $2.90 per gallon also was a record advance but prices have fallen slightly in October. Fuel oil prices also were strong, up 11.8% (46.0% y/y), while natural gas &amp; electricity prices jumped 4.6% (13.5% y/y).
Prices less food &amp; energy rose the same 0.1% as during the prior four months and again the gain was less than Consensus expectations for a 0.2% increase. Core goods prices rose 0.1% for the second consecutive month. Apparel prices fell 0.1% (-0.7% y/y) and most household furnishings prices fell as well. New vehicle prices rose 0.4% (0.7% y/y) and tobacco prices rose 0.7% (5.6% y/y).
Core services prices rose 0.1% for the second consecutive month as shelter prices fell 0.1% (+2.0% y/y) offset by a 0.3% (4.4% y/y) gain in medical care services prices. Public transportation prices rose 0.1% (7.5% y/y) for the second month and school tuition costs jumped 0.7% (6.3% y/y).
The chained CPI which adjusts for shifts in the mix of consumer purchases rose 0.8% and less food &amp; energy chain prices rose 0.2%.
Update on the U.S. Economy and Fiscal Outlook, a speech made yesterday by Federal Reserve Board Governor Mark W. Olson, is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2005/200510123/default.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> </th>
<th scope="col">Sept</th>
<th scope="col">Aug</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">Total&nbsp;</td>
<td>1.2%</td>
<td>0.5%</td>
<td>4.7%</td>
<td>2.7%</td>
<td>2.3%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.0%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.6%</td>
<td>-0.9%</td>
<td>-2.0%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.5%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>12.0%</td>
<td>5.0%</td>
<td>35.1%</td>
<td>10.9%</td>
<td>12.2%</td>
<td>-5.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.3%</td>
<td>0.0%</td>
<td>2.5%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a> </td>
<td>0.8%</td>
<td>0.4%</td>
<td>3.5%</td>
<td>2.3%</td>
<td>2.0%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>1.9%</td>
</tr>
</tbody>
</table>
U.S. Retail Sales Up; Core Spending Firm 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 14, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051014b.jpg" width="353">
US retail sales rose 0.2% last month following a 1.9% August drop that was slightly shallower than initially reported. Consensus expectations had been for a 0.4% increase. Less autos, however, retail sales beat expectations for a 0.7% gain and increased 1.1% after an unrevised 1.0% August rise.
Sales at gasoline service stations surged 4.0%, about the same pace as during the prior three months, as the retail price of gasoline rose 16.8% m/m to an average $2.90 per gallon. So far in October gas prices have averaged $2.88.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051014a.jpg" width="353">
Less gasoline, nonauto retail sales rose the same 0.6% (6.7% y/y) as in August. The increase was boosted by a 1.0% (8.6% y/y) jump in building material sales which followed a 0.7% August rise.
Sales at furniture &amp; electronics stores jumped 1.0% (7.2% y/y) after an upwardly revised 0.8% August increase. Sales of nonstore retailers (internet &amp; catalogue) added 0.2% (11.1% y/y) to the prior month&#39;s 2.9% pop and general merchandise store sales rose 0.9% (6.8% y/y). Apparel store sales lagged the pace and fell 0.2% (+5.7% y/y).
Oil Prices and Consumer Spending from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/summer2005/mehrapetersen.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Sept</th>
<th scope="col">Aug</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"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>0.2%</td>
<td>-1.9%</td>
<td>6.5%</td>
<td>7.3%</td>
<td>4.3%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>1.1%</td>
<td>1.0%</td>
<td>9.6%</td>
<td>8.3%</td>
<td>4.7%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
Depressed U.S. Consumer Sentiment Fell Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 14, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051014d.jpg" width="353">
The preliminary October reading of consumer sentiment at 75.4 from the University of Michigan slipped 2.0% from September to the lowest level since 1992 and contrasted to Consensus expectations for improvement to 80.0.
During the last ten years there has been a 78% correlation between the level of consumer sentiment and the y/y change in real consumer spending.
The current conditions index fell 2.4% m/m (-8.0% y/y) as sentiment regarding buying conditions for large household goods fell 4.6% (-8.9% y/y) but the read of personal finances improved 1.0% m/m (-7.1% y/y).
Consumer expectations slipped 1.4% after two months of double digit decline. Expected personal finances fell 3.5% (-12.6% y/y) but expected business conditions during the next 12 months improved a slight 3.2% (-43.4% y/y).
The mean expected inflation rate for the next twelve months was about stable at 5.4% but still up from 3.4% during all of last year.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">October (Prelim.)</th>
<th scope="col">Sept</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">Consumer Sentiment</td>
<td>75.4</td>
<td>76.9</td>
<td>-17.8%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>95.7</td>
<td>98.1</td>
<td>-8.0%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>62.4</td>
<td>63.3</td>
<td>-25.5%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
</table>
Hurricanes Curtailed Industrial Output  
by <a href="/comment/Moeller.html">Tom Moeller</a> October 14, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051014e.jpg" width="353">
Industrial output last month fell 1.3% reflecting the effects of Hurricane&#39;s Katrina &amp; Rita and the decline by far outpaced Consensus expectations for a 0.4% drop. Utility output (-0.9%) and mining output (-9.1%) again reflected the worst damage. Factory sector production fell a lesser 0.6% (+2.9% y/y).
The Federal Reserve indicated that storm-related production declines may have reduced the change in total industrial production about 1.7 percentage points and by nearly 0.4 percentage points in August. Additionally, the strike in the aircraft industry reduced the change in total industrial output by almost 0.5 percentage points.
Output of computers, peripheral equipment &amp; semiconductors jumped 3.7% (24.6% y/y). Excluding the high tech sector factory output fell 0.9% (+1.6% y/y).
Output of appliances, furniture &amp; carpeting rose 0.3% (4.1% y/y) but business equipment output dropped a sharp 3.7% reflecting a 24.3% drop in transit equipment and a 3.4% decline in defense &amp; space.
Total capacity utilization fell sharply to 78.6% and capacity grew 1.1% y/y. Factory sector utilization fell to 77.9% while capacity rose 1.4% 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">Sept</th>
<th scope="col">Aug</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">Industrial Production</td>
<td>-1.3%</td>
<td>0.2%</td>
<td>2.0%</td>
<td>4.1%</td>
<td>-0.0%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>0.3%</td>
<td>0.5%</td>
<td>3.6%</td>
<td>2.7%</td>
<td>0.3%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Business Equipment</td>
<td>-3.7%</td>
<td>-0.4%</td>
<td>4.0%</td>
<td>9.5%</td>
<td>1.2%</td>
<td>-7.9%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>78.6%</td>
<td>79.8%</td>
<td>78.0% (9/04)</td>
<td>78.1%</td>
<td>75.5%</td>
<td>75.3%</td>
</tr>
</tbody>
</table>
U.S. Business Inventories Rebuilt 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 14, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051014f.jpg" width="353">
August total business inventories reversed the prior month&#39;s decline and rose 0.4%. The increase was double Consensus expectations, the first since May and the largest since March. Nevertheless, the ratio of inventories-to-sales remained at the record low of 1.26 due to a 0.4% (7.1% y/y) rise in business sales.
The 0.9% rise in retail inventories gained back half of the prior month&#39;s decline due to a 1.7% increase in motor vehicle inventories but excluding autos inventories jumped 0.6% (5.9% y/y). Furniture inventories fell 0.3% (+6.1% y/y) but general merchandise surged 1.3% (6.9% y/y).
Factory sector inventories fell slightly after a sharp 0.6% July gain.
Wholesale inventories increased 0.5%. 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.
Economic Flexibility, a speech by Federal Reserve Chairman Alan Greenspan, is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2005/20051012/default.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">Aug</th>
<th scope="col">July</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">Total</td>
<td>0.4%</td>
<td>-0.4%</td>
<td>3.8%</td>
<td>7.7%</td>
<td>1.4%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.9%</td>
<td>-1.8%</td>
<td>-0.4%</td>
<td>5.7%</td>
<td>3.9%</td>
<td>5.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.6%</td>
<td>-0.0%</td>
<td>5.9%</td>
<td>5.9%</td>
<td>2.0%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.5%</td>
<td>0.1%</td>
<td>7.7%</td>
<td>10.8%</td>
<td>2.0%</td>
<td>1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.1%</td>
<td>0.6%</td>
<td>5.3%</td>
<td>7.7%</td>
<td>-1.1%</td>
<td>-5.4%</td>
</tr>
</tbody>
</table>
Brazil's Retail Sales Ease in August, But Show Good Gain from Year Ago 
by <a href="/comment/Stone.html">Carol Stone</a> October 14, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051014g.jpg" width="353">
Retail trade in Brazil decreased slightly in August, according to data reported this morning by Brazil&#39;s Institute of Geography and Statistics (IBGE). The total value of sales, seasonally adjusted, eased 0.3% from July, and the volume of sales was down by 0.4%. However, press reports highlighted a stronger move in year-on-year growth. Sales volume, not seasonally adjusted, was up 6.5% from August 2004, the best such performance since March.
The strongest sectors included furniture and appliances and computers and peripherals. Supermarket and food store sales are expanding less than they did last year. Fuel outlets have also seen persistent declines in volume this year -- on a year-over-year basis -- but the August figure, at -6.0%, was the smallest of these decreases. Notably, a price deflator for the fuel category calculated from the value and volume indexes was slowing through August, suggesting that the reduced volume of fuel purchases was not a direct response to accelerating prices. This may have changed in September, however.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051014h.jpg" width="353">
The general price situation in Brazilian retail sales continues to look favorable. A broad deflator based on the ratio of total value to total volume of sales stood at only 109.3 in August, an annualized increase of 4.5% from the middle of 2003, the base period for these data. Moreover, this index has been virtually flat for four months, and if calculated from raw data before seasonal adjustment, it has been declining mildly in the latest months. This sluggish tendency is a far cry from the double- digit pace that prevailed as recently as 2003. Again, as with fuel prices themselves, this result may have deteriorated in September as world energy prices surged. Even so, the moderation of inflation can only help the underlying health of Brazil&#39;s consumers and overall economy.

<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/EMERGELA/@E2/@E2.HTM">Brazil: </a>&nbsp; Index, 2003=100</th>
<th scope="col">Aug 2005*</th>
<th scope="col">July 2005*</th>
<th scope="col">Aug 2004*</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">Retail Sales Value</td>
<td>125.52</td>
<td>125.92</td>
<td>115.84</td>
<td>113.13</td>
<td>100.14</td>
<td>88.30</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>-0.3</td>
<td>0.3</td>
<td>10.0</td>
<td>13.0</td>
<td>13.4</td>
<td>7.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Sales Volume</td>
<td>114.84</td>
<td>115.27</td>
<td>109.47</td>
<td>109.25</td>
<td>100.00</td>
<td>103.81</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>-0.4</td>
<td>0.2</td>
<td>6.5</td>
<td>9.2</td>
<td>-3.7</td>
<td>-0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Implicit Price Index**</td>
<td>109.30</td>
<td>109.24</td>
<td>105.82</td>
<td>103.36</td>
<td>100.11</td>
<td>84.77</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>0.1</td>
<td>0.0</td>
<td>3.3</td>
<td>3.2</td>
<td>18.1</td>
<td>7.9</td>
</tr>
</tbody>
</table>
</body>
</html>

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.

In the **establishment survey**, private-sector employment rose 167,000 (1.2% y/y) after a 170,000 March increase. Factory sector jobs edged 1,000 lower (-0.7% y/y) following a 3,000 gain. Construction sector employment increased 11,000 (1.7% y/y), after rising 7,000 in March.

Private service-producing sector employment increased 156,000 (1.4% y/y) in April after improving 161,000 in March. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 70,000 (3.4% y/y) last month following a 74,000 March increase. Leisure & hospitality employment rose 24,000 (1.3% y/y) after a 38,000 gain. Trade, transportation & utilities rose 32,000 (0.9% y/y) in April following a 25,000 March increase. Professional & business services employment rose 17,000 (-0.1% y/y) following a 3,000 rise while temporary help employment rose 3,600 (-3.9% y/y) following a 2,700 decline. Financial activities employment improved 14,000 (1.2% y/y) after a 6,000 gain. The number of information sector jobs held steady (-0.4% y/y) last month after falling 2,000 in March.

Government sector payrolls rose 10,000 (1.3% y/y) last month after increasing 15,000 in March. The number of local government jobs increased 13,000 (1.4% y/y) following a 17,000 gain. State government employment rose 6,000 (1.8% y/y) following a 2,000 March increase but federal government payrolls fell 9,000 (-0.3% y/y), the third consecutive monthly decline.

Private-sector average hourly earnings rose 0.2% (3.8% y/y) in April after increasing 0.3% in March. Earnings in the goods-producing sector eased 0.1% (+4.0% y/y) following a 0.6% gain. Earnings in construction rose 0.3% (3.6% y/y), after a 0.2% rise but factory sector earnings declined 0.3% (+4.3% y/y) after surging 0.8% in March. In the private services-sector, earnings rose 0.2% (3.7% y/y) in April for the third straight month. Information sector pay increased 1.0% (5.2% y/y) last month after easing 0.1%, and financial activities earnings rose 0.5% (4.3% y/y) for the second straight month. Trade, transportation & utilities sector pay increased 0.4% (3.4% y/y) after 0.6%. Professional & business sector earnings increased 0.1% (4.4% y/y) after 0.2% in March. Leisure & hospitality earnings held steady (+3.8% y/y) following a 0.6% March increase.

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The length of the average workweek held steady at 34.3 hours in April. The workweek in the goods-producing sector eased to 39.8 hours from 40.0 hours. The construction sector average workweek eased to 39.0 hours from 39.3 hours while the factory sector workweek moved lower to 40.0 hours from 40.2. The average workweek in the private service sector held at 33.2 hours. Professional & business service hours fell to 36.3 hours from 36.4 while trade, transportation & utilities hours improved to 34.3 from 34.0 hours. Private education hours rose slightly to 32.8, but leisure & hospitality held steady at 25.5 hours.

In the **household survey**, the unemployment rate held at 4.2% in April as employment rose 436,000 and the size of the labor force increased 518,000. The labor force participation rate edged up to 62.6% last month from 62.5% in March. It remained below the high of 63.3% early in 2020. The rate for teenagers declined to 36.9%. For workers aged 20-24, the rate held steady at 72.1%, up from 71.8% six months earlier. For workers aged 25-54 the rate rose to 83.6%, a five-month high. For individuals 55 and over, the rate improved to 38.4% in April.

The employment/population ratio for all workers in April rose to 60.0%. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic.

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.

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- 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

Winnie Tapasanun

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Total factory orders rose a slightly less-than-expected 4.3% m/m in March after rises of 0.5% in February and 1.8% in January, data from the U.S. Census Bureau showed. A 4.5% m/m March increase had been expected in the Action Economics Forecast Survey. The March reading was the third successive monthly rise and the largest since July 2024. The year-on-year rate accelerated to 6.0% in March, the highest since November 2022, from 2.3% in February. Notably, orders for nondefense aircraft & parts soared 139.0% in March following a 7.4% drop in February and a 92.9% surge in January. Factory orders excluding defense rose 4.8% (5.9% y/y), the largest of three straight m/m/ rises, after a 0.4% February increase. Factory orders excluding the transportation sector fell 0.2% (+1.1% y/y), the first m/m fall since August, after rising 0.3% in February, January and December.

Durable goods orders jumped 9.2% (11.9% y/y) in March, the third consecutive m/m gain and the biggest since July 2024, on top of a 0.8% increase in February (matching +9.2% m/m in the advance report on April 24). The March jump reflected m/m orders increases of 27.1% (the largest m/m surge since July 2024; 31.2% y/y) in transportation equipment, 1.1% (4.9% y/y) in primary metals, 0.5% (-0.4% y/y) in furniture & related products, 0.1% (2.5% y/y) in fabricated metal products, and 0.1% (0.9% y/y) in machinery. To the downside, durable goods orders for computers & electronic products (-1.3%; +2.7% y/y) and electrical equipment, appliances & components (-1.0%; +4.2% y/y) declined m/m in March.

Nondurable goods orders, which equal nondurable goods shipments, fell 0.3% (+0.4% y/y) in March, the first m/m fall since September, after a 0.1% uptick in February. The March fall reflected m/m drops of 2.4% (-9.3% y/y) in petroleum & coal products and 0.9% (-1.2% y/y) in apparel. To the upside, the following nondurable goods shipments rose m/m in March: leather & allied products (1.5%; 8.6% y/y), beverage & tobacco products (0.7%; 5.8% y/y), paper products (0.6%; 2.3% y/y), printing (0.3%; 3.8% y/y), textile mills (0.3%; 0.8% y/y), chemical products (0.2%; 5.4% y/y), plastics & rubber products (0.2%; 0.4% y/y), food products (0.1%; 1.8% y/y), and textile products (0.1%; 2.1% y/y).

Total shipments slipped 0.1% (+2.0% y/y) in March, the first m/m easing since October, after a 0.7% increase in February. Excluding transportation, shipments were virtually unchanged m/m (+1.1% y/y) in March following six straight m/m gains. Shipments of durable goods industries inched up 0.1% (3.8% y/y) in March, the smallest of four consecutive m/m increases, after a 1.3% advance in February. This reflected m/m durable goods shipments rises of 1.2% (5.6% y/y) in primary metals, 0.9% (0.1% y/y) in furniture & related products, 0.8% (-0.2% y/y) in nonmetallic mineral products, 0.4% (0.0% y/y) in machinery, 0.3% (1.8% y/y) in fabricated metal products, 0.2% (4.5% y/y) in computers & electronic products, 0.2% (-2.1% y/y) in wood products, and 0.1% (3.0% y/y) in electrical equipment, appliances & components. In contrast, durable goods shipments for transportation equipment (-0.5%; +7.3% y/y) and miscellaneous durable goods (-0.1%; +2.9% y/y) fell m/m in March following three successive m/m increases.

Unfilled orders rose 2.0% (2.3% y/y) in March, up for the eighth month in nine, after a 0.1% uptick in February. Excluding transportation, unfilled orders dipped 0.1% (+0.7% y/y) in March, the first m/m easing since May 2024, after holding steady in February. Backlogs of durable goods rose 2.0% (2.3% y/y) in March, reflecting m/m rises of 3.1% (3.1% y/y) in transportation equipment and 0.2% (2.4% y/y) in electrical equipment, appliances & components.

Inventories edged up 0.1% (0.9% y/y) in March, the fifth straight m/m increase, after rising at the same pace in the prior two months. Excluding transportation, inventories were up 0.1% (0.5% y/y) in March, the fifth consecutive m/m rise. Durable goods inventories ticked up 0.1% (1.0% y/y) in March after holding steady in February and January; nondurable goods inventories edged up 0.1% (0.8% y/y), the fifth successive m/m increase.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- March manufacturers’ new orders +4.3% m/m; +6.0% y/y, highest since Nov. ’22.
- Durable goods orders (+9.2%) jump m/m, while nondurable goods orders (-0.3%) and shipments (-0.1%) decline m/m.
- Transportation equipt. orders +27.1% m/m, w/ a 139.0% m/m surge in nondefense aircraft & parts orders.
- Unfilled orders +2.0%, the eighth m/m rise in nine months.
- Inventories +0.1%, the fifth consecutive m/m increase.

U.S. Factory Orders Increase for the Third Straight Month in March

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.

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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.

Economy in Brief: October 2005

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FY 2005 U.S. Budget Deficit Fell Due To Higher Receipts

Brazil's Retail Sales Ease in August, But Show Good Gain from Year Ago

U.S. Business Inventories Rebuilt

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U.S. Retail Sales Up; Core Spending Firm

Record Gain in Energy Prices Lifted CPI; Core Prices Tame